Whitmer announces $23 million in startup funding for child care entrepreneurs

Gov. Gretchen Whitmer is chipping away at the child care crisis in Michigan with a $23 million investment in entrepreneurs who need help opening new child care businesses.

Applications for startup grants will open Nov. 7 and can be used to help launch businesses or help newly licensed facilities by shouldering some of the financial burden of recruiting and retaining staff and purchasing classroom materials.

“As a mom, I know firsthand that high-quality, affordable child care is essential so parents can go to work knowing their kids are safe and cared for,” Whitmer said. “In Michigan today, we have a shortage of child care providers that meet people’s needs in their communities, and I am proud that we have been able to work across the aisle to make a record, bipartisan investment in child care.”

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How much does it cost to start a child care center?

The startup grants are part of Whitmer’s $100 million Caring for Mi Future initiative, which intends to establish or expand 1,000 new child care facilities by the end of 2024.

Despite minuscule profits, child care businesses are not cheap to get off the ground. Application fees begin at $150 and do not include additional inspection fees for environmental health, playground safety, lead hazard risk and other matters. All told, costs can run as high as $4,830.

New child care businesses must also submit detailed lists of equipment they intend to purchase that will stimulate children’s physical, academic and social development.

“For very good reasons, child care is highly regulated, which makes it a more difficult business endeavor than you would expect for the amount of profit a child care business typically brings in,” said Tifani Sadek, a University of Michigan law professor who is co-teaching an interdisciplinary graduate course this fall entitled “Addressing the Child Care Crisis.” “I’m happy that we're treating child care owners like entrepreneurs because that's exactly what they are.”

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Child care deserts throughout Michigan

The grants speak to the huge need for more child care providers throughout the state.

An investigation by several newsrooms, including the Free Press, found that 20 counties in Michigan qualify as child care deserts, with three children competing for every one slot in an in-home or group center. An additional 23 counties just barely missed qualifying as such.

Some neighborhoods had as many as nine children vying for each available opening.

Staffing shortages and high costs stand in the way of getting centers running at full capacity and getting new ones up and running. The majority of child care businesses exist on razor-thin profit margins — if they make a profit at all. Staff working at child care centers continue to make a mean wage of below $13 an hour.

Although the challenges of running these businesses remain salient, the financial and administrative assistance will be a boon to those for whom opening a child care business might have seemed out of reach.

The child care entrepreneur grants are one piece of what Whitmer’s team says is a historic $1.4 billion investment to expand access to quality, affordable child care. Michigan’s efforts to date have helped 150,000 children access free or low-cost child care, provided nearly $1 billion in grant money to existing child care businesses and provided bonuses to 38,000 child care professionals.

The grantmaking initiative includes access to trained child care navigators who can assist with prelicensure and other business support services through the Our Smart Start website, according to the state’s announcement regarding the program.

Interested entrepreneurs can also go to the Our Smart Start website to register for one of two webinars where they can learn more about the application process.

“We encourage every child care entrepreneur in Michigan to turn their passion for providing quality care and education for our youngest residents into a business,” said Emily Laidlaw, Licensing Bureau director for the state Licensing and Regulatory Affairs agency. “The prelicensure and startup grant funding, paired with assistance from Our Strong Start navigators, will break down barriers child care professionals face throughout the licensing process.”

Jennifer Brookland covers child welfare for the Detroit Free Press in partnership with Report for America. Make a tax-deductible contribution to support her work at bit.ly/freepRFA. Reach her at jbrookland@freepress.com.