Child Care Is Essential, and Minnesota Must Invest

Minnesota’s child care sector is in a sustained crisis—one that’s jeopardizing not only families but the state’s economy. An April 2025 statewide survey by the Federal Reserve Bank of Minneapolis and First Children’s Finance finds persistent financial strain, worsening staffing shortages, and shrinking enrollment of preschoolers, all contributing to an unstable child care landscape.

The consequences are not abstract. According to a February 2025 national analysis by ReadyNation, Minnesota loses $2.1 billion annually in productivity, wages, and tax revenue due to child care challenges. And with 74% of children under age five living in households where all available parents are in the workforce, child care isn’t just a social issue; it’s economic infrastructure.

Download the PDF here

Minnesota’s Providers: “We Can’t Keep Our Doors Open at a Loss”

The survey, which gathered responses from over 600 providers, found that 86% of child care business owners and managers agree the industry is in crisis—a figure that has held steady since 2024. Notably, more child care centers now report being in crisis than ever before: 87% in 2025, up from 64% the year prior.

The primary culprits? Rising operating costs, difficulty hiring staff, and a sharp drop in preschool-aged enrollment as families shift to free, school-based programs. This trend undermines the financial model most providers rely on—using tuition from older children to subsidize the costlier care of infants and toddlers.

“I can’t keep opening my doors at a loss,” said one northeast Minnesota center director. “We’re pushing families out by increasing our rates just to stay open. If we close, there are no other options in our area.”

Enrollment Recovery Isn’t Enough

Minnesota’s child care programs are in crisis, operating at only 77% of their licensed capacity, up slightly from last year but still below the 83% industry standard for financial sustainability. The gap is due in large part to staffing shortages: 215 open teaching positions have resulted in 1,745 unavailable child care slots, and that’s just among the 8% of providers represented in the survey. The real number is likely far higher.

Despite these vacancies, providers say they’re struggling to hire at competitive wages. One-third of centers report their compensation levels are unsustainable, and many have been forced to raise tuition—putting further pressure on families.

At the same time, providers face skyrocketing insurance premiums, utility costs, and food expenses. One Twin Cities operator noted that their liability insurance has risen 51% in just one year, even without a single filed claim.

The Business Sector Is Stepping Up, Government Must Follow

Download the Moms First report, The Business Case for Child Care, here.

While child care businesses fight to stay afloat, the private sector is increasingly vocal about the need for public solutions.

Moms First, a national nonprofit, recently brought together over 50 business leaders from companies like UPS, Etsy, Mazda Toyota Manufacturing, and the National Women’s Soccer League for a day on Capitol Hill. These executives spoke directly to lawmakers from both parties, making the case that child care is essential to workforce productivity, retention, and recruitment.

Their coalition, known as the National Business Coalition for Child Care (NBCC), now includes over 200 companies and is growing rapidly. As Moms First shared, every $1 a company invests in child care yields over $4 in return.

But even the strongest private sector support isn’t enough. Business leaders made clear: solving the child care crisis requires public investment.

What the Minnesota Legislature Must Do Now

Minnesota’s Great Start Compensation Support Payment Program has helped stabilize staffing in the short term, but it’s limited in funding and scope. The program restricts funds to wage support, excluding other urgent needs like maintenance, facility upgrades, and insurance costs. Further, it doesn’t cover staff training or curriculum development. Additionally, the pandemic-era federal grants that preceded it were more flexible and, providers say, more effective.

To fully stabilize the child care sector and unlock its economic potential, policymakers should:

• Expand and diversify grant funding such as the Great Start Program to reflect actual provider costs.

• Provide tax credits to both families and employers who support child care access.

• Invest in wage and benefits support to grow and retain the early childhood workforce.

• Ensure rural and home-based providers have equal access to funding and supports.

• Level the playing field between school-based care and private providers through equitable reimbursement and incentives.

This Is a Moment for Action

Minnesota’s economy is already losing $2.1 billion annually due to the child care crisis. Without urgent intervention, these losses will only increase—deepening the strain on families, businesses, and communities.

The data is clear. The stories are compelling. The private sector is ready. Now it’s time for Minnesota’s Legislature to follow suit and invest in child care as the essential infrastructure it truly is.

To stay informed about child care policy developments in Minnesota, visit the Child Care Aware of Minnesota Bill Tracker, which monitors state-level legislation that impacts providers and families.

For updates on federal legislation, Child Care Aware of America offers a Federal Child Care Bills Tracker with summaries and status updates on key federal initiatives. Their State Policy Dashboard also provides a helpful overview of how different states are investing in child care and early learning.

These tools are invaluable for advocates, policymakers, and stakeholders seeking to stay informed and engaged in advancing child care policy at both the state and federal levels.

Rural Pathways works at the intersection of policy, practice, and partnership to build strong child care systems in rural communities. Contact us to learn more.

Reactions? Please email us your thoughts or join the conversation on LinkedIn or Facebook.

Citation: Anderson, Charity & Gilpin, Staci. (2025). Child Care Is Essential, and Minnesota Must Invest. Rural Pathways News.