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Private equity is coming for child care. What does that mean?

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A Q+A with Elliot Haspel on how private equity and shareholders are reshaping American child care
Gale, Rebecca
Publication Date: 
14 May 2024


As a follow up to Elliot Haspel's report on the role of private equity in shaping the child care, Rebecca Gale had a Q+A with Haspel about the findings and his vision for a way forward.

Gale: You mentioned that as private equity gains a larger share of the child care industry, their political influence will grow. One example you gave was the opposition to Build Back Better by the Early Care and Education Consortium (ECEC). How do you see the role of such political interests evolving as private equity gains a stronger foothold in the child care industry?

Haspel: Yeah, absolutely. I think the broader point you’re getting at is: is there an inherent conflict of interest? If we put in hundreds of billions of dollars to create a publicly funded child care system where parent fees are significantly reduced—if not making it entirely free for everyone like our public schools—but the tradeoff is that there are conditions that restrict profit, what will private equity-backed chains do?

Build Back Better did have mandatory caps on parent fees and living wage minimums for educators. And according to the New York Times, we saw the Early Care and Education Consortium, an advocacy and lobbying group that represents many of the large chains, working behind the scenes with Senator Manchin to lobby against the bill.

And then the month after Senator Manchin kills Build Back Better, executives for many of these chains provided donations to his campaign PAC.

Also, we recently saw the Massachusetts Senate passing a bill that involves quite a lot of public money—$475 million a year in grants to help child care programs—to keep their operations going… and pay their staff better. But they put some guardrails in place. They say, if you have more than 10 sites in Massachusetts, you must agree to certain conditions that include things like accepting a reasonable number of children who are on subsidy, which is a proxy for lower income children. You must agree to use a certain percentage of the grants to pay your educators better and to follow a wage ladder that’s going to be put in place. You must agree to a certain number of financial disclosures with all strings attached, right?

We found that ECEC quietly tried to get those particular provisions stripped out. They sent a letter to the chair and vice chair of the committee asking them to amend the provisions that would have targeted the larger chains.

The concern here is that economic power often equals political power, and private equity is enormously powerful politically. I have a quote in there from Brendan Ballou, who’s the former U.S. Special Counsel for Private Equity at the Department of Justice, that “Congress works for few constituencies harder than they work for private equity.”