State Cuts May Force an Arizona Day Care Center to Close Its Doors

After nearly a century in business, Phoenix Day is Arizona’s oldest provider of child care to low-income families. But as the state has reduced subsidies for its services 40 percent since 2009, the organization’s executive director, Karyn Parker, is not sure how much longer the center can continue.

“We’re at a pretty critical point in our existence,” Ms. Parker says.

Phoenix Day provides education programs to 108 children ages six weeks to 5 years. It also operates a neighborhood youth center for about 60 teenagers.

The impact of state budget cuts is falling hardest on the low-income families that the center serves. Eighty percent of the youngsters the center serves get tuition subsidies because their families earn less than $15,000 a year. But as the amount the state pays has dropped, Phoenix Day has had to ask families to pay more for services as it seeks to stay afloat.

Revenue generated from its programs—including the tuition subsidies provided by the state—have declined 71 percent from $807,236 in 2007 to $233,401 in 2012. Meanwhile, Phoenix Day’s federal and state grants have dropped 27 percent from 2009 to 2011.

The center has offset some of the government cuts by increasing private donations. But those don’t make up for the government reductions, says Ms. Parker, or the fact “that our costs have continued to increase.”

Serving Fewer Children

Arizona’s finances fell so far so fast in 2008 that in early 2009 the state cut $71-million in subsidies for child care for low-income families. That was a 35-percent reduction. Before the cuts, 48,300 children were subsidized. Today 26,000 receive the state support, 45 percent fewer than in 2009.

The limits that Arizona placed on the number of children who can receive subsidies in 2009 forced 30 children to leave the center and required Ms. Parker to make big changes.

In addition to charging parents more, the center tapped into its investment funds over the past two years at a rate of $20,000 to $40,000 a month to support operations.

“We thought that the economy was going to change,” she says. “There has been no recovery. The dollars are not coming in quickly enough for us to stay solvent.”

Soon, she added, the center will have to start serving fewer low-income families and to increase revenues from families that can afford to pay the center’s fees. “We can no longer bridge that gap between the subsidy and the cost,” she says.

Other steps Phoenix Day has taken:

• Increased by 13 percent the rate families who get no subsidies at all are paying.
• Asked families who get subsidies to pay $20 a week, up from $12. “We’ll see some families unable to pay that,” says Ms. Parker.
• Required staff members to pay a bigger share of their health-insurance premiums than they did in the past, and the 50 percent discount on child care they received for putting their own kids in the center’s program has been reduced to 25 percent. The center also cut the salaries of its managers.
• Eliminated six jobs, mainly from administrative and managerial ranks to maintain healthy teacher-student ratios.

Bruce Liggett, executive director of the Arizona Child Care Association, says centers that serve the poor across the state are dealing with the same problems as Phoenix Day.

“It’s been devastating,” Mr. Liggett says of the cut to the state subsidies. “There are no plans to restore it.”