Why Sioux Falls parents can't afford to work

Editor's note: This is one in a series of stories breaking down the findings of a six-month study looking at possible solutions to the childcare crisis in Sioux Falls. Find an overview here.

Simplified: It costs more in one year to send your kid to a childcare center in Sioux Falls than it would to send them to a South Dakota state university. And as parents try to figure out how to balance careers and children, there aren't many ways the math works out, according to the findings from the Sioux Falls Childcare Collaborative.

Why it matters

Most parents – as many as 9 in 10 – in the city cannot afford childcare. Based on federal definitions of affordability, childcare should take no more than 7% of annual household income.
In reality, parents are paying about $11,400 per year per child for childcare. In order to be "affordable," a family would have to make more than $163,000 annually for one child. That's nearly two and a half times the median household income in Sioux Falls.
Embe CEO Kerri Tietgen, who's also on the childcare collaborative leadership team gave the example of a four-person household where two parents are college educated and each working professional jobs for a combined income of $90,000 annually. They'd pay about a quarter of their income just in childcare.
Even if one parent leaves the workforce, looking at average housing costs, health insurance, monthly student loan payments, utilities, food and other costs of living, there isn't much (if anything) left over.

Oh boy. Is that the childcare crisis?

It's a big part of it, yeah.

There are two other major factors at play: lack of available childcare slots and childcare workforce shortages.

You'll find a breakdown of that problem and proposed solutions in future stories in this series.

So what are the solutions for parents?

As Mayor Paul TenHaken said Monday night, there are no "home runs" here. Only singles.

Here's where the Childcare Collaborative's final report comes into play.

The report outlines a number of specific solutions to fix the affordability gap in childcare that essentially boil down to some combination of the following:

Get businesses to pay part of the childcare costs for their employees
Get the city or state government to pay a portion of childcare costs or help subsidize the costs providers face.

Uh oh. That sounds like you're about to propose a tax increase.

Listen. I'm not proposing anything. I'm the messenger here.

That said, a tax increase is one of the many possible solutions laid out in the nearly 100-page final report from the Sioux Falls Childcare Collaborative. It's a solution proposed, not the solution proposed.

Here's a closer look at some of their ideas:

Use video lottery money. The state already uses a good chunk of video lottery revenue to help fund education. The collaborative proposes the city doing something similar with extra video lottery revenue it collects.

The city gets an estimated $85,000 per year in fees associated with video lottery machines. The collaborative suggests taking that money to help fund an Office of Child and Youth Development to focus on solving this community issue.

Give more local control. Right now in state law, cities have the ability to impose what's called a "non-ad valorem tax" (e.g. sales tax), but that tax is limited to 2%.

The collaborative report suggests changing state law to either allow for a higher rate or removing the cap so that local communities can decide if they want to increase sales tax as a way to generate money to fund community efforts to make childcare more accessible and affordable.

Provide employer-paid assistance. Employers can provide and contribute to a Dependent Care Flexible Spending Account as a pre-tax benefit for employees. Or, they can give vouchers to employees to help offset childcare costs.

Some companies are already doing this. The report references Pioneer Bank & Trust, which offers $5,000 to employees to offset childcare costs. The success in retaining staff outweighs the costs of the program, per a South Dakota Searchlight article cited.

Create scholarship programs. The collaborative also suggests creating a community scholarship fund for families who earn too much to receive state aid for childcare, but too little to be able to afford it on their own – folks who fall between 209% and 350% of the federal poverty level. That's a family of four with a household income of between $62,700 and $105,000.

The report estimates a $2.5 million fund could help support up to 500 families.

Match funds businesses invest. Another type of scholarship program the report proposes is a Childcare Business Incentive Grant.

In this setup, employers would pay at least $300 per child per month as an employee benefit, and the state would match with another $300 per month.

Split the bill three ways. A community tri-share program – modeled off a similar program in Michigan – would split childcare costs equally between the parents, the employer and the local community via a community fund.

The collaborative estimates a one-year pilot program to test this concept could help 500 families for just shy of $2 million.

Where do we go from here?

The Sioux Falls Childcare Collaborative is just getting started, said Michelle Erpenbach, president of Sioux Falls Thrive, the organization coordinating the 90-member group.

This group has been working hard, Erpenbach said, but now's the time for everybody to get on board.

"We are all going to have to do this together," she said.