Private Operators And Child Care Funding
By Martin Corkery - Director
Children First Learning Centres QLD

Funding for private operators tends to come in the form of lending from financial institutions. Right now the biggest funding issue we face is the lack of credit available from the banks. Several of the largest banks had their fingers burnt as their bad lending decisions lost them hundreds of millions of dollars.

Now, when approached by people looking to expand or enter the market, they hear the words 'child care' and suddenly the conversation goes icy.

The collapse of ABC, CFK and hundreds of small private operators, along with the hike in subsidies required by government supported centres is evidence to anyone that this is not a 'cash cow' industry.

Sure, child care isn't rocket science, but it is often a small business with a multimillion dollar turnover, beset with regulatory burdens (14 regulatory bodies in NSW at last count). This is a highly regulated industry - and whilst the government bodies are happy to come out and tell parents that they're making it 'tougher' for shoddy operators, what they don't say is that each and every centre will incur additional costs. The Food Authority in NSW, for example will be licensing centres - this doesn't change the standard of food handling, which will remain exactly the same, it just imposes additional documentation and auditing, which will cost centres up to $2,000 extra per year. I doubt that they'll be explaining to families how this will affect their daily fees.

It is incredibly difficult for smaller operators, and their staff, to manage this kind of administration and compliance, so it comes as no surprise that plenty of them are going to the wall. ABC and CKF along with numerous developers rapidly built centers in areas of low cost land across Australia during the past seven years which then caused their downfall through over supply and low occupancies.

It is difficult for private operators to remain competitive with government funded centres. Whilst the fees that we charge have to cover staffing and care provision costs (just as theirs do), our fees also have to cover the cost of mortgage/loan repayments or rent (most government centres are rent free) and taxes etc.

In addition, government run centres receive grants, ongoing subsidies and funding. They even get grants for things like water tanks, energy saving investment, computers and so on for which private centres are not eligible. Why, I ask, is it more important for children at a council-run centre to understand the importance of rainwater harvesting, storage and responsible use than those at a private centre?

A level playing field, making money available to all centres, based on the level of care they actually provide, would benefit all sectors of the industry.

Private operators make up around 85 per cent of the child care industry. Sadly, we do not have a strong or coherent national association representing our interests when speaking to government. Individual politics have tended to get in the way of a thoughtful and collaborative approach to engaging with government.

However, the split between private and government operations should be put aside, and the focus should be on obtaining the best outcomes for children.

A strong, coherent national body that represents all operators, both private and public, would benefit all parties. When evidence based practice is being touted; higher staff ratios to children, it is important we also explain the additional costs this would entail for families, and how the government can help mitigate these costs in a fair and equitable way.

Certainly the Federal government should be supporting child care; economists have provided many studies showing the rate of return on investment (up to $1.84 for every dollar spent). Hopefully in the pending Federal budget there will be no cut back on child care benefits, as all taxpayers should be entitled to assistance without further means testing, when the return on investment to the Federal Government is one that would be the envy of any current investor!

Whilst there is an undersupply of available spaces in some areas of Australia, and certainly a chronic undersupply of high quality care in many areas across the country, there are also areas of high over supply. This coupled with the previously outlined inability to be competitive, cripples private operators.

The government could limit the number of centres entering the market in areas of over supply, by requiring new operators to demonstrate need. The data identifying centres with high vacancies is available through the CCMS the government just needs to look at it.

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