Page 57

57 | P a g e FFY 2025–2027 CCDF State Plan

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)? Instead of a narrow cost analysis, the Lead Agency conducted a ￿total cost study￿ in three parts: development of a cost model, review of internally available provider-level data, and extensive survey efforts administered externally to a large number of child care providers. The second and third parts informed assumptions in the model in a statistically valid and representative manner. The goal of the total cost study was to understand what expenses providers actually paid considering the constraints under which they operate rather than develop estimates based on aspirational case studies. Cost model development was initiated by the Lead Agency in 2019 and involved significant modifications to the Cost of Provider Quality & Revenue (CPQ&R) tool from the National Institute of Early Education Research (NIEER). The developer of the CPQ&R assisted the Lead Agency in these modifications after being introduced to the Lead Agency by NIEER representatives. That CPQ&R is a system-level model for estimating preschool costs at the provider, district, and state level, and allows a population of children to be modeled based on a mix of part-day, full-day, and extended-day slots (e.g., 3-, 6-, and 11-hour care). It was modified for the Lead Agency to accommodate any age-group participating in subsidized child care as well as programs of varying duration that may operate simultaneously within a single child care facility. To that end, several new concepts were introduced in the model calculations: the ability to vary operating assumptions by time of day; the impact of shared or unused classrooms on calculated costs per child; and the acceleration or deceleration of depreciation expense based on asset utilization rates. Cost calculations at the district and state level in the CPQ&R were removed so that the Lead Agency’s model focused solely on costs at the provider level, and a user interface was created allowing the Lead Agency to navigate between model parameters and assumptions more easily. The two provider types included in subsidy reimbursement rate tables in Georgia are licensed child care learning centers (CCLCs) and licensed family child care learning homes (FCCLHs). Additional dimensions in the rate tables include three geographic regions (Market Rate Zones 1, 2, and 3), three quality rating levels (Quality Rated One Star, Two Star, and Three Star), and two types of care (Full-Day and Before-/-After-School). In addition, the Lead Agency wanted a cost model that could dynamically vary assumptions by facility size (for CCLCs), by providers’ level of participation in child care subsidy (a socioeconomic indicator), and by season. The Lead Agency observed that the distribution of children by age group that it serves varies between the summer and the school year. Initially, the Lead Agency used its state licensing standards and indicators from its Quality Rated program, data from the Bureau of Labor Statistics (BLS), and other publicly available secondary data sources to inform its first round of cost model estimates in 2020. However, it had concerns with using this information to establish new subsidy rates. Among its concerns: