REGIONAL REPORT : Child-Care Industry Hurt by Downturn : Economy: Parents laid off from jobs pull their children from centers. The businesses, which operate on thin margins, have hard time surviving.

For more than four decades, Linda Tullius’ family in Whittier has helped children by the thousands grow up.

Preschoolers passing through Tullius’ School for Beginning Years have had their noses wiped, their tears dried, their drawings praised, their accomplishments applauded. Former students, now parents themselves, have enrolled their children at the school founded by Tullius’ grandmother and aunt.

But on one sunny Friday in late March, the preschool closed forever--a victim of the recession.

“We’ve always been a break-even operation,” Tullius said. “But when the recession hit and family members were laid off, they couldn’t afford to bring their children here. It’s always been tough for us, but the recession was the straw that broke the camel’s back.”

During the last six months, as the economic downturn resulted in layoffs and cutbacks, many in Southern California’s child-care industry have felt the financial sting. Parents, suddenly out of work or scraping by on trimmed paychecks, have pulled their children out of day-care, leaving many preschools and child-care providers--some of them accustomed to turning business away--with unfilled playrooms. Now that the economy is starting to recover, some centers are beginning to recover as well, while others continue to founder.

“The child-care industry is extremely sensitive to the economy,” said Nancy Claxton, past president of the Orange County chapter of the Assn. for the Education of Young Children. If money is tight, “you don’t use child care or a preschool when you can keep your child at home or take him to a relative,” she said.

Ironically, past recessions have been kind to the child-care industry. Historically, when fathers’ paychecks were lost or household budgets became tight, stay-at-home mothers found jobs and placed their children in child-care centers, said one preschool director.

But today, dual-income families and single parents are the norm. According to 1988 figures from the U.S. Bureau of Labor Statistics, 57% of married women with children age 6 and younger work outside the home; for divorced women, the figure grows to 70%. With costs ranging from $65 to $110 a week, child care ranked in 1988 as the fifth-largest monthly household expense, after housing, transportation, food and taxes. Some child-care directors say it is now even higher on the list. Without a job, child care becomes unaffordable--and unnecessary.

“It’s hard. This is an emotional time for us,” said Michelle Rossi of the Southern California office of Kinder-Care Learning Centers, the nation’s largest chain of child-care centers. “You bond with these parents. They become part of the family. When they get laid off, it’s not just a matter of the numbers going down.”

The impact of the recession on child-care centers has hit some harder than others in the Southland. Rossi said some Kinder-Care centers have gained enrollment, while others have slumped. Child-care centers have suffered particularly in communities where local industries have had massive layoffs, or where military families have moved away while a parent was stationed in the Persian Gulf, Rossi said. Other operators cited still more factors for the downturn, such as high housing prices that require two paychecks, a slump in new housing construction, or an oversupply of preschools.

Many have felt the pinch. For example:

* The Early Childhood Education Center in affluent Irvine, a preschool operated by the University of California and open to the public, saw its enrollment tumble to about 90 students after the first of the year--a time when officials were banking on a traditional enrollment surge. Teachers had to reduce their hours and pay by 15% to balance the budget for the center, which is licensed for 125.

* In Ventura County, many women who are licensed to take care of children in their homes are finding business waning. “Last time this year, I had a waiting list,” said Delilah Garcia, who is licensed to take in 12 children at her home in Oxnard. She lost five children when parents were laid off and presently has seven spots open. “Even now, when it’s strawberry season, when workers are always desperate for child care, I have openings, even with that. It’s awful.”

* Some child-care centers in San Diego County were dealt a triple blow late last year, hit by not only the recession but also by the drought and the Persian Gulf crisis. Employees in the agriculture and landscaping industries suffered layoffs because of the drought, and the Marine and Navy personnel who went to the Gulf often sent their children to live with family members elsewhere, said Sally Hamel, district manager for Children’s World, the nation’s third-largest chain of child-care centers.

“I always thought we were more isolated because of the diversity of the economy, but we were hit more than we expected,” Hamel said. She declined to say how much business dipped but added that enrollment is picking up. “A recession, a drought and a war. That’s a pretty unique set of uncontrollable events.”

Child-care centers that serve the poor by offering subsidized care are reporting no vacancies during the recession. This is because children on long waiting lists quickly fill any openings, officials in Los Angeles, Orange and San Diego counties said.

But that does not mean the poor are unaffected. Claxton, administrator of the subsidized program run by the Orange County Department of Education, said parents who lose jobs must notify the department of their changed economic status, then have 60 days to find another job to retain their subsidized day care.

“I’m seeing on the average of two or three (notices) a week now,” said Claxton, whose program serves more than 1,000--and has 3,000 on the waiting list. “It was one or two a month a year ago.” What is more, she said, it is harder for laid-off parents to find new jobs. “It used to be, they’d come in in tears on Friday, but they’d have another job on Tuesday. Now it’s taking longer.”

Affluence is no safeguard either. Diamond Bar--full of new, large houses that commonly require two incomes to finance--is home to at least one child-care center feeling the crunch. Peppertree Child Enrichment Center usually has all 64 of its spots filled this time of year, but now has about 20 vacancies, said director Elaine Dalton.

“I’ve lost a lot of kids, kids who have been coming here a long time, because their parents lost jobs,” Dalton said. One mother, she recalled, was laid off on Christmas Eve. In addition to layoffs, the depressed real estate market is hurting business.

“Nothing is selling. There is no influx of people,” Dalton said. “Children are aging, but no new families are coming in.” Peppertree has enrolled a few new children as a result of the recession--one mother, a nurse who took on a second shift to earn more money, takes her daughter to the school full time instead of part time--but more children are dropping out.

“It’s hard to lose children. We become attached to them,” Dalton said. “They become very special to us and you feel sad that their mothers have lost their jobs. But what can we do?”

At the Early Childhood Education Center on the edge of the UC Irvine campus, director Gail Nadal geared up staffing last year, expecting the seasonal enrollment peak in January, when mothers traditionally re-enter the work force. Instead, parents started losing jobs.

“We waited and waited and waited for the increase,” Nadal said. “Then some parents started to change their children from full-time care to part time. Others were totally taking their children out.” Under orders by the University of California not to lose money, she was prepared to cut the staff by 20% to 30%. Instead, the teachers opted to take a pay cut.

It was especially difficult, she said, because the university affiliation allows her to hire “cream of the crop” teachers, and the pay cut was a step backward in the quest for higher standards and rewards for the profession, she said.

Enrollment is on the rebound at the preschool as parents find jobs. In addition, Nadal is looking for new ways to fill the remaining empty spaces, even if parents cannot afford the full preschool tuition--perhaps by establishing scholarships or a “parent co-op,” a program that would allow parents to pay part of the cost by working at the center.

At Childtime in San Diego, “we’ve increased, if anything,” said director Robin Cannice. The center, located next to the University Town Center shopping mall, has a regular preschool program and also accepts “drop-ins” from shoppers who need child care and from parents with fluctuating work schedules. “I don’t know if it is the time of year, or if more mothers are going back to work,” Cannice said.

There are waiting lists for the infant rooms operated by Children’s World in Laguna Beach in Orange County and Bonita in San Diego County. A second infant room just opened in Rancho Penasquitos and is almost filled, Hamel said.

What’s more, the recession appears to be prompting some mothers--either laid off from jobs or looking for additional income while staying at home--to become interested in starting family day-care centers.

“High, high numbers are showing up at the orientation meetings,” said Kelly O’Connell, director of resources and referrals at Options, a child-care agency in the San Gabriel Valley. At a recent meeting held by county officials who license the homes, about 80 women showed up, four times the usual turnout, she said.

Weathering the recession by cutting costs is not an option for child-care centers, authorities said. Child care is not a lucrative business; most of the money collected from parents goes to pay the teachers, who receive little more than minimum wage, they said. As the child-care profession strives to improve its quality, teachers’ salaries must go up, not down, they argue.

Linda Tullius adds her voice to the argument. Before her School for Beginning Years in Whittier closed, she charged $65 a week for child care that might cost $125 elsewhere. The teachers were subsidizing the other $60 by accepting “unlivable wages,” with no health benefits, no paid sick leave, no vacations, she said. Located in a blue-collar section of Whittier, the school could not charge more.

Tullius said she scraped by, taking no pay herself, until the recession caused enrollment to drop so low that the $65 charge did not cover teachers’ salaries. That happened last September, after 40 of the oldest preschoolers graduated to kindergarten. No new students enrolled.

It broke her heart to close the preschool, Tullius said, so she tried to sell the property to the city or an agency that would run a subsidized child-care program for low-income parents. She could find no takers. Along the way, a developer heard the property was available.

“This is where I had all my birthday parties when I was growing up. This is the homestead. Now, they’re going to tear it down and build apartments,” said Tullius, who is starting a business as a child-care consultant.

On the final day the school was open, Tullius held one last party. The 11 remaining students colored table cloths and decorated the yard with crepe paper. Guests included former students and teachers, including Tullius’ 83-year-old aunt and co-founder of the school, Mary Wallace.

“I’m surprised at how sad I am today,” Tullius said as she prepared for the party. “I thought I had cried all my tears. Usually, when my kids leave me, more come in right behind them. But when they leave today, that’s it.”

CONSUMER SPENDING The following is a breakdown in average annual household expenditures for a family of 2.7 people in 1988. It is based on a before-tax income of $28,540:

Housing $8,079 28.3% Transportation $5,093 17.8% Food $3,748 13.1% Taxes $2,391 8.4% Child care $2,080 7.3% Pensions, Social Security $1,935 6.8% Apparel and Services $1,489 5.2% Entertainment $1,329 4.7% Health Care $1,298 4.5% Misc. $1,098 3.8% Total $28,540 100%

Source: Bureau of Labor Statistics and Bureau of the Census