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)? September 1-30, 2023 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: Prior to implementation, the Market Rate Survey and Cost Model were shared with the Arkansas Childhood Commission which is Arkansas’ State Advisory Council. A copy of the Market Rate Survey and Cost Model was emailed to the Commission in the February 2024. iv. Local child care program administrators: Prior to implementation, the Market Rate Survey and Cost Model were shared at a public meeting, April 2024, of the Arkansas Early Childhood Commission where child care program administrators are in attendance. A copy of the Market Rate Survey and Cost Model was emailed to the Commission in the Spring 2024. v. Local child care resource and referral agencies: Prior to implementation, the Market Rate Survey and Cost Model were shared with the public on the OEC website vi. Organizations representing child care caregivers, teachers, and directors from all settings and serving all ages: Prior to implementation, the Market Rate Survey and Cost Model were shared at a public meeting of the Arkansas Early Childhood Commission where organizations representing caregivers, and directors can attend. This information was also place on the OEC website. vii. Other. Describe: NA 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? 1/31/2024 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)? September 2023 iii. Describe how it represented the child care market, including what types of providers were included in the survey: Child care providers have the ability to update their rates at will. This survey includes rates from child care centers, family homes, Head Start/Early Head Start and state funded Pre-K programs. iv. What databases are used in the survey? Are they from multiple sources, including licensing, resource and referral, and the subsidy program? OEC provided data to the University of Arkansas of Medical Science Research and Evaluation Division (UAMS RED), from our Enterprise Licensing System (ELS), for all licensed child care providers. OEC also provided state funded Pre-K program data from the state’s system. The data for Head Start/Early Head Start was provided by the Arkansas Head Start State Collaboration Office (AHSSCO). v. How does the survey use good data collection procedures, regardless of the method for collection (mail, telephone, or web-based survey)? The data is collected directly from state systems. vi. What is the percent of licensed or regulated child care centers responding to the survey? 100.00 vii. What is the percent of licensed or regulated family child care homes responding to the survey? 100.00 viii. Describe if the survey conducted in any languages other than English: No ix. Describe if data were analyzed in a manner to determine price of care per child: OEC provided data to DFPM/RED for all licensed facilities (including the type of program and number of children licensed to serve by child age), market prices, CCDF children by age and facility, state-funded program (e.g., Arkansas Better Chance for School Success) children by age and facility. Further, OEC attained data from the Arkansas Head Start collaboration office on the number of children in Early Head Start and Head Start by facility. This permitted the calculation of an adjusted number of private pay slots for each facility by each child care submarket (e.g., child age, type of care, and location). x. Describe if data were analyzed from a sample of providers and if so, how the sample was weighted: Differences in response rates make it necessary to use sample weights. To compute sampling weights, each combination of the categories which significantly predicted having pricing data was calculated. Sample weights were computed as the ratio of the total percentage of programs in multiple sampling types by the percentage with pricing data. 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. OEC uses an urban/rural geographic distinction for CCDF reimbursement. This distinction has three geographic designations: Rural, Urban and Urban Plus. Urban Plus consists of Benton and Washington Counties. The Urban Plus area has remained an outlier in the state for several years. 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). Data was used from licensed programs: center-based care, child care family homes, state funded preschool, and Head Start and Early Start. iii. Describe how the market rate survey or pre-approved alternative methodology reflected age of child (e.g., infant, toddler, preschool, school-age): Rates are taken from the following age groups: infant, toddler, preschool, and school age. iv. Describe any other key variations examined by the market rate survey or ACF pre- approved alternative methodology, such as quality level: Arkansas uses a tiered reimbursement rate system for child care subsidies. These rates are set by two geographic areas, Urban/Rural and Urban Plus. Rates do not differ by program provider type. Rates increase as QRIS levels increase. 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)? Arkansas contract with the UAMS RED to develop and update a cost model for the state. Geographic variations in the states were identified in the 2019 model and continued to ring true in the updated 2023 model. b. In the Lead Agency’s analysis, were there any relevant variations by geographic location, category of provider, or age of child? OEC uses an urban/rural geographic distinction for CCDF reimbursement. This distinction has three geographic designations: Rural, Urban and Urban Plus. Urban Plus consists of Benton and Washington Counties. The Urban Plus area has remained an outlier in the state for several years. 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.)? UAMS RED used the following to determine the cost of care: QRIS level, geographic region, previous reimbursement rates, wage data, inflation, classroom demographics, and program revenue. 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). Arkansas uses our QRIS system called Better Beginnings to define higher quality in the state. This system does address items such as ratios, professional development, etc. Arkansas’s cost modeling estimated several program expenses including but not limited to: wages/salary, rent, food, insurance and education equipment/supplies. Reciprocity is recognized for Head Start, National Association for the Education of Young Children (NAEYC), National Association Family Child Care (NAFCC), etc. 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 Market Rate Survey indicated a need to increase reimbursement rates for infants and toddlers in nearly all geographic areas. State rates were increased effective July 1, 2024, as a result of this 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: 1/31/2024 ii. Provide the date the report containing results was made widely available (no later than 30 days after the completion of the report): 2/29/2024 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://dese.ade.arkansas.gov/Offices/office-of-early-childhood/financial- assistance-and-resources-for-providers 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: Prior to implementation of new rates, the Market Rate Survey and cost projections were share publicly on OEC’s website. In addition, it was shared with the Arkansas Early Childhood Commission which includes representation from early childhood partners. OEC’s new rate structure was approved by the Arkansas State Board of Education. OEC received positive feedback on updated rates, which were influenced by the report.