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)? October 2022 through September 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 Lead Agency attends quarterly SAC meetings and coordinates with ECI staff on agenda items. At one of the SAC quarterly meetings lead agency staff discussed the plan to contract with Iowa State University(ISU) to conduct the analysis of the MRS data and collection and analysis of the NCA data. Feedback from the SAC was supportive of contracting with ISU. iv. Local child care program administrators: The lead agency consulted the Workforce Committee in September of 2022 regarding contracting with Iowa State University to analyze MRS data and to collect and analyze the NCA data. The workforce committee, which has child care program administrators and they were supportive of this plan. Additionally Iowa State University held focus groups with program administrators from both home-based and center-based child care to obtain feedback on the NCA survey questions and logistics of the survey. Questions were reworded or modified based on this feedback. v. Local child care resource and referral agencies: The lead agency consulted the CCR&R Network Team, which is made up of the Regional Directors for all five regional CCR&R organizations. They were supportive of contracting with Iowa State University to analyze MRS data and collect and analyze the NCA data. Additionally, CCR&R staff that consult directly with child care programs attended a focus group held by Iowa State University and provided feedback on the NCA survey questions and logistics of the survey. vi. Organizations representing child care caregivers, teachers, and directors from all settings and serving all ages: The workforce committee which was consulted as described above contains individuals that represent Iowa Association for the Education of Young Children, Early Childhood Iowa, Iowa Women’s Foundation, institutions of higher education, First Children’s Finance, HeadStart recipients and the HeadStart State Collaboration office. 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? 9/1/2023 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)? Iowa CCR&R is required to update all provider rates at least one time per year and all provider rates in their data system had been updated within the last year at the time that the data was pulled in September 2023. iii. Describe how it represented the child care market, including what types of providers were included in the survey: The Child Care Resource and Referral system contains licensed center-based programs, licensed family child care homes and license-exempt family child care homes. Iowa does not have licensed-exempt child care centers. iv. What databases are used in the survey? Are they from multiple sources, including licensing, resource and referral, and the subsidy program? The National Data System powered by WorkLife Systems which is used by Iowa’s Child Care Resource and Referral agencies. v. How does the survey use good data collection procedures, regardless of the method for collection (mail, telephone, or web-based survey)? Child care providers are able to update their rate information in an online portal, through the phone or email by contacting their child care consultant or through a paper form that is mailed to them. Child Care Resource and Referral staff monitor the NDS database and reach out to providers to ensure that no provider rate information is not more than 1 year old. vi. What is the percent of licensed or regulated child care centers responding to the survey? 87.00 vii. What is the percent of licensed or regulated family child care homes responding to the survey? 93.00 viii. Describe if the survey conducted in any languages other than English: : Child Care Resource and Referral staff have access to translation lines if needed to assist child care providers in completing updates of their provider information. ix. Describe if data were analyzed in a manner to determine price of care per child: Data were analyzed to determine price of care per child based on the age of child (infant/toddler, preschool or school-age) and the type of program (licensed center, Category A/B Child Development Homes, Category C Child Development Homes, and Non-Registered Child Care Homes). x. Describe if data were analyzed from a sample of providers and if so, how the sample was weighted: N/A 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 Market Rate Survey included rates from 87% of center-based providers and 93% of home-based providers in the state. There were respondents from all counties in the state including rural and urban areas. Rates were analyzed by urban and rural zip codes. 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 data was analyzed by provider type including licensed centers and homes (called registered child development homes in Iowa). Iowa does not have licensed-exempt centers and we were unable to analyze data for licensed-exempt homes due low response rate. 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 data was analyzed for each provider type by three age categories 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: The market rate survey data was also analyzed by QRIS level (i.e. level 1-2, level 3-4, level 5) and center size (i.e. small, medium, large). 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 Lead Agency contracted with Iowa State University to conduct the narrow cost analysis. A combination of a cost survey and cost modeling data were used to complete the NCA. Data for costs related to staffing were taken from the 2023 Iowa Child Care Workforce Study. Surveys were used to collect direct cost for limited expendable, operational, and outsources costs and estimated for total of each type of cost using 2020 Narrow Cost Analysis estimates and focus group input from child care financial experts, licensed center administrators, and child development home small business owners. b. In the Lead Agency’s analysis, were there any relevant variations by geographic location, category of provider, or age of child? Differences were identified by geographic location and age of child. Differences in per child per day cost were identified in rural versus urban geography, with urban areas having a higher per child per day cost. This was driven primarily by differences in staff costs. Additionally were differences noted per age group, with the highest per-child-per day costs for infants/toddlers, then preschoolers and the lowest per child per day costs for school-agers. These differences were mostly based on our improved ability to estimate staff costs more precisely and spread classroom staff costs by the age-specific teacher-child ratio and group size. Differences between center- based and home-based care is hard to compare due to the fact that we are able to breakdown per child per day costs by age group in center-based care and we are not able to do the same in home-based care. The per child per day cost in home-based settings is approximately equivalent to the per child per day cost for infants/toddlers in center-based care. 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 following assumptions were used to estimate costs for center-based care: Programs operating less than seven hours per day were considered part-time. Enrollment was calculated in full time equivalent (FTE) with children enrolled part-time counted as .5 FTE Non-teaching staff costs were spread evenly among FTE regardless of age. Teaching staff costs were calculated at the median wage for the specified education level reported in the 2023 Iowa Child Care Workforce Study. Classroom staffing of teaching staff was calculated at 1 lead teacher and 1.6 assistant teachers per day. Enrollment used to calculate teaching staff cost was set at 8 infants and toddlers, 16 preschoolers, and 20 school age children per classroom. Before and After School Program (BASP) teaching staff costs were calculated at 4 hrs/day of lead teacher time and 3 hrs/day of assistant teacher time. Legally required employee benefits costs were calculated at 7.65% of wages (FICA) plus $420 annually for each director, other administrator, lead teacher, and one assistant teacher per classroom (FUTA), and Iowa unemployment taxes and disability insurance was calculated as 2% of staff wages. The following assumptions were used to estimate cost for registered child development homes: Providers worked 63 hrs/week (median reported hours) in models using reported hours per week to calculate costs. Provider wage costs were calculated to include 15.3% self-employment tax rate. All costs were spread equally across enrolled children, regardless of age. This helps to manage the complexity of possible age combinations for CDH that is different than center-based care. Similarly, reported enrollment FTE is used in calculations for CDH, as opposed to regulatory group sizes. FTE was calculated as one reported full-time enrolled child or two children reported as part-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). Estimated costs at various levels of quality used Iowa’s IQ4K levels to operationalize quality. For the sake of having large enough groups for meaningful analysis, we grouped participants into four categories￿not engaged, currently working toward first rating, levels 1-3, and levels 4-5. Regression analyses were conducted to examine differences in base cost to provide care for non-staff related costs. Controlling for program group, there were not significant differences in base non-staff operating costs by IQ4K group. However, we note that the education criteria for IQ4K levels 4 and 5 most closely align with the ￿high education￿. Therefore, additional costs wages costs for high education levels were used. We calculated additional costs reported by participants as specific to their efforts towards IQ4K, specific examples of these efforts are in the detailed MRS report. Respondents also had an open-ended opportunity to describe any additional costs. 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? For licensed centers there was not a gap between the 75th percentile of the market rate and the average per child per day cost of care for preschool aged children, school-aged children. For infants and toddlers in rural centers there was not a gap between the 75th percentile of the market rate and the per child per day cost, however, for infants and toddlers in urban centers the cost of care exceeded the 75th percentile of the market rate by $1.14 to $7.70 per day. For Child Development Homes the per child cost per day I not done by age group however there was a gap noted between the 75th percentile of the market rates and the per child per day average for all age groups, ranging from $6.37 to $28.93 per day. Current legislation directs the department to set CCA’s tiered reimbursement rates between 65th and the 80th percentile of the market rate survey. Since there is a gap between price and cost for infant/toddler slots in both center-based and home-based programs the Lead Agency specifically supported allowing the infant/toddler base rates to be set at the 75th or higher percentile for all tiers instead of starting at the 65th percentile. Since the cost analysis was not fully completed until after legislative session was finished the Lead Agency intends to continue to review the NCA data and provide additional information to the legislature. 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: 5/13/2024 ii. Provide the date the report containing results was made widely available (no later than 30 days after the completion of the report): 5/15/2024 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://hhs.iowa.gov/media/13428/download?inline The Lead Agency notified providers and stakeholders through distribution lists when the report was available on the website. Additionally CCR&R released social media posts to make the public aware. 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 consulted with providers and stakeholders prior to contracting with Iowa State University (ISU) to analyze the market rate data and conduct and analyze the narrow cost analysis. Feedback from providers indicated that they believed their prices and especially their costs vary based on key factors such as geographic location (urban vs rural), type of program (non-profit, for profit) and types of benefits provided to employees. This information informed the analysis of both the market rate survey and the narrow cost analysis as the information was broken up in multiple different ways to try to determine what factors influenced price and cost.