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)? October 1 to December 31, 2022 (State Fiscal Year 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.

i. State Advisory Council or similar coordinating body: The Child Care Advisory Council includes individuals from the Governor's Office of Early Childhood Development, local child care resource and referral agencies as well as parents, providers, partner agency and INCCRRA. The council assisted with drafting and reviewing the survey prior to its use and was consulted on how best to utilize the results.

ii. Local child care program administrators: Child care providers from various parts of the state are included in the Child Care Advisory Council and the Early Learning Council.

iii. Local child care resource and referral agencies: CCR&Rs were consulted prior to the data collection period about the required data elements to collect, format of data collection, and procedures for consistency across all agencies .

iv. Organizations representing child care caregivers, teachers, and directors from all settings and serving all ages: Leadership from SEIU, the union that represents all home based child care providers in Illinois, and the Coalition of Site Administered Child Care Programs have served on the Child Care Advisory Council and the Early Learning Council and the Early Learning Council.

v. 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? 3/15/2023

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)? Data elements were collected between September through December 2022.

iii. Describe how it represented the child care market, including what types of providers were included in the survey: The Market Rate Survey represents Licensed Family Child Care, Licensed Family Group Homes, and Licensed Center provider types.

iv. What databases are used in the survey? Are they from multiple sources, including licensing, resource and referral, and the subsidy program? Illinois Market Rate Survey utilizes the Child Care Resource and Referral (CCR&R regionally collected administrative data) from child care providers. Data is collected and inputted into a statewide database, managed by the Illinois Network of Child Care Resource and Referral Agencies (INCCRRA).

v. How does the survey use good data collection procedures, regardless of the method for collection (mail, telephone, or web-based survey)? Following standardized procedures outlined in the manual and as part of their training, CCR&R staff aim to contact 85% of centers and 85% of family child care homes within a three-month data collection period. This approach leads to higher sample rates compared to typical surveys. Each quarter, INCCRRA conducts data quality assurance processes on the collected data and collaborates with CCR&Rs to resolve any errors.

vi. What is the percent of licensed or regulated child care centers responding to the survey? 32%

vii. What is the percent of licensed or regulated family child care homes responding to the survey? 78%

viii. Describe if the survey conducted in any languages other than English: The Market Rate Survey is conducted based on the providers need and also available in Spanish as applicable.

ix. Describe if data were analyzed in a manner to determine price of care per child: The rates presented in the market rate survey are a function not only of the rate charged by each provider for a particular age group but also a function of the number of child care spaces or slots available for that age group for all providers serving that age group within a particular market. Thus, the mean rate is a weighted mean, with each provider's rate for a given age group weighted by the licensed capacity for children of that age group. Percentiles, moreover, are based upon weighting a given rate by the number of slots available at that rate, for a given age group, within a given payment region and then ordering the rates from lowest to highest.

x. Describe if data were analyzed from a sample of providers and if so, how the sample was weighted: The rates presented in the Market Rate survey are a function not only of the rate charged by each provider for a particular age group but also a function of the number of child care spaces or slots available for that age group for all providers serving that age group within a particular market. Thus, the mean rate is a weighted mean, with each provider's rate for a given age group weighted by the licensed capacity for children of that age group. Percentiles, moreover, are based upon weighting a given rate by the number of slots available at that rate, for a given age group, within a given payment region and then ordering the rates from lowest to highest .

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 is established at several units of geography. First, rates are calculated at the county level and will be reported if those rates are based on at least 3 slots. Rates will then be calculated at the level of CCAP county groups (Group IA, IB, and II). These county groupings reflect geographic variation in terms of the most urban counties (Group IA) to the most rural (Group II). As an appendix to the main analysis, we will include analysis of license-exempt center rates. Due to the smaller numbers of these programs, the geographic analysis will be conducted at the level of service delivery area (SDA). The SDA is a grouping of 1 or more counties that break up the State of Illinois into the areas served by local CCR&Rs.

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 primary focus of the report is on licensed programs. As such, market rates will be established for licensed child care centers, licensed family child care homes, and licensed group family child care homes. In the Market Rate Survey, there is an appendix included with analysis on the data available for license-exempt centers.

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 is established at the level of child's age. We do this analysis on two different groupings of ages. First, we do the analysis by the following age groups, which align with child care licensing: infants, toddlers, twos, preschool (3-4), fives, and school-age. We then do the analysis based on the age groups used for the CCAP reimbursement rates, which are: under age 2, age 2, and age 3 and older .

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 examines additional fees charged by providers and availability of care during non- standard hours.

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)? To assess child care providers' cost of care through a narrow cost analysis, IDHS-DEC developed a cost model engine that estimates the cost to provide care that meets today's child care licensing standards and the cost to meet requirements for the State's Quality Rating and Improvement System (QRIS), ExceleRate Illinois. The model incorporates assumptions for expenditures associated with providing care and calculates costs differentiated by geographic region within the State (1A, 1B, and 2), type of care (licensed centers, licensed family child care homes, and licensed family group child care homes), quality tier (licensed, ExceleRate Bronze, ExceleRate Silver, and ExceleRate Gold), and age of child served (infants and toddlers, two-year-olds, preschool-eligible children, and school-aged children). Like most cost models, it was built to calculate costs for theoretical providers, meant to represent the average provider experience across the State, with varying input assumptions across these lines of differentiation. For each child care setting, associated staffing patterns, wage assumptions, and non-personnel costs were incorporated to calculate provider costs, staff wages and rent (a non-personnel cost) vary based on geographic region of the State. The model is structured to allow for scenario and sensitivity analysis based on varying input assumptions that can be updated annually. Cost driver input assumptions for the analysis have been informed by financial modeling, surveys, data collection, and studies that have been conducted by the State in the recent past, as well as by conversations with local experts and stakeholders .

b. In the Lead Agency's analysis, were there any relevant variations by geographic location, category of provider, or age of child? Providers are grouped by counties throughout the State. Child care markets are defined by specific geographical regions, age group, and type of care (family child care or center child care). Within the state of Illinois, child care markets are broken down into three reimbursement tiers represented by groups of counties with similar populations and makeups. Group IA consists of 7 urban counties: Cook, DeKalb, DuPage, Kane, Kendall, Lake, and McHenry. Families in these counties who are eligible receive the highest child care assistance rates in the state. Group IB is comprised of 16 counties spread throughout the state that have at least one urban area. These counties include: Boone, Champaign, Kankakee, Madison, McLean, Monroe, Ogle, Peoria, Rock Island, Sangamon, St. Clair, Tazewell, Whiteside, Will, Winnebago, and Woodford. Eligible families in these counties receive child care assistance below that of those families in Group IA but above the rates received by families who live in the counties represented by Group II. All other counties in Illinois, which are primarily rural, make up Group II and received the lowest rates of child care assistance.

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 build the narrow cost analysis, the Lead Agency had to determine how to include key provider expenditure assumptions. Based on federal requirements, review of other states' submissions, and existing Illinois practice, the narrow cost analysis differentiates the cost of care across provider settings, quality tiers, state geographies, and age groups. To address the cost of providers' implementation of health, safety, quality, and staffing requirements, licensing standards were used as a guide to set cost modeling assumptions. These included assumptions about size, child count, and ratios; staffing and credentials; personnel expenditures (wages and benefits); and non-personnel expenditures, all based on licensing requirements. These assumptions were then synthesized by provider setting type, geographic region, and age group to develop estimated costs per classroom for licensed child care centers and estimated costs per program for family child care homes and family group child care homes .

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). To address the cost of providers' implementation of higher-quality care, Illinois relied upon the ExceleRate Quality Rating and Improvement System as a guide to set cost modeling assumptions. These included assumptions about size, child count, and ratios; staffing and credentials; personnel expenditures (wages and benefits); and non-personnel expenditures, all based on ExceleRate Bronze, ExceleRate Silver, or ExceleRate Gold requirements. These assumptions were then synthesized by provider setting type, geographic region, and age group to develop estimated costs per classroom for licensed child care centers and estimated costs per program for family child care homes and family group child care homes, each differentiated by ExceleRate Circle of Quality.

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 narrow cost analysis estimates the current costs that providers incur today to meet what is required through child care licensing standards and by ExceleRate Illinois Circle of Quality as it is implemented today - it is not an analysis of the cost of all services that providers may provide (or that children may need) above and beyond licensing standards or the costs associated with services in an adequate system. For example, the narrow cost analysis relies upon current personnel costs for both programs meeting child care licensing standards and programs that have earned ExceleRate Illinois Circles of Quality. These personnel costs are accurate for current providers to offer current levels of child care in their communities; however, they may not be adequate to expand the workforce, support more advanced qualifications, or reduce turnover. Further, the narrow cost analysis provides estimated costs per classroom for licensed child care centers and by program for licensed family child care home and licensed family group child care home. The greatest drivers of cost in a licensed child care center or home are personnel costs, which do not vary evenly or on a linear basis compared to child enrollment and participation. Rather, these costs vary by classroom of children, and it is for this reason that the narrow cost analysis estimates costs per classroom or by program. This creates challenges when comparing the gap between costs incurred by child care providers at a per-classroom level to the Lead Agency's payment rates, which are set at a per-child level.

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.

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: 3/1/2024

ii. Provide the date the report containing results was made widely available (no later than 30 days after the completion of the report): 4/1/2024

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:

The Market Rate Survey was sent to the Child Care Resource and Referral Agencies to share broadly with their service delivery area, the Illinois Network of Child Care Resource and Referral Agencies, members of the Professional Development Advisory Council, members of the Child Care Advisory Council, and members of the Early Learning Council. Additionally, the report was sent throughout the Division of Early Childhood as the Lead Agency to share as appropriate with other programs within the Division. The report was posted on the IDHS website at Market Rate Survey 2023 Final (state.il.us)

https://www.dhs.state.il.us/OneNetLibrary/27897/documents/MarketRateSurvey/MarketRateSurvey2023_A11Y.pdf

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 conducting data collection, the Lead Agency works with partners at the Illinois Network of Child Care Resource and Referral Agencies (INCCRRA) and with the local Child Care Resource and Referral Agencies for feedback. The Lead Agency reviews comments from all stakeholders and consults with the Governor's office, office of the budget, and internal management in determining if any considerations should be made based on available resources. The Lead Agency works with INCCRRA on presenting the results and major findings of the report with Advisory bodies and state agency partners.