By Jessica Holdman
SCDailyGazette.com
COLUMBIA
After nearly three decades in child care, a GOP leader in the South Carolina House has left the business.
But as co-chair of a special legislative committee formed in 2023 to address shortfalls in the state’s child care system, state Rep. Shannon Erickson has said she’ll continue to advocate for the industry and help other operators stay in business.
Erickson sold off her four Beaufort-area centers in late 2024 to Otter Learning, which has more than 50 locations across six eastern U.S. states. Rising costs and shrinking margins have made it harder for small companies like hers to operate, leaving only larger, national providers in the market, she said.
“What I’m seeing in our industry is the small mom-and-pops like me can’t hang,” said Erickson, the chamber’s education committee chairwoman since December 2022. “We can’t afford to stay in the business.”
The study committee she co-leads, which last met in January, hasn’t released any recommendations yet. But the state budget might start to help.
The House, in its budget proposal approved last week, set aside $4 million in child care-related funding, enough to cover a pair of programs that the Beaufort Republican told the S.C. Daily Gazette she considers a priority.
That includes money to give South Carolina access to additional federal funding and a pilot program that, if successful, could serve as a statewide model for funding child care into the future.
To start, the state Department of Social Services needs $3.1 million more annually to take full advantage of federal child care grants for low-income families. South Carolina became eligible this year for $10.6 million more in federal funding, as long as the state increases its own share.
“We need to make sure we’re drawing down as much federal money as possible,” agency spokeswoman Connelly-Anne Ragley said during a Statehouse hearing earlier this year.
The additional funds would be enough to offset the cost of care for 1,700 more children annually whose parents’ salaries fall below a certain income — for example, less than $83,446 for a family of four.
These so-called scholarships can be used at centers that have volunteered to be part of the state’s ABC Quality Program and meet health and safety standards beyond state minimum requirements.
As of late January, federal advocates did not expect proposed congressional budget cuts to impact this pool of funding.
A new model
Next, Erickson expressed hope for a cost-sharing model known as Tri-Share.
The proposal splits the cost of child care three ways — between the parents, employers and the state government.
The program started in Michigan in 2021 and is aimed at families whose income is too high to qualify for federal aid yet too low to afford ever-increasing child care costs. Three years later, the Great Lakes State had 195 employers and 351 childcare providers participating, with about 700 children enrolled.
At least two other states, Kentucky and North Carolina, have started similar programs.
“Individuals need child care in order to get to work and in some cases raise their family out of poverty,” Department of Social Services’ acting director Tony Catone told House budget writers.
The push for a South Carolina pilot started in the Lowcountry, near Erickson’s district, with the Greater Island Council of Hilton Head Island and Bluffton.
Under the group’s proposal, participating parents pay 50% of their child’s tuition, or about $6,500 per year. Participating employers would pay 25%, and the state would pay 25%, about $3,250 each.
The council said the model is intended to help small and mid-size businesses that can afford to add $1.50 in hourly benefits to their employees’ paychecks to help pay for child care.
“The problem, as is the case with so many things, is money and where to get it,” the council wrote on its website.
For infants, the most costly age for care, the price of daily care in South Carolina averaged $11,512 for calendar year 2023, according to an analysis released earlier this month by the Economic Policy Institute. For 4-year-olds, it was $10,481.
“A typical family in South Carolina would have to spend 26.10% of its income on child care for an infant and a 4-year-old,” according to the report.
In places like Beaufort County, where the cost of living is greater, families pay more for care.
The state Department of Social Services asked budget writers for $1 million to start a pilot program in five counties: Cherokee, Greenville, Oconee, Sumter and Beaufort. (Those are the home counties of Statehouse GOP leaders, including the chief budget writers in each chamber, the Senate president, and the House speaker. Beaufort County is home to Erickson and four other committee leaders.)
Meanwhile, at least 42% of South Carolinians live in a childcare desert, defined as any area where there are more than three young children for every licensed childcare slot. While that’s the percentage often cited, the problem is likely worse, since that statistic is from 2018.
The COVID-19 pandemic exacerbated the problem, pushing that number, at least temporarily, to 67%, according to First Steps.
In response, the federal government came in with $955 million in pandemic relief money. Help from startup grants led to 52 more licensed child care centers opening in the state in the past year, said Michelle Bowers, director of early care and education for the state Department of Social Services.
But that funding has dried up, begging the question of what to do next as South Carolina’s population and workforce needs continue to grow.
Tough decisions
Even with $4 million that approved in its spending proposal for the fiscal year starting July 1, the state Department of Social Services will be left with some tough decisions on how to allocate that money.
Last year, the Legislature granted the agency $2.5 million to continue with a COVID-era program to help cover child care costs for working families. That was enough to continue with scholarships for 750 children but left more than 2,000 previously enrolled kids without aid.
The Department of Social Services is seeking $1.9 million more annually in hopes of covering 250 additional children. That won’t be possible unless senators fight for it. Their budget proposal is still weeks away.
“The other piece I think we have to look at is how do we lower costs,” Erickson told agency representatives earlier this year. “Because at the end of the day, we don’t have an unlimited supply of money, and parents certainly don’t.”
Bowers agreed that the cost to run facilities certainly is high, but she also had a question: “Where do you cut?”
Child care workers often make less than $11 an hour. Even so, salaries make up the bulk of providers’ costs, according to a study by DSS. Plus, federal funds used to give those workers a pay boost during the pandemic are gone, with little hope for the $25 million in annual state funding it would take to keep running.
Out of business
When it came to her own exit from the industry, Erickson said it’s not something she sought out.
For her, it began with the pandemic. Beaufort Memorial Hospital asked her to provide care to the school-age children of its employees who were virtual learning. She staffed a classroom with retired teachers, while students did lessons over Zoom. After the state rolled back COVID restrictions, the hospital asked her to keep the space operating as a traditional day care center.
When the hospital opted to move its child care to a new space, Otter bought the recently refurbished building and made plans to move in.
It was then that the company reached out to Erickson, asking her to keep the center operational as the move was made to make it easier for licensing purposes. The relationship grew from there.
“So, I wasn’t looking,” Erickson said. “It literally came to me. After six months of conversations and discussions, it made sense.”
The 61-year-old legislator and grandmother has growing commitments, both at the Statehouse and to her own family.
“It just it all kind of fell into place that it was probably the right choice,” said Erickson, first elected to the House in 2007.
It will also be better for her directors and staff that helped her grow her business from one center to four. Otter, as a bigger company, can offer them health benefits, retirement, professional development and career growth.
“So, hopefully it’s given them more options than I could give them,” Erickson said. “They’re now in a bigger pond.”
The four centers she sold were licensed for 387 children total, according to DSS records.
Unlike small operators, larger chains like Otter can tap into savings and spread costs over a greater number of children. Otter has greater purchasing power for groceries and can afford better technology.
Erickson also gave the example of liability insurance, which for her tripled in price over the course of a year.
“Not many businesses can withstand that,” she said.
Jessica Holdman writes about the economy, workforce and higher education. Before joining the S.C. Daily Gazette, she was a business reporter for The Post and Courier. S.C. Daily Gazette is part of States Newsroom, the nation’s largest state-focused nonprofit news organization.
