MARY LOUISE KELLY, HOST:

Federal pandemic aid for the nation's child care industry is going to run out in September. That funding cliff is forcing several states, including California, to make tough decisions about how to subsidize its child care system. Meanwhile, underpaid providers are caught in the middle, as Daisy Nguyen of member station KQED explains.

DAISY NGUYEN, BYLINE: Annette Nicholson opens her child care business, based out of her home in Stockton, Calif., as early as 6 a.m.

(SOUNDBITE OF BELLS CHIMING)

UNIDENTIFIED PERSON #1: Good morning.

UNIDENTIFIED PERSON #2: Good morning.

NGUYEN: Nicholson lives on the north edge of town, where there are few child care options for families. Stockton is where these working-class parents can afford to live, but they need to drop their kids off with her early so they can commute long distances to the Bay Area. Throughout the day, Nicholson will read to 10 children, play with them and set them down for naps and answer questions like she's doing here with a 5-year-old boy named Tyree (ph).

TYREE: I'm still getting big like my dad.

ANNETTE NICHOLSON: Yeah. One day you'll be a man, but you got a long time - not at 5. You got to get 10 and then 15 and then 20.

TYREE: I'll be 20?

NICHOLSON: One day.

NGUYEN: Nicholson works as long as 10 to 12 hours per day, but she barely gets by. That's because running a licensed child care business costs far more than what parents can afford to pay her.

NICHOLSON: We provide all the meals, the location, toys, the assistant, the education piece, the tools to go with that.

NGUYEN: She knows she can't charge parents more to cover all those expenses. So she essentially takes a pay cut. She figures she loses about $25,000 every year. At 62 years old, she doesn't have enough savings to retire. That's because she says she's been underpaid for years.

NICHOLSON: People still kind of see us as, I'll say, babysitters and not look at that we are actually the ones that are developing our next generation.

NGUYEN: Child care is a labor-intensive, essential service. Yet people in this industry nationwide are some of the lowest paid workers. Nearly all are women of color, like Nicholson, and many are also immigrants. Recent data from a UC Berkeley survey found home-based child care providers in California earn as little as $16,000 a year, even though almost a third of them have a bachelor's degree and more than a decade's worth of experience. Anna Powell is a researcher at Berkeley's Center for the Study of Child Care Employment.

ANNA POWELL: The data has shown us that high-quality early education is absolutely beneficial to children. It's beneficial to parents, right? These are long-term investments that are good for all of us. But let's also remember that the people we're investing in are truly high-quality professionals themselves.

NGUYEN: Powell says the state needs to streamline the way it sets reimbursement rates for child care providers so that they're based on what it actually costs to provide care instead of what parents can afford. This year Democrats in the California legislature want to do just that by raising the payback rate by 25% or about a billion dollars. Eloise Gomez Reyes, the majority leader in the state assembly, is leading the effort.

ELOISE GOMEZ REYES: They're taking care of the most precious people in our lives, and yet we are not paying them enough to keep their doors open.

NGUYEN: While a billion might sound like a lot, Reyes says the increase will help make up for inflation since the current rates are stuck at 2016 levels. Reform and better pay won't happen overnight. But Nicholson says she hopes to see change before she retires.

NICHOLSON: You know, you got to love kids 'cause kids can wear you down. And you have to even love them even more to know that you're not going to get what you deserve. It's a lot of love you have to give to stay in this industry.

NGUYEN: Nicholson hangs on, knowing that without her, parents can't go to work. For NPR News, I'm Daisy Nguyen in Stockton, Calif.

(SOUNDBITE OF MORGAN WALLEN SONG, "LAST NIGHT") Transcript provided by NPR, Copyright NPR.

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