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. [ ] Market rate survey. i. When were the data gathered (provide a date range; for instance, September – December 2023)? b. [x] ACF pre-approved alternative methodology. i. [x] 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? Data was gathered in January and February 2024 and the report was completed in July 2024. 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. There were no major differences between the pre-approved methodology and the final methodology. 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: In November 2023, OSSE presented the findings of the 2023 cost model analysis and OSSE’s Administration for Children and Families (ACF)-approved alternative methodology and solicited feedback and input from the State Early Childhood Development Coordinating Council (SECDCC) on any needed modifications to OSSE’s approach to the 2024 Cost Model Analysis. OSSE also engaged the SECDCC through consultation sessions around the District’s CCDF Plan held in March and April 2024. iv. Local child care program administrators: In fall 2022, OSSE conducted a 2022 DC Child Care Provider Survey, which informed the updating of key inputs in the District Child Care Cost Modeling Tool. The survey was conducted in partnership with DC Child Care Connections (DC CCC) (the District’s CCR&R) and national experts in child care financing. Local child care program administrators were also engaged as members of the SECDCC and through several working groups that OSSE regularly consults with. OSSE reviewed the cost model inputs and assumptions with the DC Child Care Recovery Working Group, a working group of child development facility leaders representing the diversity of settings within the District’s child care ecosystem that OSSE engages regularly as an informal advisory group on key policy, programmatic, and other questions facing the agency and child development facilities. OSSE reviewed the model’s inputs and assumptions with these groups to ensure the model is representative of the District’s child care programs and facilities. v. Local child care resource and referral agencies: DC CCC is a member of the SECDCC and the District’s Child Care Recovery Working Group. During these sessions, OSSE received input into the alternative methodology from all participants. DC CCC also partnered with OSSE on the administration of the 2022 Child Care Provider Survey, which was used to update model inputs and assumptions for the 2023 and 2024 cost model analyses. vi. Organizations representing child care caregivers, teachers, and directors from all settings and serving all ages: Organizations representing caregivers, teachers, and directors ￿including the District of Columbia Association for the Education of Young Children (DCAEYC), DC Head Start Association, the DC Family Child Care Association (DCFCCA), Multilingual Spanish Speaking Providers Association (MSSPA), and DC Action for Children￿are all represented by members of the SECDCC. Additionally, OSSE conducted conversations with individual program leaders and directors to solicit additional information and feedback on key assumptions or data points. OSSE also reviewed the cost model inputs and assumptions with the DC Child Care Recovery Working Group. vii. Other. Describe: OSSE leadership regularly presents on the District’s child care cost modeling for national audiences. Feedback received from these presentations and discussions informs the ongoing development and refinement of our approach. 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? 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)? iii. Describe how it represented the child care market, including what types of providers were included in the survey: iv. What databases are used in the survey? Are they from multiple sources, including licensing, resource and referral, and the subsidy program? v. How does the survey use good data collection procedures, regardless of the method for collection (mail, telephone, or web-based survey)? vi. What is the percent of licensed or regulated child care centers responding to the survey? vii. What is the percent of licensed or regulated family child care homes responding to the survey? viii. Describe if the survey conducted in any languages other than English: ix. Describe if data were analyzed in a manner to determine price of care per child: x. Describe if data were analyzed from a sample of providers and if so, how the sample was weighted: 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. N/A - the District of Columbia has only one geographic area. 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 District’s alternative methodology used the District’s Child Care Cost Modeling Tool to separately model the costs for the three types of licensed providers that exist in the District: child development centers, child development homes, and child development expanded homes. Additionally, the model estimated costs for centers and homes participating in District early learning programs, such as the Quality Improvement Network (QIN) and PKEEP. iii. Describe how the market rate survey or pre-approved alternative methodology reflected age of child (e.g., infant, toddler, preschool, school-age): For each provider type, OSSE developed a variety of scenarios to model that reflect variation in the ages of children served: classroom configurations based on facility size, group sizes, and adult/child ratios and other regulatory requirements related to child age. iv. Describe any other key variations examined by the market rate survey or ACF pre- approved alternative methodology, such as quality level: The District’s Child Care Cost Modeling Tool assesses costs across quality designations assigned by Capital Quality, the District’s quality rating and improvement system (QRIS). The model also allows OSSE to assess costs for high-quality programs that may provide additional comprehensive services to children and employ additional staff positions (family engagement specialist, health care specialist, and professional development coach) to provide those services. 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)? OSSE conducted child care cost modeling under the District’s approved alternative methodology to analyze the cost of providing child care services at various levels of quality. The District’s Child Care Cost Modeling Tool addresses the narrow cost analysis requirements to conduct, obtain, and analyze data on the estimated cost of care (including relevant variation by category of provider or age of child) taking into account the costs of providers’ implementation of health, safety, quality, and staffing requirements, and the cost of higher quality care. The District’s Child Care Cost Modeling Tool goes beyond these requirements to allow the modeling of different scenarios and factors that affect providers’ costs, revenues, and overall financial viability. OSSE used information generated from the District’s Child Care Cost Modeling Tool to conduct the analysis of costs and gaps between subsidy rates and costs to provide care. b. In the Lead Agency’s analysis, were there any relevant variations by geographic location, category of provider, or age of child? The District’s Child Care Cost Modeling Tool allows OSSE to model a variety of scenarios that reflect variation in the ages of children served: classroom configurations based on facility size, group sizes, adult/child ratios, and provider type (child development homes, expanded child development homes, and child development centers), and other regulatory requirements related to child age. The analysis does not account for variation by geographic location because the District has only one geographic area. OSSE’s analysis found variations in costs based on the size of the facility, the age of children served, and the type of care provider. 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 base level of quality in the District’s Child Care Cost Modeling Tool is based on meeting health, safety, and staffing requirements in the District’s licensing regulations (e.g., group size, adult/staff ratios, etc.). Classroom teaching personnel are determined by ratio requirements for each age group and administrative personnel roles are included based on facility size. Teacher salaries were based on data collected from the 2022 DC Child Care Provider Survey, adjusted for inflation, and director and assistant director salaries were based on Bureau of Labor Statistics (BLS) Occupational Employment Statistics Occupational Employment and Wage Estimates for the Metropolitan Washington Area. Employer-paid benefits were included for all employees, using data provided by DC Health Benefits Exchange (DCHBX) on costs to employers to purchase coverage via the Exchange’s small business marketplace. The analysis calculates the cost for classroom coverage throughout the day, as well as coverage for paid leave (including sick leave) and professional development release time. 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 District’s QRIS, Capital Quality, is used to measure and assess quality across licensed child development facilities. OSSE considers programs designated as ￿Quality￿ or ￿High-quality￿ ￿ the two highest tiers of the rating system ￿ to be high quality for purposes of the CCDF Plan. Capital Quality designations are determined using observation data from valid and reliable observation tools: the Classroom Assessment Scoring System (CLASS) for pre-K center-based classes, the Infant/Toddler Environment Rating Scale (ITERS-3) for infant/toddler center-based classes, and the Family Child Care Environment Rating Scale (FCCERS-3) for homes and expanded homes. OSSE engages independent and reliable observers to conduct observations and calculates Capital Quality designations for each participating facility based on scores received across all applicable observational tools for the past two years for which valid and reliable observation data exist. The District’s Child Care Cost Modeling Tool calculates the cost of care at each of the District's Capital Quality designations: Developing, Progressing, Quality, and High-quality. In reviewing the assumptions embedded in the model as part of the 2023 cost model analysis, OSSE concluded that many of the interactions and environmental features measured by the valid and reliable observation tools that determine Capital Quality designations, such as adults’ use of language with children or how classroom transitions are managed, do not carry direct costs that can be easily quantified and measured. Therefore, costs of child care provision are largely equal across quality designations. The District’s Child Care Cost Modeling Tool does, however, allow OSSE to assess costs related to the provision of higher quality services as represented by additional staff positions (family engagement specialist, health care specialist, and professional development coach), which can be selected as inputs in the cost model. This approach enables the calculation of scenarios that consider that some programs, particularly those serving vulnerable children, provide additional services to support children’s and families’ comprehensive needs, which require additional staff positions. 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? OSSE reviewed the cost estimates generated by the District’s Child Care Cost Modeling Tool from the 2023 cost model analysis to assess gaps between cost, price, and subsidy payment rates. In response to that analysis, in FY24, OSSE increased child care subsidy payment rates. The analysis found that the largest gap between cost and rates was for infant care in centers and, therefore, OSSE raised infant subsidy rates by 15 to 29 percent for homes and centers, depending on a provider’s Capital Quality designation. Facilities with the lowest quality designations received the largest rate increases. In 2024, OSSE compared the findings of the 2024 cost model analysis to the new FY24 subsidy rates and found that, while costs had increased since the 2023 analysis, the FY24 rate increase still reduced the gap between subsidy rates and costs to deliver care and in some cases eliminated the gap. Based on this most recent analysis, child care subsidy payment rates for infants in child development centers cover 80 to 88 percent of the cost of infant care, depending on the quality designation. Payment rates for toddlers in child development centers exceed the cost of care by 6 to 15 percent, depending on the quality designation. Child care subsidy payment rates for infants and toddlers in child development homes exceed the cost of care by 7 to 20 percent depending on the quality designation. OSSE's long-term plan is to continue to adjust rates to meet the cost of care when funds are available in the District, with a focus on increasing rates for infants in child development centers, which show a remaining gap. 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: 7/10/2024 ii. Provide the date the report containing results was made widely available (no later than 30 days after the completion of the report): 7/16/2024 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://osse.dc.gov/page/modeling-cost-child-care-district-columbia. All current and past cost modeling reports are posted here to allow stakeholders to easily access information to understand how the District’s cost modeling practices, estimated costs to deliver care, and child care subsidy rates have evolved over time. The District’s cost model reports are shared widely through OSSE and partners, including distribution in OSSE email communications and presentations to the SECDCC and other stakeholder groups. 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: OSSE adjusted the assumptions, data inputs, and model scenarios included in the District’s Child Care Cost Modeling Tool in response to stakeholder input received when presenting the 2023 Cost Model Report. The final published report presents cost estimation findings and analyses that incorporate these adjustments and describes changes that OSSE made in response to stakeholder input. For example, OSSE adjusted staffing assumptions for expanded child care homes and center administrative roles based on stakeholder feedback and updated classroom configurations to reflect those most common in child development facilities. OSSE also made adjustments to underlying staff:child ratio assumptions in consideration of a proposed change to licensing requirements. This change allowed us to share with stakeholders the potential cost implications of this change The detailed report also includes information about additional scenarios that OSSE modeled in response to stakeholder input in 2023, including a scenario estimating the cost to deliver care with teacher salaries comparable to those of teachers in public schools and cost analyses for community-based organizations (CBOs) participating in PKEEP and the Quality Improvement Network (QIN).