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Seeking a pay bump for early childhood teachers, Colorado advocates look to the tax code

Arianna G. H. Kingston, an assistant preschool teacher in Colorado Springs, has worked in the early childhood field for much of the last 30 years.

She makes $15 an hour.

Kingston, who helped a group of children piece together a giant construction-themed puzzle one morning this week, considers the job a calling. She said she’s come to accept the low pay “not because it’s right, but just because it’s the way that it is.”

But Kingston and around 7,000 other child care teachers could soon get a boost if Colorado lawmakers pass legislation that creates state tax credits for some early childhood educators. The credits would range from $1,000 to $2,000 a year, depending on the teachers’ credentials, and would be awarded whether or not the educators owe income taxes. 

With annual provider salaries ranging from $24,000 to $27,000 a year, such modest sums won’t solve the longstanding problem of low early childhood wages. But Kingston believes they are a step in the right direction.

“To me, it would really feel like a financial pat on the back,” she said. “It makes me feel like the legislators and the taxpayers care about what I’m doing.”

The proposed tax credits are among three pieces of early childhood tax legislation under consideration this year. The other two bills focus on parents. One would extend  the lifespan of a tax credit for low-income parents paying child care expenses and the other would fund a more narrow state version of the federal child tax credit.

That’s on top of two early childhood tax laws approved during the 2018 legislative session — one an extension of a tax credit for donors to early childhood programs and one an expansion of a tax credit that benefits low- to middle-income parents paying for child care. (For details, see the list at the end of this story.)

Experts say using state tax credits for early childhood purposes is no panacea for the field’s chronic funding woes, but can be an effective tool for encouraging teacher training and quality improvement efforts, or addressing other specific needs. In addition, since tax credits are essentially tax dollars the government forgoes, they don’t require new layers of bureaucracy the way new tax-funded programs would.

It’s a “smart and viable way to expand the variety of ways we finance early childhood,” said Louise Stoney, an expert in early childhood finance who runs a group called Opportunities Alliance. “It’s also an idea that appeals to policymakers that have trouble with tax-and-spend.”

While other states have established various early childhood tax credits, none have used them as extensively as Louisiana, which passed five credits in 2007.

“I’ve been sort of shocked actually,” Stoney said. “I thought we would see a lot more uptake of the tax credit strategy,” she said.  

Among Louisiana’s credits is one similar to Colorado’s proposed early childhood educator tax credit, also tied to teachers’ credential level. After it passed, child care and preschool teachers went back to school in droves to get additional training, said Melanie Bronfin, executive director of the Louisiana Policy Institute for Children, a statewide advocacy group.

“It’s a very directed tool to do a very specific thing and the thing you’re doing is not creating slots,” she said. “It’s a way to improve quality.”

In Colorado, preschool teachers earn just over $13 an hour and child care teachers earn about $11.50 an hour on average.

Bronfin said in garnering support for Louisiana’s tax credits, advocates there emphasized that early childhood education is like any other industry in which tax credits are offered.

“It’s important for people to understand that tax credits are used usually to assist businesses in their community,” she said. “We showed that child care is a very important industry itself.”

In Colorado, the proposed educator credit would be available only to a subset of early childhood teachers and directors: Those who work in programs that have a rating higher than a Level 1 in the state’s five-level child care rating system, and that accept state child care subsidies or meet federal Head Start standards. The idea is to target employees in programs that serve vulnerable children and that have tried to improve their quality. If approved, the credit would cost the state about $11.5 million in forgone tax revenue during its first full year.

For Kingston, who holds the highest early childhood teacher credential offered by the state, the credit could be worth $2,000 a year. She works at the South Chelton location of Early Connections Learning Centers, which has a high state rating and serves many students on state subsidies.

Although Kingston and her husband dream of taking a Hawaiian vacation, that’s not where she’d spend the extra money if lawmakers approve the tax credit.  

“For the most part it’s going to go to practical things,” said Kingston. “A payment on my house, groceries in my fridge, or gas in my car.”

Here’s a roundup of existing and proposed Colorado income tax credits that relate to early childhood.

For Donors
Child Care Contribution Tax Credit
This credit took effect in 1999 and has been reauthorized twice, most recently in 2018. It will extend through 2024. The credit allows donors to claim an income tax credit worth up to 50 percent of their contribution to child care centers, residential treatment centers, homeless youth shelters, or programs offering before- and after-school care. In other words, a donation of $200 to a qualifying child care provider would yield a state tax credit of $100 for the donor.

For Parents
Low-Income Child Care Expenses Tax Credit
(A bill under consideration HB19-1013, would increase the law’s lifespan from three to eight years.)
This refundable state credit helps low-income families who don’t make enough money to qualify for a similar federal tax credit, and therefore can’t qualify for Colorado’s Child Care Expenses Tax Credit (see below). Families with a federal taxable income of $25,000 or less may claim a refundable state income tax credit for child care expenses for children under 13 years old. The tax credit is equal to 25 percent of eligible child care expenses incurred during the year, up to a maximum amount of $500 for a single dependent or $1,000 for two or more dependents. This credit currently extends through 2020.

Child Care Expenses Tax Credit
This refundable tax credit helps families cover child care costs. It’s available to families with a taxable income of $60,000 or less who qualify for a federal tax credit for child care expenses. In 2018, the legislature changed the law so all eligible families could claim a state credit worth 50 percent of their federal credit. Previously, families with taxable income from $25,000 to $60,000 could only claim a credit worth a smaller percentage of the federal credit.

For Parents:
Child Tax Credit (HB19-1164)
This refundable credit is more an anti-poverty measure for families than a provision focused on the early childhood education industry. However, it would put more money in the pockets of parents with children 5 and under. It was originally approved by the state legislature in 2013, but has never been funded. A bill now under consideration would fund the credit, which would be a percentage of the federal child tax credit. The largest credits would go to low-income families and the smallest credits going to families earning up to $85,000 a year.

For early childhood teachers:
Early Childhood Educator Tax Credit (HB19-1005)
This proposed refundable credit, similar to ones in Louisiana and Nebraska, would award tax credits ranging from $1,000 to $2,000 to certain early childhood teachers and directors. The credit would be available to employees who work in facilities that accept state child care subsidies or house Head Start or Early Head Start programs. Eligible programs will have to have a state rating higher than the state’s lowest Level 1 rating in the Colorado Shines system. The amount of the credit would be based on the educator’s credential level.