Nearly 20% of childcare centers in Arizona are owned by private-equity firms, according to a study led by Arizona State University. This statistic has raised concerns among parents as the implications of private-equity ownership in various sectors, including healthcare and education, are often viewed negatively.
Findings on Ownership Trends
Chris Herbst, a professor at ASU’s School of Public Affairs, and Jessica Brown from the University of South Carolina are exploring the impact of private-equity ownership on childcare facilities. Their research reveals that while private-equity ownership has grown nationally—from 1% in 1997 to nearly 10% today—the geographical distribution of such ownership is uneven. As of 2024, a significant 82% of U.S. counties reported no private-equity-backed childcare providers, with concentrated ownership in states like Arizona (17%), Nevada (19%), Virginia (13%), and Georgia (11%).
In Arizona, private-equity-owned centers are particularly concentrated in affluent areas such as Mesa, Chandler, and Scottsdale. Herbst noted that private-equity firms are drawn to regions with wealthy families, fewer publicly funded preschool options, and more lenient regulations on staffing and classroom sizes, which can help reduce competition and operating costs.
Complex Relationship Between Cost and Quality
The study’s results indicate that the relationship between private-equity ownership, costs, and quality is multifaceted. Although private-equity centers generally charge higher fees compared to other childcare facilities, their prices are somewhat lower than chains that do not have private-equity ownership.
Herbst remarked on the complexity of the findings, stating that private-equity ownership is not the sole factor contributing to high childcare costs. He emphasized that for most families, the high cost of childcare is likely not directly related to private-equity involvement.
Variability in Quality Metrics
To assess the quality of childcare facilities, the researchers evaluated factors such as accreditation status and turnover rates among teachers and children. The findings were mixed; private-equity-owned centers were more likely to receive high ratings from state systems and to achieve accreditation from the National Association for the Education of Young Children. However, these centers also exhibited higher turnover rates, which may suggest issues with satisfaction among staff and children.
Future research is planned to further examine the influence of various factors on quality measures at childcare facilities. Herbst indicated that concerns about private-equity ownership should also extend to large national childcare chains, as their operational behaviors often resemble those of private-equity firms.
The School of Public Affairs at ASU is part of the Watts College of Public Service and Community Solutions.
Source: Arizona State University
