HB 149-CHILD CARE PROVIDER COLLECTIVE BARGAINING  4:28:27 PM CO-CHAIR SPOHNHOLZ announced that the next order of business would be HOUSE BILL NO. 149, "An Act relating to allowing certain child day care providers to organize for the purpose of collective bargaining." 4:28:38 PM CO-CHAIR FIELDS, as prime sponsor, stated that HB 149 would solve the issue of persistently low wages and benefits in the child care sector, which results in an inadequate supply of child care workers, which in turn inhibits Alaska's ability to economically recover from the COVID-19 pandemic. He discussed the different models of structural change, along with their pros and cons. The first model, he said, focuses on countries that have high taxes and directly subsidize child care, which Alaska wouldn't be able to afford with its current revenue. The second option, he said, would be to create a structure for the industry to negotiate with the state for wages and benefits as outlined in HB 149. He noted that this model is based on the model in place in 11 other states. It is non-coercive for workers, he said, and the industry would be able to collaborate with the state to adjust the cost structure according to changing circumstances. The third model, he said, is legislative establishment of a living wage for the child care industry, but it would be difficult to adjust the model in response to changing circumstances. The fourth option, he said, would be to establish a prevailing wage covering all providers that receive public funding. He pointed out that the construction industry has higher-than-average wages due to public intervention to ensure the industry's place as a middle-class profession. He said the model would be based on established policy; however, unlike construction, child care does not experience robust public investment, so there may not be the market penetration necessary to sufficiently raise wages. It's also more coercive in terms of private sector impact, as opposed to the bargaining structure proposed under HB 149. Of all these options, he concluded, HB 149 outlines the option which is both the least expensive and the least coercive. CO-CHAIR FIELDS said key goals of HB 149 are to raise wages and benefits to allow workers a living wage, which would make it easier for employers to find and keep employees. This would increase the supply of quality child care, he said, which is important so that working professionals can help the economy recover. Another key goal, he said, is to not increase the already high prices of child care; the economics of the model must also work so employers can stay in business, and a structure must be provided for the industry to work with the state for adaptability in response to changing circumstances. He stated that the longstanding structural problems within the industry, the pandemic's effect on women's participation in the workforce, and workforce nonparticipation due to the lack of available child care all make HB 149 necessary. 4:33:26 PM NOLAN KLOUDA, Executive Director, Center for Economic Development, University of Alaska, presented a PowerPoint titled "Economics of Child Care in Alaska." He presented the overview on slide 2, which read as follows [original punctuation provided]: ? Economic value of child care ? Pandemic impacts ? Wages for child care workers ? Affordability of child care MR. KLOUDA presented slide 3, "Economic impact of investing in early childhood learning," which displayed the Heckman Curve showing that educational investments made between birth and age five have much higher payoffs in terms of generating positive lifetime benefits for individuals. He clarified that early education programs could include child care or Head Start. He noted that investments in K-12 education and job training later in life are important, but they produce lower benefits per dollar invested. He then presented slide 4, "Economic impacts of early childhood education," which displayed a graphic that said, "High quality birth-to-five programs for disadvantaged children can deliver a 13% Return on Investment," and which read as follows [original punctuation provided]: ? Increased parental income ? Greater educational attainment ? Increased earnings and employment ? Fewer arrests ? Reduced likelihood of drug use ? Greater overall health MR. KLOUDA presented slide 5, "Pandemic effects on child care in AK," which read as follows [original punctuation provided]: ? Child care capacity in AK reduced to ? 49% in June 2020 ? 75% in January 2021 ? 37% of centers considered permanently closing ? 63% needed additional funding to stay open MR. KLOUDA noted that the committee has previously demonstrated the understanding that child care capacity has been reduced due to the pandemic and said almost 40 percent of daycare centers considered closing permanently, with 60 percent needing additional funding in order to stay open. 4:38:09 PM MR. KLOUDA pointed out the link between the availability of child care and the ability of parents, particularly mothers, to participate in the workforce. He presented slide 7, "Child care and workforce participation," which read as follows [original punctuation provided]: ? In May/June 2020, 41% of unemployed parents looking for work said they were unable or uncertain about returning to pre-pandemic arrangements for child care (Urban Institute, 2020). ? "For parents with young children, the loss of full-time childcare was associated with an increased  risk of unemployment for mothers but not fathers." (Petts, Carlson, Pepin, 2020) MR. KLOUDA presented slide 8, "Workers' Ability to Return to Prepandemic Child Care Arrangements, by Employment Status," which displayed a graph showing the ability to return to previous child care arrangements as a function of unemployment status. The graph shows that those who were unemployed or laid off, but actively seeking employment, had the biggest problems with child care access; the workforce categories of "unemployed but not seeking employment," "furloughed," "hours reduced," and "working part time," had progressively decreasing degrees of difficulty in child care access, with the category of "working full time" experiencing the least difficulty. Mr. Klouda pointed out that difficulty accessing child care impairs an unemployed person's ability to accept work. MR. KLOUDA presented slide 8, "Workforce shortfalls are among employers' greatest concerns," which displayed a graph from the annual Business Confidence Index Report by the Anchorage Economic Development Corporation. The report from 2021 showed that most of the top issues concerning businesses in Anchorage related to the availability, affordability, and readiness of the workforce. He then presented slide 9, "Survey of AK child care workers," which read as follows [original punctuation provided]: ? Over 50% said pay inadequate to meet living expenses ? Passion for job, but 65% planned to leave ? 36% not compensated for professional development ? Over 70% do not receive health insurance from employer ? 97% are women 4:42:40 PM MR. KLOUDA presented slide 10, "Hourly pay compared," which displayed a graphic showing that the median pay of a child care worker in Alaska is $13.21 per hour, which is at least $10 less than the median pay for all occupations. For points of comparison he included two other occupations for which, like child care, the prerequisites are a high school diploma and on- the-job training; median pay for a corrections officer is $30.08 per hour, and $42.84 per hour for a special education teacher. He noted that these occupations relate to the Heckman Curve, as individuals receiving less early education are more likely to have encounters with criminal justice and to need remedial education, both of which cost more and are less effective than early education. He shared that he learned that animal caretakers are, on average, paid more than child care workers. MR. KLOUDA presented slide 11, "National data about child care workers," which read as follows [original punctuation provided]: ? Disproportionately women of color ? 1 in 7 live in poverty, twice the rate of other occupations ? Almost half are in households using public assistance programs (vs 25% of the general population) ? Cannot afford their own child care: infant care costs equal 40-60% of the median child care worker's earnings in most states (7% is the DHHS standard) MR. KLOUDA said, "In a particularly cruel twist of fate, most ... could not afford child care on their own, because the typical child care would cost about 40 to 60 percent of what they make in wages." He pointed out that the standard published by the U.S. Department of Health and Human Services is that approximately 7 percent of income should be budgeted for child care. He then presented slide 12, "How can costs be high but wages so low?" Slide 12 read as follows [original punctuation provided]: ? Highly labor intensive: 1 teacher for 4 infants ? Wages and benefits are almost 70% of costs ? At $12,000 per year per child, center collects $48,000 in fees per teacher ? Subtract administration, rent, utilities, insurance, materials, etc ? Leaves about $30,000 to pay staff (including admin and support staff other than teachers!) MR. KLOUDA pointed out that economies of scale don't function in the child care industry because handling more children means hiring more child care workers. He then presented slide 13, which displayed a graph showing a breakdown of personnel costs, noting that they're higher for those caring for infants and are approximately 70 percent of a daycare's total cost. He proceeded to slide 14, which read as follows [original punctuation provided]: "...adequately compensating a highly qualified workforce is a mathematical impossibility when public funding is limited and parents cannot afford to pay higher tuition rates." MR. KLOUDA noted that there is more federal involvement in child care under the current administration, as well as tax credits and funds available through block grants to the state. 4:48:30 PM REPRESENTATIVE MCCARTY asked for statistical information on child care businesses, licensed in-home operations, unlicensed in-home operations, and stay-at-home parents. MR. KLOUDA responded that he doesn't have such information on hand. REPRESENTATIVE MCCARTY asked what the worker to child ratio is for toddlers. MR. KLOUDA responded that he doesn't know the exact ratio for the licensing requirements in Alaska, but said the ratio becomes more lenient as kids get older and require less care. CO-CHAIR SPOHNHOLZ interjected that child care prices tend to decrease as the ratios get higher. REPRESENTATIVE MCCARTY asked about the ratio of infants to older children. MR. KLOUDA replied that he doesn't know the breakdown of the ages of kids in the daycare system, but that most child care research is focused on the ages of birth to age five. 4:51:05 PM CO-CHAIR FIELDS said that it's harder to find a spot for infants because the economics are more challenging for a child care provider. He said it's easier to find care once a child reaches 15 months. CO-CHAIR SPOHNHOLZ added that the cost is due to the licensing requirements mandating a certain ratio for workers to children. CO-CHAIR FIELDS opined that there will never be a provider that accepts only infants because that facility would not survive. He explained that a facility that accepts infants and toddlers makes enough money taking care of the toddlers to subsidize infant care. CO-CHAIR SPOHNHOLZ asked Representative McCarty to clarify his earlier question about child care businesses, noting that even an in-home provider is a child care business. 4:53:04 PM REPRESENTATIVE MCCARTY said that he was trying to differentiate between a child care operation in an "office," in-home child care operation, and unlicensed providers. He shared an anecdote of a child care facility that recently stated to him its belief that it was turning away business because they can't hire employees because people are making more money on unemployment. CO-CHAIR SPOHNHOLZ reminded the committee that it is illegal to decline appropriate employment when an individual is collecting unemployment. She pointed out that the additional wage replacement for unemployment expires in September, meaning the state will revert to the traditional wage replacement value of 49 percent for a minimum-wage worker, which is what many child care workers are. She then pointed out that Mr. Klouda's research found that 50 percent of child care workers are on public assistance. 4:55:14 PM REPRESENTATIVE KAUFMAN noted a 2012 study from Rutgers University and asked Mr. Klouda if he has studied the child care industry in "more free-market states." MR. KLOUDA responded that he doesn't study many other states. Low wage states, he said, would be expected to have cheaper child care due to an overall lower average wage. He hypothesized about licensing requirements allowing more children per worker and explained that the main variables are the cost of labor and the number of children per workers. REPRESENTATIVE KAUFMAN commented that he suspects there could be other factors and talked about population growth in Texas and Florida. 4:58:15 PM CO-CHAIR FIELDS noted that the biggest cost driver is the ratio of teacher to child, which is fairly consistent across most states. 4:58:52 PM REPRESENTATIVE MCCARTY asked whether there would be an economic difference if the ratio changed by one child. CO-CHAIR FIELDS responded yes, which is why providers are more likely to stay in business taking care of toddlers. He said that it wouldn't be desirable to increase the number of children per worker when discussing infant care due to safety issues. 4:59:53 PM CO-CHAIR SPOHNHOLZ pointed out that it is very difficult to care for more than four infants at a time. 5:00:43 PM CO-CHAIR SPOHNHOLZ opened public testimony on HB 149. After ascertaining that no one wished to testify, she closed public testimony. 5:01:09 PM REPRESENTATIVE SCHRAGE moved to report HB 149 out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, HB 149 was reported out of the House Labor and Commerce Standing Committee