4.2 Assess Market Rates and Analyze the Cost of Child Care

To establish subsidy payment rates that ensure equal access, Lead Agencies must collect and analyze statistically valid and reliable data and have the option to conduct either a (1) market rate survey (MRS) reflecting variations in the price to parents of child care services by geographic area, type of provider, and age of child, or (2) an ACF pre-approved alternative methodology, such as a cost estimation model, which estimates the cost of care by incorporating both data and assumptions to estimate what expected costs would be incurred by child care providers and parents under different scenarios. All Lead Agencies must analyze the cost of providing child care through a narrow cost analysis or pre-approved alternative methodology. Prior to conducting the MRS or pre-approved alternative, Lead Agencies must consult with the State Advisory Council on Early Childhood Education and Care (designated or established pursuant to the Head Start Act (42 U.S.C. 9837b(b)(1)(A)(i)) or similar coordinating body, local child care program administrators, local child care resource and referral agencies, and other appropriate entities; and organizations representing child care caregivers, teachers, and directors. Prior to conducting the MRS or pre-approved alternative methodology, Lead Agencies must consult with the State Advisory Council on Early Childhood Education and Care (designated or established pursuant to the Head Start Act (42 U.S.C. 9837b(b)(1)(A)(i)) or similar coordinating body, local child care program administrators, local child care resource and referral agencies, and other appropriate entities; and organizations representing child care caregivers, teachers, and directors. Note: Any Lead Agency considering using an alternative methodology instead of a market rate survey to set payment rates, is required to submit a description of its proposed approach to OCC for pre-approval in advance of developing and conducting the alternative methodology. Advance approval is not required if the Lead Agency plans to implement both an MRS and an alternative methodology to set rates at a percentile of the market rate, but a Lead Agency conducting a limited market rate survey and using it to inform their cost model would need pre-approval for this approach. In its request for ACF pre-approval, a Lead Agency must provide details on the following elements of their proposed alternative methodology: • Overall approach and rationale for using proposed methodology • Description of stakeholder engagement • Data collection timeframe (if applicable) • Description of the data and assumptions included in the methodology, including how these elements will yield valid and reliable results from the model • Description of how the methodology will capture the universe of providers, and reflect variations by provider type, age of children, geographic location, and quality 4.2.1 Completion of the market rate survey or ACF pre-approved alternative methodology Did the Lead Agency conduct a statistically valid and reliable MRS or ACF pre-approved alternative methodology to meet the CCDF requirements to assess child care prices and/or costs and determine payment rates? Check only one based on which methodology was used to determine your payment rates. a. [x] Market rate survey. i. When were the data gathered (provide a date range; for instance, September – December 2023)? The period for which data was collected for the 2024 Market Rate Survey was October 17-November 14, 2023 for the first round of surveys. The second round and focus groups were completed January 31- February 28, 2024. b. [ ] ACF pre-approved alternative methodology. i. [ ] The alternative methodology was completed. ii. [ ] The alternative methodology is in process. If the alternative methodology was completed: When were the data gathered and when was the study completed? Describe any major differences between the pre-approved methodology and the final methodology used to inform payment rates. Include any major changes to stakeholder engagement, data, assumptions or proposed scenarios. If the alternative methodology is in progress: Provide a status on the alternative methodology and timeline (i.e., dates when the alternative methodology activities will be conducted, any completed steps to date, anticipated date of completion, and expected date new rates will be in effect using the alternative methodology). c. Consultation on data collection methodology. Describe when and how the Lead Agency engaged the following partners and how the consultation informed the development and execution of the MRS or alternative methodology, as appropriate. iii. State Advisory Council or similar coordinating body: The lead agency’s advisory council is referred to as the Child Care Citizen’s Coordinating Committee. This council includes representation from the state’s tribal agency, center and family home providers, local quality enhancement agencies that provide child care resource and referral services and training for providers, higher education, public health, provider associations, child advocacy groups, and the Alabama Department of Early Childhood Education, which is responsible for the state’s child advisory council. The committee advised the lead agency on the following: length of survey, survey questions, focus groups, method of data collection and validity of the data collected. Meetings are held quarterly with the lead agency's advisory council via zoom meetings. iv. Local child care program administrators: The lead agency’s advisory council is referred to as the Child Care Citizen’s Coordinating Committee. This council includes representation from the state’s tribal agency, center and family home providers-child care program administrators or center directors, local quality enhancement agencies that provide child care resource and referral services and training for providers, higher education, public health, provider associations, child advocacy groups, and the Alabama Department of Early Childhood Education, which is responsible for the state’s child advisory council. The committee advised the lead agency on the following: length of survey, survey questions, focus groups, method of data collection and validity of the data collected. Meetings are held quarterly with the lead agency's council via zoom meetings. v. Local child care resource and referral agencies: The lead agency’s advisory council is referred to as the Child Care Citizen’s Coordinating Committee. This council includes representation from the state’s tribal agency, center and family home providers, local quality enhancement agencies that provide child care resource and referral services and training for providers, higher education, public health, provider associations, child advocacy groups, and the Alabama Department of Early Childhood Education, which is responsible for the state’s child advisory council. The committee advised the lead agency on the following: length of survey, survey questions, focus groups, method of data collection and validity of the data collected. Meetings are held quarterly with the lead agency's council via zoom. vi. Organizations representing child care caregivers, teachers, and directors from all settings and serving all ages: The lead agency’s advisory council is referred to as the Child Care Citizen’s Coordinating Committee. This council includes representation from the state’s tribal agency, center and family home providers representing all settings and serving all ages, local quality enhancement agencies that provide child care resource and referral services and training for providers, higher education, public health, provider associations, child advocacy groups, and the Alabama Department of Early Childhood Education, which is responsible for the state’s child advisory council. The committee advised the lead agency on the following: length of survey, survey questions, focus groups, method of data collection and validity of the data collected. Meetings are held quarterly via zoom. vii. Other. Describe: N/A d. An MRS must be statistically valid and reliable. An MRS can use administrative data, such as child care resource and referral data, if it is representative of the market. Please provide the following information about the market rate survey: i. When was the market rate survey completed? 3/20/2024 ii. What was the time period for collecting the information (e.g., all of the prices in the survey are collected within a three-month time period)? The first round of surveys were issued October 17-November 14, 2023. The second round of surveys and focus groups were held January 21-February 28, 2024. iii. Describe how it represented the child care market, including what types of providers were included in the survey: The Alabama child care market consists of faith-based, community-based non-profit, and for-profit organization that are both licensed and exempt from licensure and that are registered with the lead agency to legally operate which consists of 2,201 providers designated as centers and family child care homes. iv. What databases are used in the survey? Are they from multiple sources, including licensing, resource and referral, and the subsidy program? The database used to identify providers is the lead agency’s Child Care Management System. The system holds all providers that are registered to legally operate in the state. v. How does the survey use good data collection procedures, regardless of the method for collection (mail, telephone, or web-based survey)? Data was collected by on-line surveys, mailed surveys and focus groups of child care providers representing all settings and serving all ages. The data for the MRS was cleaned to remove incomplete responses and erroneous data. The data was then reviewed and categorized by the principal researcher to calculate descriptive statistics, averages, and totals for different categories. vi. What is the percent of licensed or regulated child care centers responding to the survey? 56.00 vii. What is the percent of licensed or regulated family child care homes responding to the survey? 59.00 viii. Describe if the survey conducted in any languages other than English: The survey was not conducted in any other language however the survey could be translated via an online instrument (Google translator) and at the request of the provider. ix. Describe if data were analyzed in a manner to determine price of care per child: The data collected was reflective of cost per child based on weekly rates and various ages. The data collected was disaggregated by the weekly child care rate mean and 75th percentile for each of the 9 regions in the state for the three child age groups, under 2.5, 2.5 to 5 years, and school-aged (5+ years) for both day care centers and family child care homes. Tables were included to reflect differences in rate per rate child. x. Describe if data were analyzed from a sample of providers and if so, how the sample was weighted: The data was analyzed from a sample of the providers that submitted responses to the survey. A sample of providers were included in a focus group to weigh responses from the data collected in the survey versus in-person discussions to gain a better understanding barriers to providing quality child care. The focus group was selected from the participants of the overall population of the MRS survey participants, representing various provider types, licensed and license-exempt centers and family child care homes, and regions in the state. The focus groups offered a comprehensive understanding of the challenges and opportunities faced by the child care providers across the state. e. Price variations reflected. The market rate survey data or ACF pre-approved alternative methodology data must reflect variations in child care prices or cost of child care services in specific categories. i. Describe how the market rate survey or pre-approved alternative methodology reflected variation in geographic area (e.g., county, region, urban, rural). Include information on whether parts of the State or Territory were not represented by respondents and include information on how prices or costs could be linked to local geographic areas. The MRS survey participants were reflective of all geographic areas of the state. The examination of subsidy rates, access and affordability of child care services builds on the variations in the child care market fees by provider type, geographic region, and age of the child. Cost were linked by geographic area based on the mean cost of each region. ii. Describe how the market rate survey or pre-approved alternative methodology reflected variation in type of provider (e.g., licensed providers, license-exempt providers, center-based providers, family child care home providers, home based providers). The MRS produced a valid response rate of 57% of 1,250 respondents. The respondents were inclusive of all child care types; licensed and licensed- exempt child care centers, and family and group child care homes. iii. Describe how the market rate survey or pre-approved alternative methodology reflected age of child (e.g., infant, toddler, preschool, school-age): The study compiled data and reflected differences in the age of children. The three child age groups were under 2.5, 2.5 to 5 years, and school-aged (5+ years) for both day care centers and family child care homes. iv. Describe any other key variations examined by the market rate survey or ACF pre- approved alternative methodology, such as quality level: There are no other key variations examined by the market rate survey. 4.2.2 Cost analysis If a Lead Agency does not complete a cost-based pre-approved alternative methodology, they must analyze the cost of providing child care services through a narrow cost analysis. A narrow cost analysis is a study of what it costs providers to deliver child care at two or more levels of quality: (1) a base level of quality that meets health, safety, staffing, and quality requirements, and (2) one or more higher levels of quality as defined by the Lead Agency. The narrow cost analysis must estimate costs by levels of quality; include relevant variation by provider type, child’s age, or location; and analyze the gaps between estimated costs and payment rates to inform payment rate setting. Lead agencies are not required to complete a separate narrow cost analysis if their pre-approved alternative methodology addresses all of the components required in the narrow cost analysis. Describe how the Lead Agency analyzed the cost of child care through a narrow cost analysis or pre-approved alternative methodology for the FFY 2025–2027 CCDF Plan, including: a. How did the Lead Agency conduct a narrow cost analysis (e.g., a cost model, a cost study, existing data or data from the Provider Cost of Quality Calculator)? The methodology for conducting the narrow cost analysis includes an analysis to address the cost of higher quality care as defined by the lead agency using the quality rating and improvement system, a focus group cost study, and use of the Provider Cost of Quality Calculator. b. In the Lead Agency’s analysis, were there any relevant variations by geographic location, category of provider, or age of child? In the Lead Agency's approach for the narrow cost analysis was completed using a cost model informed by a limit cost survey. The questions on the cost survey were informed by the Provider Cost of Quality Calculator (PCQC) and cost surveys utilized in other states. The Child Care Cost Survey collected information from providers about the cost of operating a child care facility, such as personnel salaries, facility maintenance, utilities and supplies at different quality levels for multiple ages. The survey data was cleaned and used to complete the PCQC. The variations in prices existed in category of provider, geographic location and age of the child. Larger, more populous areas reflected a higher rate for child care than those in rural communities. For child care centers, the gap ranged from $19 to $46 for children under 2.5 years from the base level payment as compared to higher quality levels, the gap ranged from $9 to $123. The trend identified the same for children 2.5 to 5 years and school age children. The variations identified in child care homes were similar as well were the gap ranged from $2 to $47 based on the star 1 level since all family child care providers are star 1 rated as compared to higher star ratings. The trend was the same across all geographic locations and the age of the child. c. What assumptions and data did the Lead Agency use to determine the cost of care at the base level of quality (e.g., ratios, group size, staff compensations, staff training, etc.)? The data used to determine the cost of care at the base level of quality included operational cost, such as personnel salaries, facility maintenance, utilities, supplies, number of children served, transportation, food, and professional development and private pay rates for licensed child care providers that were not participating in the state's QRIS. Assumptions were based on the number of children served, number of employees, salaries for employees, benefits offered, and cost to operate the facility at the base or star 1 level and star 2 through 5. d. How does the Lead Agency define higher quality and what assumptions and data did the Lead Agency use to determine cost at higher levels of quality (e.g., ratio, group size, staffing levels, staff compensation, professional development requirements)? A Lead Agency can use a quality improvement system or other system of quality indicators (e.g., accreditation, pre-Kindergarten standards, Head Start Program Performance Standards, or State-defined quality measures). The lead agency defines high quality as meeting standards of the state's QRIS that are above the minimum requirements for licensure. The MRS utilized a limited cost survey for the narrow cost analysis to understand the cost factors impacting day care centers and family child care home at different quality levels for multiple age groups across the state. The cost of care was based on the approximates provided by the sample of child care providers. The assumptions used in the narrow cost analysis were the domains of the lead agency’s QRIS requirements. Those include staff qualifications, environment, health and safety, professional development, and family involvement and community partnerships. e. What is the gap between cost and price, and how did the Lead Agency consider this while setting payment rates? Did the Lead Agency target any rate increases where gaps were the largest or develop any long-term plans to increase rates based on this information? The lead agency has not determined if payment rates will be increased to satisfy the 75th percentile benchmark. The results of the MRS indicated that in most regions of the state, reimbursement rates were below the 75th percentile in all child care setting types. The variations in prices existed in category of provider, geographic location and age of the child. Larger, more populous areas reflected a higher rate for child care than those in rural communities. For child care centers, the gap ranged from $19 to $46 for children under 2.5 years from the base level payment as compared to higher quality levels, the gap ranged from $9 to $123. The trend identified the same for children 2.5 to 5 years and school age children. The variations identified in child care homes were similar as well were the gap ranged from $2 to $47 based on the star 1 level since all family child care providers are star 1 rated as compared to higher star ratings. The trend was the same across all geographic locations and the age of the child. The lead agency did not use the data from the 2024 MRS to determine payment rates as rates have not been increased since the 2022 MRS. The lead agency wanted to lower the gap between cost of care and price. Therefore, rates were increased to the 75th percentile benchmark as indicated in the 2022 MRS. The lead agency continues to believe the rates are adequate and enable providers to meet the cost of care requirements for maintaining licensure, and health and safety requirements. The lead agency has not developed any long-term plans to increase payment rates based on this information. The current payment rates were based on the previous MRS and were increased to the 75th percentile based on that data. 4.2.3 Publicly available report on the cost and price of child care The Lead Agency must prepare a detailed report containing the results of the MRS or ACF pre- approved alternative methodology and include the Narrow Cost Analysis if an ACF pre-approved alternative methodology was not conducted. The Lead Agency must make this report widely available no later than 30 days after completion of the report, including posting the results on the Lead Agency website. The Lead Agency must describe in the detailed report how the Lead Agency took into consideration the views and comments of the public or stakeholders prior to conducting the MRS or ACF pre-approved alternative methodology. a. Describe how the Lead Agency made the results of the market rate survey or ACF pre-approved alternative methodology report widely available to the public by responding to the questions below. i. Provide the date the report was completed: 5/20/2024 ii. Provide the date the report containing results was made widely available (no later than 30 days after the completion of the report): 5/24/2024 iii. Provide a link to the website where the report is posted and describe any other strategies the Lead Agency uses to make the detailed report widely available: https://dhr.alabama.gov/wp-content/uploads/2024/05/2024-Child-Care-Cost- Study-Final-2024.05.17.pdf iv. Describe how the Lead Agency considered partner views and comments in the detailed report. Responses should include which partners were engaged and how partner input influenced the market rate survey or alternative methodology: The lead agency shared the draft of the final report with its advisory council for comment and review. The partners included state CCR&Rs, child care providers, non-profit organizations, and other state agencies including the state's tribal organizations. The lead agency received no comments for recommended changes to the report.