Subsidies creating headache for day care centers

Private operators: Tax-backed programs at public schools are unfair

Guy Falzarano owns 11 Rainbow Academy day care centers in New Jersey, but as he looks to expand his business, he’s looking outside the state.

Guy Falzarano owns 11 Rainbow Academy day care centers in New Jersey, but as he looks to expand his business, he’s looking outside the state.

“It’s so hard to grow in New Jersey because of what is going on in the private sector” for day care centers, Falzarano said.

What is going on, according to industry advocates, is a challenge presented by new competition from public schools offering preschool and child care services, combined with reduced eligibility for low-income children to receive state subsidies for day care.

The industry has been attempting to push back against these changes, both by asking the state to put public school preschool tuition on equal footing with private-sector tuition, and by easing restrictions on participation in before- and after-school care.

The competition from public schools began after then-Gov. Jon S. Corzine signed into law a measure that expanded preschool programs.

Falzarano has seen districts that have seen declines in enrollment offer tuition-based preschool. He said the competition is unfair, because the district doesn’t have to cover the costs of facilities, including utilities, in the tuition. In effect, Falzarano said, the districts’ taxpayers are subsidizing preschool at public schools, forcing private providers to close.

“In order for those districts to fill those spaces, they’ve got to look for a new class of students,” Falzarano said.

In school districts like Piscataway and Red Bank that offer preschool, private providers have been squeezed.

“I can compete with anybody, but you can’t compete with subsidized rates,” Falzarano said. “Why should taxpayers pay for something that isn’t required by the constitution?”

Falzarano said the teachers unions have supported the preschool expansion because they can represent the employees.

Falzarano operates 11 facilities in New Jersey, including in Bergen, Morris, Middlesex, Monmouth and Hunterdon counties, and his rates depend on the market — costs run from $950 per month for 4 year olds to $1,200 per month for infants.

“We’re going to be the last one standing,” he said. “We provide what I believe is exceptional service, so when the last one goes down, it’s going to be me.”

Kathy Feigley, president of the New Jersey Child Care Association, said districts should be required to charge their per-pupil cost as tuition. She is director and owner of Kangaroo Kids Child Care and Learning Center, in Branchburg.

“There’s many smaller preschools, especially in this area and throughout the state, that just can’t keep up with it,” Feigley said of public-school tuition rates. When the businesses close, the state loses the business, sales and property taxes that they generate, she noted. In addition, parents who are interested in facilities close to their home or work, or who want a religiously affiliated center, lose options.

“All of those choices keep getting eliminated,” Feigley said.

She agreed with Falzarano that unions have been a key factor in the public preschool expansion: “A lot of public schools are declining in enrollment, and it’s important for them to keep up their ranks. The more they pull into their ranks, the stronger their voice is.”

But New Jersey Education Association spokesman Steve Wollmer rejected the contention. He said preschools should not be considered competitors to day care centers, since the schools are education-focused and governed by state education laws, including teacher certifications.

“We support high-quality preschool, period, and we support it because there’s a mountain of data” supporting the value of preschool to disadvantaged children, Wollmer said.

And counter to what private providers have charged, Wollmer said the tuitions charged by public preschools are not inappropriately low, adding that state law shouldn’t be changed for the benefit of private operators.

“It costs what it costs, and that’s what the market (price) is,” Wollmer said. “There’s nothing written in the law that says we have to pay for a profit for a private entity.”

Barbara DeMarco, who lobbies for the New Jersey Child Care Association, said the combination of public-school competition and reduced eligibility in low-income areas for subsidized before-school, after-school and summer child care is putting some centers out of business.

These changes have led to 9,000 fewer children attending these “wraparound” programs, which has raised concerns among legislators.

DeMarco said the child care industry is a significant economic driver in the state. The most recent report focusing on the industry, prepared by Thomas Edison State College in 2006, found it generates $2.55 billion in annual gross receipts and provides the equivalent of 65,300 full-time jobs.

Lynette Galante, owner of Jersey City-based Future Generation Early Learning Centers, closed a child care center in East Orange due to the eligibility restrictions.
“When they changed the guidelines, they basically pulled the rug from underneath us without warning,” Galante said.

She said the changes are going to cost the state jobs and put pressure on parents. She added that in the past year, she has laid off 25 workers, some of whom she had employed for 20 years.

“It’s scary, and we didn’t expect the climate of our business to turn this way,” Galante said. “These are all primarily small businesses, owned by women.”

E-mail to: akitchenman@njbiz.com
On Twitter: @Kitchenman

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