By Howard Fischer
Capitol Media Services
PHOENIX -- Calling it a matter of economic development, Gov. Katie Hobbs took the first steps Wednesday in what is expected to be a move to increase child care subsidies in Arizona.
The action comes as the state is trying to get more people to fill current and anticipated vacancies in semiconductor, high tech and other industries. Some of that is being advanced through expansion of apprenticeship programs.
But what is missing are sufficient subsidies of child care to free up parents to take those jobs, according to Melinda Morrison Gulick. She is the chief executive officer of First Things First, a state agency created by voters in 2006 with the specific goal of spending proceeds from a new tax on tobacco products on early childhood development.
"Child care is an urgent economic priority at every level,'' Gulick said Wednesday.
"It allows parents to go to work, businesses to hire workers,'' she said. "And it's an investment in our kids' futures.''
That's also the position of the governor.
"Having children should never come at the expense of having a good-paying job,'' she said. "And I've heard from too many parents who are trying to support their families the lack of affordable child care has been one of the biggest barriers.''
Officially speaking, what Hobbs is doing is ordering state agencies to conduct a "childcare needs study'' to assess gaps across the state, with a specific focus on the semiconductor industry. And that includes addressing child care "deserts'' where availability is limited.
But Gulick said a potentially more pressing issue is affordability.
The state Department of Economic Security is supposed to provide subsidies for families making up to 165% of the federal poverty level. For a family of three, that figure is about $41,000 a year.
First Things First was designed in part to use its resources to cover the gap going up to 300% of the federal poverty level, or close to $75,000 a year.
But Gulick said that isn't enough, considering that child care for an infant runs about $20,000 a year.
"You can't afford $20,000 if you're making $80,000,'' she said.
Getting more money into the system, however, faces a double problem.
Any increase in state dollars would have to be approved by the Legislature. And lawmakers face a $400 million deficit for the current budget year, with another $450 million in red ink for the new fiscal year that begins July 1.
In fact, Gulick said, state lawmakers actually took funds out of the account for child care subsidies during the recession. So her organization has ended up providing what were supposed to be emergency "scholarships'' to make up what the state was not funding.
"The funds have not been restored, and certainly not accounted for price increases in inflation,'' Gulick said. That is costing about $43 million.
And it comes as First Things First itself is looking at reduced revenues.
It is largely financed by a voter-approved 80-cent-a-pack tax on cigarettes. That generated nearly $165 million in its first year.
But the collections this year are now projected to be only slightly more than $101 million as people smoke less. And the levy was crafted to include only smoking, with no thought of -- and tax on -- increasingly popular vaping of nicotine products.
All that, Gulick said, has implications, and not just for the families.
"Seventy percent of employees have missed work in the last 90 days because of a child care issue,'' she said. "And 6% of the workforce has voluntarily left because of lack of child care.''
Some of that, Gulick said, goes to the issue of availability and that issue of child care "deserts,'' with no available care -- or facilities with available spaces -- within five to seven miles of someone's home.
"We've got to expand the spaces available to serve the need so that parents can go back to work,'' she said. And Gulick said additional subsidies are required, beyond what First Things First provides.
Restoring state subsidies aside, that still leaves the question of how Gulick's organization deals with an increasing demand for its own funds, what with reduced tobacco tax dollars.
"We're at the beginning stages of figuring out how to get more revenues for First Things First,'' she said, not just for child care but for other money that it spends on early childhood development, like professional development and incentives for those who work in early childhood development.
That, Gulick said, could include seeking more public funds -- including potentially trying to extend the tax levy to cover nicotine vaping products. But that means seeking support from lawmakers, the governor or voters.
The most realistic source may be the voters, not only because of the state's current fiscal situation but because any increase in taxes requires the consent of a nearly impossible two-thirds vote of the House and Senate. But even an initiative to increase revenues cannot be approved unless it gets the consent of 60% of those who vote on the issue.
In any event, Gulick said she does not foresee any effort for the 2024 ballot. She said the time is not right.
"We've got some issues to address,'' Gulick said, including educating people about why they approved First Things First and the tobacco tax in 2006 -- and not just about subsidized child care.
"It's important that we get back to it and remind people how important showing up ready for kindergarten on the first day so you're not making up for that for the next 12 years is for kids and for families and for Arizona, workforce development, all of those connect-the-dots,'' she said.
There is another developing issue: being able to hire and retain quality child care workers.
"It's a challenge we're facing right this second because we've been able to use COVID relief funds to support the early childhood workforce with things like attendance bonuses, retention bonuses, sign-on bonuses that have increased their wages,'' Gulick said. And she sees implications as those funds expire and workers quit.
"They can go to Starbucks and make more per hour -- and get a degree from ASU,'' she said, noting a deal the company has with Arizona State University for its employees to get not only scholarship funds but any remaining costs of tuition for an undergraduate degree covered by Starbucks.
One thing that may partly fill the gap, at least as to child care availability, is the federal CHIPS Act, which stands for Creating Helpful Incentives to Produce Semiconductors. That $39 billion program, approved last year, is aimed at increasing domestic production and decreasing dependence on foreign suppliers.
But there also is a provision that says any applicant requesting more than $150 million in direct funding must also submit plans to provide access to affordable, accessible, reliable and high-quality child care, not only for their regular workers but those doing construction.
"CHIPS won't be successful unless we expand the labor force,'' Commerce Secretary Gina Raimondo said in announcing the program. "We can't do that without affordable child care.''
Gulick said, though, that the federal program isn't specifically designed to deal with existing gaps in child care services.
"The intent behind the requirement to submit a child care plan if you're applying for more than $150 million is that the new employees moving to an area don't gobble up all of the capacity in child care and leave nothing for the rest of the employees in the area and families in the area,'' she said.
What is unknown, Gulick said, is how many Arizona semiconductor manufacturers decide to seek those grants.
"We're talking with several of them,'' she said.
One option is for a company to pay for additional space -- and staff -- at a local child-care center. They also can build and staff their own on-site or off-site child care for their workers.
And Gulick said they can include child care as part of each worker's benefit package.
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