Little Falls hospital, school district jump into the child care fray

Jon Radermacher remembers searching around for child care as a first-time dad. He’s been through the process multiple times — and knows there’s something wrong.

He moved from Madison, Minnesota, where his family also faced difficulties finding child care for his son, to Little Falls in central Minnesota. Once he got to the Morrison County town of 9,100 people, he saw the ripple effects the shortage has presented for not only families, but for jobs and the economy.

“It became very evident to me that … child care was a huge issue that just wasn’t seen within the community very highly,” he said. “I would hear sentiments of, ‘Well, I don’t want to tell my employer that I’m having issues with child care because if they find out or they are worried about my attendance, they may not want to have me around.”

He came to Little Falls to take a job as city administrator in 2015. But because there was a child care shortage, his wife and child stayed behind until they could find child care in the area.

There’s a deep shortage of child care options in the area. Waitlists are long, providers say people will sign up for one and make a deposit as soon as they find out they are pregnant.

Radermacher said that in 2016, the Little Falls City Council and the mayor began to take more action on the issue once they saw how much it was affecting their economic development.

To combat the shortage, the city, along with a local hospital, has been leading the efforts to reduce the costs for family child care providers, making it easier for them to stay afloat.

In the past year, the hospital has begun leasing a building to child care providers, who take care of children in “pods,” while the school district has started construction on a child care center in one of its buildings. Meanwhile, other ideas — like a potential way to offer health insurance for providers — have been floated.

‘Economics just do not line up’

The shortage of child care affects the city’s desirability as a place for people to live, even if there are jobs with good wages, said Don Hickman, vice president for community and workforce development at the Initiative Foundation, an organization that focuses on communities and economies in central Minnesota.

“Wages are number one, but I would argue access to affordable housing and access to child care are tied for number two. No matter how good you are with your wage offer. If they can’t find both of the other, you’re not going to attract young families,” Hickman said.

Stephanie Marx and Natasha Lopez are licensed family child care providers in Little Falls. They both have children of their own, and have taken care of kids before in their homes, although they were limited to only one family because they weren’t licensed at the time.

Both of them considered doing child care out of their homes, but financially it didn’t make sense. Lopez said her home was too old and small to even pass the licensing requirements. Marx’s home would’ve needed many repairs that would have been too costly, she said.

SuppliedStephanie Marx, a child care provider, works with kids inside the child care pods in Little Falls.

“Financially, it would have been very hard to get the house in order — to have all the railings, our deck and things like that,” Marx said. “It would have been a lot of money to put into the business to where we wouldn’t have been able to see a return for a while just for how much you would have to get started to do everything and make sure you know everything is safe for the kids.”

The city worked on some projects to fund some businesses, giving grants to some of the providers, like Lopez and Marx.

In 2021, city officials met with U.S. Rep Pete Stauber, R-8th District, who represented their district at the time. Radermacher said Stauber encouraged them to apply for federal funds that were becoming available.

“The economics just do not line up for our part of the state,” Radermacher said. “A family, the wages that they earn here, are most likely the case where they can only afford up to a certain dollar amount per week for their child care in order to sustain working. If they don’t make enough and the child care is more expensive than what they’re making working, they’re just going to stay home and stay with kids, which then leads into a problem that we’ve also really experienced in our community around availability of workforce.”

A win-win solution

Employees of St. Gabriel’s Hospital Little Falls were also struggling to find child care. The hospital, in response, took one of its empty buildings — formerly known as St. Camilla’s place — and transformed it into pods for child care.

Now, Lopez and Marx work out of that building, with each of them having their own pod. They pay a portion of the rent, internet and garbage costs, Lopez said, while the hospital covers other expenses.

Right now, each of them takes care of 10 kids. In the second year, there could be 12 kids, and 14 if they get a helper.

Both of them take care of kids who have a parent who works at the hospital. Lopez says the mother of one of her children has a much better arrangement now with this new “center.”

“(She) was driving for 45 minutes one way to go to a different town to drop off her kid and drive back to come to work. Every single day,” Lopez said.

Their pods are a five-minute walk from the hospital, which also gives parents the option of seeing their kids more often and even breastfeeding, which may not have been possible if they were at a further location.

Lopez has 25 people on her waitlist — and says she “will be full until the end of 2025.”

“We have people that just found out four weeks pregnant calling us asking us for spots and, like, we don’t,” Marx said.

She says there’s definitely demand for what they’re offering because not many providers are able to offer what they are without the support and funding. “If more businesses or whoever did more like this I feel like more people would open daycares,” Marx said.

The city, with the help of the school district, is opening a similar but larger center at the end of March that will serve around 100 kids inside of Lincoln Elementary School, which is partially being constructed with the $1.5 million in grant funding the city received from a federal appropriations bill.

In the 2023 session, the Minnesota Legislature set aside funding for grants to local governments, communities and non-profits who are creating new child care slots. The first round of funding made $6.2 million available, with a limit of $600,000 per applicant.

Radermacher said market research has shown that Morrison County was 550 child care slots short, with roughly 200 of them being in the Little Falls area. This center will serve children ages zero to five — a big area of need for families.

He said he’s heard stories of folks looking for spots for infants, but by the time the spots open, the child is no longer an infant. And in Greater Minnesota, the number of child care centers have not grown to cover that need.

“No centers are really even being built in Greater Minnesota because of the economics. You’re just not able to charge enough to pay your staff, pay your operating costs and support that facility, even if it’s paid for,” he said.

The school’s center will be a little easier to support than a traditional center, he said, because it has the funding to support it in the early stages. He said it will have some operating losses in the first years — but also more cushion to operate at a loss for a couple of years.

Upfront funding was also crucial in the case of Lopez and Marx. The city gave both of them $5,000 to help with start up costs.

“There’s no way I could have done this without the grant that we had,” Lopez said. “Without that, I would not have had everything. The hospital who owns this building, they provided all of the actual sort of things we need like any safety things, the gates, the cribs, things to get us to pass. Without that even there’s no way I could have done it. Financially, absolutely not. There’s no way.”

Radermacher anticipates the school district child care center will greatly benefit the city. People in the area are not picky about the type of child care because the need is so high, he said.

“You’re not really given the luxury in where we live to say, ‘Oh, I would prefer center versus in home.’ … The solution is not a silver bullet — is not (to) build more centers or provide more in-home family child care, create pod models,” Radermacher said. “We need all of them.”

He said the center will bring employees who want to work there, too, although people who perhaps would have done in-home child care might opt to work at the center instead. He doesn’t think the center will drive out other family operated providers, because centers are generally more expensive for families, so it won’t be price competitive.

Supporting providers

While these financial supports have helped so far, some providers are still struggling. Radermacher said that when he started at the city, there were 25 child care providers. Last year, there were 17.

“We absolutely need to do everything that we can within our means to create more child care slots, but we have to do everything we can to support providers in any way shape or form to sustain or retain any other spots that they have,” he said. “We have lost so many just even in my time, this being a huge supply demand issue that’s way out of whack. We’ve absolutely had way more demand than we had supply and we’re still losing providers.”

One idea for supporting providers that’s been tossed around is finding a way to offer health benefits for providers.

Hickman, who runs the Initiative Foundation’s Childcare Solutions program, says that providers are struggling as in-home care providers aren’t clearing over $30,000 or $40,000 a year.

“That’s not a family sustaining wage. You can’t make ends meet no matter how smart a person you are,” Hickman said. “What can we do that would greater incentivize the sector? What could we do that would improve their profitability or attract and retain talent?”

He remembers speaking to a child care provider who said she could earn more at a local gas station, plus benefits and retirement. Lopez has a friend who used to do daycare in a different town and ended up quitting after less than seven months because she needed health insurance.

“So many people going into child care do it because they are also young mothers, and you realize how vulnerable you are if you or your children get sick. It could ruin you quickly,” Hickman said. “If we could provide that safety net, even if it was catastrophic coverage, I think it would cause people to think much longer before they say, you know, that the sector doesn’t love me as much as I love it. I’m gonna have to date other people.”

Creating a healthcare pool for providers has come up, as well. In 2017, Hickman took the idea to some people, but insurance companies said they’d need a large number of people to opt in for it to be successful.

“They just said that a regional pool is still too small,” he said. “The larger the pool, the less the risk, and so the more interest someone’s going to have in addressing this.”

In 2017, Minnesota passed a law allowing a similar program for people in the agriculture industry. They are now able to create cooperatives that provide healthcare insurance coverage to people in production agriculture.

“Farmers can pool their resources and sort of co-op themselves up to get health care for their employees and themselves. That was kind of the original model. We were like, ‘Oh, we should do something like that,’” said state Sen. Aric Putnam, a DFLer who represents the St. Cloud region and has been in conversation with Hickman on this potential solution.

Hickman said the state’s Management and Budget office told him MNsure is the best option, But the rates people get there are not cutting it.

“I had one woman from the Office of Budget Management say, ‘It’s never been cheaper. A woman can buy family health care for $600 a month if she’s truly low income.’ Well, $600 a month if you’re clearing ($30,000) or $35,000 (a year) is an enormous expense. That’s just not an option and so I’m grateful for MNsure, but for this sector it’s not addressing the need,” he said.

Other states, like Washington, for example, have done similar things, offering better healthcare coverage for providers, Hickman said.

“The fact that states on opposite ends of the political spectrum came to the same conclusion tells me, you know, this really isn’t a crazy idea,” he said.

Putnam said he originally heard about the idea from state Sen. Michelle Benson, a Republican from Ham Lake.

Two years ago, he worked on a bill to make a health care pool — but he said it didn’t go anywhere. Instead, during the last session he authored a bill that offers grants to local governments and organizations, which can be tailored to the specific needs of a community, he said. While the bill he authored went through some changes, it was included in the Jobs and Economic Development Omnibus bill that was signed into law.

It created $6.5 million in yearly grant funding for organizations and local governments, with a requirement that 50% of the funds​ go toward communities located outside the​ seven-county metropolitan area.

“What most excited me about the bill was that it lets different childcare centers in different regions say, ‘This is what we need to do for our workforce problem, getting people to do this job.’ In some places it might be healthcare, sometimes it might be wages. It might be any number of different variables,” Putnam said.

“That health insurance was a big deal. Very big deal. That was something that Don (Hickman, of the Initiative Foundation) really explored. At the time, it was a really new idea. Nobody really knew how to make that work. So it didn’t happen,” Radermacher said.

But the landscape has shifted.

“(There is) certainly more acknowledgement that this is indeed a crisis and that things need to be done. The state being involved in that — even the federal government being involved with that — is wonderful. So now there are actual dollars,” Radermacher said. “There needs to be ways that we can support people in the industry of child care through wages and benefits for those providers. We don’t expect teachers in many instances to finance entirely (their) school without subsidizing or supporting it from the public sector.”

While more funding is going into child care programs — and there’s a better understanding of the complexity of the issue in the Legislature — Putnam said there is more to do.

“I was stoked that this resource that we provided had that kind of flexibility,” he said, in reference to the grants. “But that doesn’t mean we’re going to stop working for healthcare,” he said. “With the healthcare thing, I think that that is something that we should sort of take out and make as a separate concern, but there are other conversations about providing healthcare to everybody that are going on at the same time.”

Marx and Lopez said something like this could help providers a lot, especially those whose partners don’t have medical coverage or those who are single.

“We rely on our husbands to basically carry our insurance. For us, who have to put all this money into having a building and all the supplies and everything, there’s no way I could pay for health insurance and come out ahead and pay for other bills,” Marx said. “That would be huge in our industry.”