California Close to Launching $80 Billion Child Care Worker Retirement Fund

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California is one step closer to creating the nation’s first retirement fund for family child care providers after they overwhelmingly approved a new contract with the state, Child Care Providers United, the union representing 40,000 of these workers, announced late Monday.

The deal, which still needs to be approved by the Legislature and signed by Gov. Gavin Newsom this summer, would provide an $80 million retirement fund for an underpaid workforce that is dominated by women of color. This would make California the first of 11 states with family child care unions to offer such a plan.

“We’re exceedingly happy,” said Nancy Harvey, a 61-year-old family child care provider in West Oakland who helped negotiate the deal. “This is a historic moment for child care providers, not only here in California, but throughout the nation.”

A little over 50% of family child care providers in California are 50 years old or older, yet less than a quarter of them have any retirement savings, according to research from the Center for the Study of Child Care Employment at UC Berkeley.

“It’s really a huge step forward in terms of equity when you think about who the workforce is,” said Brandy Jones Lawrence, a senior analyst at the UC Berkeley center.

She said improving work conditions will raise the quality of care for California’s youngest residents.

“If an educator is worrying about whether or not they’re going to be able to put food on the table or if they’re going to get their lights turned back on, they’re not going to be able to bring their whole self and all that they know and need to be for children at this age. … when [they’re] feeling much more professionally supported I think that they can show up the way they need to be.”

Family child care providers are small-business owners who care for children out of their homes. There are more than 24,700 (PDF) licensed family child care providers in the state. When license-exempt carers are added (family members, friends or neighbors who care for children), that number rises to about 40,000, according to the union.

For 16 years, family child care workers sought to form a union to improve their pay and obtain benefits such as health care, a retirement plan and access to professional development training.

In 2019, they won the right to collectively bargain by successfully arguing that they’re employees of the state because they receive public funding for serving lower-income families who qualify for subsidized care.

The contract deal addresses one of their biggest demands: a promise and a timeline from the state to overhaul the way providers get paid for subsidized child care.

Family child care workers have long complained that the state calculates reimbursement rates for subsidized child care based on outdated market prices. They’re currently paid based on rates from at least five years ago. The rates neither reflect the true cost of care nor keep pace with current costs of living, making it hard for these workers to stay financially afloat, according to an analysis by the California Budget and Policy Center.

Providers frequently set their prices below their true costs to fill the gap between what parents can afford — and what the government pays for subsidized care.

Under the new contract, the state will provide $600 million in temporary rate increases over two years until a new payment system takes effect. The increases represent a 20% average rate increase, but vary slightly by region. A family child care provider in the Bay Area, for example, will receive an additional $211 a month per child, while a license-exempt provider will get an extra $148.

“This rate increase, and most importantly, the state’s commitment to finally set a plan to reimburse us for the entirety of our costs each month, means I can keep my doors open with the confidence that I can make ends meet and feel the dignity of my work,” said Shannon Benjamin, a provider from Carson in Southern California and a member of the union’s bargaining committee, said in a statement.

While the new contract represents major progress, more sweeping changes are needed to ensure that all early childhood educators are making a living wage and can afford to stay in the profession, industry observers like Lawrence said.

She estimates that less than a quarter of the family child care workforce is represented by the union, while the larger majority of workers are not because they don’t receive public funding.

Once union-represented providers are paid for the true cost of care, she asked, “How then are we going to reproduce or recreate a system that actually gets to all of the educators … and treat [early childhood education] like the public good that it is, like elementary education, where everyone has access and it’s based on the costs of the care?”