Tammie Kyle spent early July wondering where she was going to get $200,000 to keep her business running that month. She operates Comprehensive Child Development, which provides preschool and child care to 400 low-income children in Long Beach on a contract with the state of California. It finally arrived in August.
Waiting for the first reimbursement check after services start up for the preschool year every July can be rough for her and other state-subsidized child care providers. And state budget battles can really hurt.
In 2008, when the state budget was late, Kyle and other providers were waiting into November for their checks to arrive for services they provided starting in July. Kyle took out a loan to pay her staff and thought she’d have to shut down – she even handed out lay-off notices to her staff. The checks finally came and she remained open.
She and others said checks can lag by days or weeks even without a crisis in Sacramento.
"We've actually had to take out bank loans many years, not just when the budget was late," Kyle said. "And any interest we paid on those loans had to come out of monies we would use for running our program."
Because rates are so low - $21.22 per day per child for a half day class and $34.38 per day for a full day - it’s hard especially for smaller providers who may only be caring for a couple dozen kids to save up enough to get them through reimbursement cycles or delays.
But now a non-profit financial organization in the San Francisco Bay Area is stepping in to help by providing zero-interest loans to daycare providers who are in the lurch waiting for a state check.
Candace Wong, California Director of Child Care at the Low Income Investment Fund, said it loaned $1.8 million to 11 Los Angeles childcare providers in July, the third year it’s made loans in Los Angeles.
“We were able to preserve 3,300 childcare spaces,” Wong said.
The program is paid for by donations. First 5 LA and the California Community Foundation contributed to the fund for the current round of child care loans in LA County.
Wong said the idea for the loans started a decade ago, when staff at the nonprofit began hearing stories of childcare providers having to close down because they couldn’t make payroll while they waited for state reimbursement.
“These organizations operate on very tight margins, they don’t have a lot of additional cash flow and other things in order to sustain themselves while they’re waiting for they’re payments from the state,” she said.
She said the program has a 100% pay back rate.
The loans are especially important in neighborhoods like Compton, where childcare is scarce. There’s only enough preschool and childcare space there for about 30 percent of kids under 6.
Heavenly Vision Educational center in Compton had to close for a week in 2012 due to late payment from the state, according to its founder, Sandra Scranton Lee.
"Several parents lost their jobs because they had no one to take care of their children," said Lee, who opened the center 35 years ago. "Most of our parent work at place like Walmart, Kmart, so they’re not making that much money anyway."