Facing a financial crossroads, the Palo Alto nonprofit that provides subsidized after-school and child care services to more than 100 low-income families is asking the school district to cover in full what its leadership says is an unsustainable gap between rising costs and stagnant state funding.

Palo Alto Community Child Care (PACCC) manages Palo Alto Unified's child-development contract for the state, which provides funding to serve eligible low-income children. This year, 70 kids are enrolled using this state money (another 35 students are subsidized by the City of Palo Alto).

Providing these services as well as meeting administrative requirements of the state contract costs the child care agency close to $1 million annually, about half of which is covered by the California Department of Education, staff said. PACCC is now asking the school district to make up the remaining gap — $420,000 this year.

The nonprofit's costs have increased sharply since it took over the state contract in 2001, leadership has said. Minimum wage has doubled and the nonprofit has seen a 175 percent increase in health care costs, according to PACCC. While state funding increased between 2006 to 2008, the contribution has hovered between $420,000 and $550,000 since then. This year, PACCC will receive $515,000.

The shortfall also was compounded this past fall by an "unintended consequence" of the school district's shift to full-day kindergarten at all of its elementary schools, PACCC Executive Director Lisa Rock said in an interview with the Weekly. Families with kindergartners who were enrolled at the nonprofit no longer needed after-school care, resulting in a loss of $250,000, Rock said. The nonprofit's overall budget is about $10 million.

To mitigate the gap over the years, Palo Alto Community Child Care has increased its rates for full-paying families, paid its employees lower-than-average wages and, for the first time last year, dipped into its reserves.

Without a commitment from the school district to make up the budget shortfall, nonprofit staff said they will either reduce the number of families served by the state contract or put its management back in the district's hands.

"PACCC is at a crossroads," the nonprofit wrote in a recent request to the school district. "PACCC cannot continue to bear the burden of supporting the district's contract with the state."

But without PACCC, the children served by the state contract would have difficulty accessing quality preschool or after-school programs, according to the nonprofit's leaders. In this affluent community, their families occupy the lower end of the economic spectrum: The eligibility cut-off for a family of four is $42,200 in annual income.

In total, the 105 low-income families PACCC serves make up about 15 percent of the total 800 to 900, according to Rock. The programs provide children with homework help, enrichment activities and the chance to develop social skills and spend time with teachers and adults when they otherwise might be at home alone or with a parent whose first language is not English. And it is "well-researched," PACCC stated, that early intervention and education is key to narrowing the achievement gap.

"These children are not on a level playing field with their more privileged peers," Rock told the school board at a budget study session last Tuesday, when she, staff and PACCC board members asked for increased financial support. "These are our community's achievement-gap kids."

The programs provide academic and personal support for struggling families, staff told the board. Cipriana Morin Ramos, PACCC's financial-aid coordinator and manager of the state contract, recalled a family who recently lost their home and jobs, leading to a point when their children could no longer attend school. The nonprofit worked closely with the parents to get their children into an after-school program, "which allowed the family to get back on track," she said.

"This program is a beacon of hope to them, to the families," she added.

Over the years, the nonprofit has made up for the annual funding gap — initially between $140,000 and $175,000 — through fundraising and other adjustments, Rock said. The nonprofit already charges higher-than-average tuition when compared with other Palo Alto child care programs and has raised rates for full-paying families to help mitigate the state-funding shortfall. (Tuition is PACCC's main source of revenue, Rock said.)

This year, tuition for the after-school program ranges from $230 to $800 per month depending on the number of days a student is enrolled. The nonprofit's all-day preschool programs charge as much as $1,840 per month for five days a week.

It's become increasingly difficult to offer staff competitive pay, according to PACCC. The nonprofit pays its teachers about $18 per hour compared to an average in Palo Alto of $20 per hour, and its director earns about $56,000 annually compared to an average of $72,000 elsewhere.

Meanwhile, the agency has a waiting list of more than 100 families for the subsidized slots.

In addition to providing child care, overseeing the contract entails making monthly, quarterly and yearly reports to the state; handling billing and contract agreements with families; making sure the appropriate staff are meeting state requirements; and attending required meetings, Rock said.

The child care agency's request for support comes at a time of financial strain for the school district itself, which faces an ongoing, multi-million dollar shortfall.

Several board members indicated support on Feb. 14 for helping the organization. Board Vice President Ken Dauber said he is a "strong supporter of the idea that we should share the burden of this gap with PACCC" and asked staff to return at the next board meeting with an estimate of how much the district could contribute.

Member Jennifer DiBrienza acknowledged that shrinking the achievement gap is where the district is "weakest" and has committed to serious improvement.

"This is where all evidence shows is our bang for our buck," she said. "The earlier we intervene, the cheaper it is down the road for us and the more successful" students are.