A new report on the costs of child care reveals what parents in the United States already know: It’s incredibly expensive.
In the 50 states, the average cost for an infant in center-based care can be as high as $17,082 per year. For a four-year-old, the annual average cost for similar care can range up to $12,796. Those figures rival what the average family spends on one year of tuition and fees at a four-year public college, according to the report from Child Care Aware of America, a child care policy and advocacy organization.
The problem of expensive care is endemic in the U.S.; the study found that the cost of center-based infant care exceeds 7% of family income—the U.S. Department of Health and Human Services’ cutoff for affordability—in 49 states and the District of Columbia.
But there is one exception: Louisiana.
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In Louisiana, center-based infant care costs an average of $5,754 annually. The median income for a married couple in the state is $85,688, meaning childcare constitutes 6.7% of median income, putting it just below the HHS’s affordability threshold. Louisiana also has the most affordable care for four-year-olds; at $4,920 annually or 5.7% of a family’s median income.
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The relatively low cost of childcare in Louisiana is due, in part, to the so-called School Readiness Tax Credits the state rolled out in 2007. The set of tax credits urges parents, providers, and employers to invest in high-quality child care. The child care expense credit, for instance, is a refundable credit to families with incomes under $25,000 who enroll their children at higher-quality providers. Some child care directors and staff also receive a credit if they work in a higher-quality setting and participate in the state career development system. Businesses can also access tax credits for child care expenses and for donations to child care resource or referral agencies.
Michelle McCready, policy chief at Child Care Aware of America, told Fortune that when the organization used to rank states by child care licensing requirements, Louisiana typically landed near the bottom. So the tax credit package, she says, was a way to ease the cost of care while “getting parents to have more, higher-quality options.”
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Jeanie Donovan, an economic policy specialist at the Jesuit Social Research Institute at Loyola University in New Orleans, says the credits serve as motivation for a family to—say—enroll their children in high-quality care setting rather than dropping them off at a relative’s or neighbor’s home. But she maintains that the tax credits—because they are refunds—don’t help parents who can’t afford to pay child care costs upfront. She also points out that child care in Louisiana is significantly less affordable for single parents than it is for families. Center-based child care for infants and four-year-olds costs 27.9% and 23.8% of a single parent’s annual income, respectively.
And after nearly ten years, the program could be in jeopardy since Louisiana currently faces a gaping budget deficit, Donovan says. The state legislature “is looking to increase tax revenue and this is an obvious place [to do it], though we’ve made the argument that the [program’s] returns are incredible,” she says. A 2015 economic analysis found that every dollar spent in the Louisiana early child education sector returns $1.78 to the economy. The same report found that for every job created in the field, 1.3 jobs were created in the larger economy.
Even with its cons, Louisiana’s tax credit program is a standout nationwide and an example for other states, says McCready. Similar programs are needed across the country to make child care more affordable. It would be infeasible for many child care providers to lower what they charge parents, considering they already operate on minuscule margins and generally pay workers low wages. The child care business is labor-intensive due to state-mandated staff-to-child ratios, meaning that despite the high cost to parents, child care employees earn less than two-thirds the median wage for all occupations in a state, according to the Child Care Aware report.
McCready says the U.S. needs an “all-hands-on-deck” approach to increasing investment in and funding for high-quality child care. During his campaign, President-elect Donald Trump proposed deducting child care expenses from working parents’ income taxes and allowing parents to enroll in tax-free dependent care savings accounts for children. He wants to provide low-income households with child care tax rebates and a matching $500 contribution for their savings accounts.
“The new administration opened a door…and has highlighted this issue,” McCready says. “It’s a step, the intention is good, but a lot more needs to be done.”
