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For a few years, the child-care center at River's Edge Hospital in St. Peter, Minn., thrived.

Opened at the beginning of the COVID-19 pandemic as a temporary solution to serve hospital employees, the center offered round-the-clock care for those who needed it and only charged families for the time their children spent there. It worked so well, the hospital opted to expand the center's capacity and make it a permanent fixture, filling an old clinic space.

Before long, though, the cost of offering flexibility to families and the logistics of state licensing requirements became unsustainable, said Jackie Kimmet, chief human resources officer at River's Edge.

"The organization just felt like it was two big mountains for us to climb," she said, adding even state officials' offer to work with the hospital to craft a solution wasn't enough to save the center.

The center closed Thursday, leaving the parents of 21 children to find care elsewhere. It's among the latest of several casualties in the already sparse population of employer-sponsored child-care centers in Minnesota, a sector experiencing high demand but varying success. The Minneapolis Fed reported in August it had counted 42 employer-sponsored programs in Minnesota licensed to serve 2,700 children total, a tiny fraction of the state's roughly 8,000 child-care providers licensed to care for more than 221,000 children.

Since then, multiple centers have announced plans to close. In January, Golden Valley-based General Mills said it would close its on-site child-care center Sept. 30, citing declining enrollment as more employees work hybrid schedules. In February, St. Catherine University in St. Paul told families enrolled at its Early Childhood Center (ECC) the 93-year-old program would shutter in May. University spokeswoman Sarah Voigt pointed to a drop in enrollment and the end of a pandemic-era federal grant program that kept child-care centers afloat nationwide as reasons for the closure.

'Ripple effects'

None of the ECC's 19 students are children of university faculty, staff or students, though the center has served the campus population in the past, Voigt said. It is also not currently serving as an instructional lab for university students, the original purpose upon its founding in 1931.

Still, the center's connection to the university was a draw for Sommer McInerney, a St. Paul resident who helps train St. Kate's nursing students through her job as a pediatric nurse practitioner. Her 3-year-old son began attending the ECC full time last year, and she's now both advocating to keep the center open and scrambling to find an alternative if it doesn't.

The abrupt closure announcement has created "ripple effects ... beyond reallocating students to other programs, beyond the stress that it puts on working parents," McInerney said.

"It really goes into the core of that community, the teaching of their own students — of their own undergraduate and graduate students — and to the Sisters who have supported the program for these many years," she said.

The ECC's small size was appealing, McInerney said, making it easier to communicate with the people caring for her child every day. But many such independent centers are finding that the economics no longer work, and some have sought out a larger provider to take the helm, said Clare Sanford, chair of government relations for the Minnesota Child Care Association.

"What that speaks to, to me, is that it is too expensive and too difficult to offer child care, and that it is getting harder and harder for independent operators to do it," said Sanford, who is also vice president of government and community relations at New Horizon Academy. "And that, to me, means we as a state need to work more on the public investment side and how we're supporting providers on the policy side."

Employer-sponsored child care began to proliferate half a century ago, as government support for child care declined and women's workforce participation rose. There are government incentives for private sector-sponsored child care: Employers that offer child care are eligible for federal tax credits, and the Biden administration is requiring semiconductor manufacturers that apply for more than $150 million in Creating Helpful Incentives to Produce Semiconductors (CHIPS) funding to provide child care for workers.

But like other employee benefits, a child-care center attached to a workplace can disappear when an employer decides to instead spend money elsewhere. At a college or university, for example, officials might decide to close a child-care center with low enrollment and instead invest in another campus facility, Sanford said.

"I think it just boils down to: If it makes sense for the employer, they will do it, and if it doesn't, they won't," she said.

Making it work

Across the child-care sector, the financial challenges of operating a center have become more acute since the onset of the pandemic. Though families still need child care whether they're working from the office or home, increased flexibility has prompted some to make sacrifices. That has including cutting back on how much child care they use, logging on to work after their child goes to bed or splitting care with a co-parent during the day, Sanford said. Many families are now choosing child care based on proximity to their home rather than their workplace, she said.

In addition, child-care providers are facing the same economic challenges of other businesses, from a labor shortage to the increased costs of basics such as food and utilities, said Ann McCully, executive director of Child Care Aware of Minnesota.

"What they charge is very different than what it actually costs them to run their program," she said. "No matter what way you slice the data, there's a gap: There's a gap between what parents can pay, and we can't ask our programs to take in any less."

Minnesota legislators this session have introduced a bill that aims to reduce child-care costs for families earning 150% or less of the state median income, or about $175,000, by making monthly state payments directly to providers.

In the meantime, some employers are still making the calculus work, citing on-site child care as a benefit that helps recruit and retain staff.

Allianz Life opened a center in 2011, which Bright Horizons operates, that can serve about 100 children, said Chief People and Culture Officer Jenny Guldseth. The center has been able to keep enrollment near capacity despite the pandemic, she said, and is about 80% full. Though Medtronic closed its child-care center when the pandemic began and didn't reopen it because of lack of demand, the company continues to offer backup child-care services to employees through Bright Horizons, according to spokeswoman Kira Jastive. Hormel Foods is completing a 13,000-square-foot facility — slated to open before the end of April — that will serve up to 130 children of employees and community members, according to Angie Bissen, human resources manager.

At River's Edge, Kimmet hasn't given up hope the child-care center might one day reopen.

"I would love for it to work in the future," she said. "We had employees that we hired that didn't have children and didn't plan to have children anytime soon but said that that is why they accepted the position: just because it showed how much we cared about our employees."