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)? May - June 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: The Department of Human Services convenes quarterly with the Child Care Advisory Committee. The Child Care Advisory Committee provides input on potential revisions of the Market Rate Survey. iv. Local child care program administrators: The Department of Human Services Child Care Advisory Committee includes center-based providers and directors or program administrators. v. Local child care resource and referral agencies: The Department of Human Services contracted statewide child care resource and referral agency conducts the Market Rate Survey annually for the Department. The child care resource and referral service agency surveys licensed and registered child care providers statewide and enters the responses received into a proprietary data system that captures the data. The child care resource and referral service agency provides the Department’s Audit, Quality Control, and Research Office Research staff with a data extract of the survey responses received from child care providers. The Research staff use statistical software to analyze the child care rate data and create summary reports of the analysis. vi. Organizations representing child care caregivers, teachers, and directors from all settings and serving all ages: The Department of Human Services Child Care Advisory Committee includes individuals from identified organizations representing child care caregivers, teachers, and directors. 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? 11/17/2023 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)? May - June 2023 iii. Describe how it represented the child care market, including what types of providers were included in the survey: The Department of Human Services contracted statewide child care resource and referral agency, People Attentive To Children (PATCH), conducts the Market Rate Survey annually for the Department. PATCH surveys licensed and registered child care providers statewide and enters the responses received into a proprietary data system that captures the data. PATCH also provides the Department’s Audit, Quality Control, and Research Office Research staff with a data extract of the survey responses received from child care providers. The Research staff use statistical software to analyze the child care rate data and create summary reports of the analysis. iv. What databases are used in the survey? Are they from multiple sources, including licensing, resource and referral, and the subsidy program? The Department of Human Services contracted statewide child care resource and referral agency, People Attentive To Children, maintains information in a proprietary National Association of Child Care Resource and Referral Agencies data system. v. How does the survey use good data collection procedures, regardless of the method for collection (mail, telephone, or web-based survey)? The Department of Human Services contracted statewide child care resource and referral agency, People Attentive To Children (PATCH), conducts the Market Rate Survey annually for the Department. PATCH surveys licensed and registered child care providers statewide and enters the responses received into a proprietary data system that captures the data. PATCH also provides the Department’s Audit, Quality Control, and Research Office Research staff with a data extract of the survey responses received from child care providers. The Research staff use statistical software to analyze the child care rate data and create summary reports of the analysis. vi. What is the percent of licensed or regulated child care centers responding to the survey? 82.00 vii. What is the percent of licensed or regulated family child care homes responding to the survey? 75.00 viii. Describe if the survey conducted in any languages other than English: The survey was not conducted in other languages. Providers were informed if they needed assistance in translation of the survey, they may contact the contracted statewide child care resource and referral agency for interpreter services. ix. Describe if data were analyzed in a manner to determine price of care per child: Data includes prices of child care for all ages of children, infant/toddler, preschool and school age. x. Describe if data were analyzed from a sample of providers and if so, how the sample was weighted: 542 surveyed providers were included in the final analysis. A total of 2,527 rates from these providers were used in the survey. Providers with the following license types were included in the child care rate analysis: Licensed Before and After School Program, Registered Family Home, Licensed Group Home, Licensed Infant/Toddler Center, and Licensed Preschool. Full-time monthly rates were weighted by total desired capacity of each provider. The desired capacity rather than licensed capacity was used because individual providers do not always choose to enroll the maximum number of children they are licensed to serve. For providers with missing desired capacity information, licensed capacity was used. A provider’s rate data was excluded from the analysis if both desired and licensed capacity were missing. 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. Child care rates are examined by geographic area: by state, by county, and by urban/rural classification. 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 market rate survey included center-based infant/toddler centers, accredited center-based providers, licensed center-based/group child care home, registered family child care home ￿ infant/toddler providers, registered family child care home providers, and licensed before and after school care providers. iii. Describe how the market rate survey or pre-approved alternative methodology reflected age of child (e.g., infant, toddler, preschool, school-age): The market rate survey reflected infants ages six (6) weeks to 12 months, toddlers ages 12 months to 36 months, preschool ages two (2) years to six (6) years and school-age from kindergarten age enrolled in public or private elementary schools. iv. Describe any other key variations examined by the market rate survey or ACF pre- approved alternative methodology, such as quality level: The market rate survey also included accredited center-based providers. Accredited means providers who are certified by the National Association for the Education of Young Children or the National Early Childhood Program Accreditation. 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)? An online cost calculator, accessed through https://costofchildcare.org/, is a tool that estimates the cost of providing care in Hawaii, was used for the narrow cost analysis in addition to the 2023 Hawaii Market Rate Survey. For this purpose, the Department of Human Services chose to analyze the cost to increase staff salaries to incentivize quality in licensed Center-Based Infant and Toddler Centers and licensed Group Center-Based providers and compare the findings to Hawaii’s current child care payment rates for these particular child care centers. b. In the Lead Agency’s analysis, were there any relevant variations by geographic location, category of provider, or age of child? One (1) relevant variation is the online cost of care calculator distinguishes infant and toddlers as separate ages while the Department of Human Services combines infant and toddlers under one (1) group. 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.)? To achieve a higher level of care, one assumption is the staff to child ratio would be fewer children to one (1) teacher. The online cost of care calculator provided an estimated base cost lower than Hawaii’s 2023 Market Rate Survey. Another assumption was the online cost of care calculator did not account for accredited facilities which incur additional expenses to the overall costs to be accredited. Hawaii￿s child care payment rates for the preschool are based on facilities that are accredited and non-accredited. The online cost of care calculator indicated a figure between Hawaii’s 2023 Market Rate Survey for accredited and non-accredited care. 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 Department of Human Services provides a higher rate for center-based child care providers accredited by the National Association for the Education of Young Children, the National Early Childhood Program Accreditation, or the National Association for Family Child Care Accreditation . The Department of Human Services does not define any variations or levels of quality that providers may have other than the three (3) types of accreditations recognized for the tiered subsidy. 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 online cost calculator and Market Rate Survey were utilized to evaluate the gap between cost and price. Based on the data collected for 2023 Hawaii Market Rate Survey, to provide equal access (75th percentile) to the child care in the following care settings, the child care payment rates should be set at: $2,260 per month per child in a licensed Center-Based Infant and Toddler setting, and $1,525 per month per child in a licensed Accredited Center-Based setting. The Department is currently working on policy amendments for the Child Care Subsidy Program; and one (1) area being reviewed is the child care payment rates as referenced in Chapter 798.3, Hawaii Administrative Rules. The Department continues to collaborate with its program contractors as well as other child care partners on ways to narrow the gap in the department’s child care payment rates to provide equal access for CCDF families. 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: 11/17/2023 ii. Provide the date the report containing results was made widely available (no later than 30 days after the completion of the report): 11/21/2023 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://humanservices.hawaii.gov/bessd/child-care-program/ 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: At the Department of Human Services Child Care Advisory Committee statewide quarterly meetings, the Department has discussed and will continue to discuss the requirement with members and early childhood stakeholders of the Department to conduct the narrow costs analysis as well as the current process for the Market Rate Survey to determine if there are revisions that will need to be made to the Market Rate Survey in subsequent years to capture more information about the cost for programs to meet the licensing requirements and provide higher quality care.