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)? Data was collected from January 16, 2024 to February 14, 2024. The report was submitted March 27, 2024 to DCC for approval. Citation: https://www.childcareawareky.org/research/ 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 Child Care Advisory Council (CCAC) group was consulted on the Market Rate Study. The Market Rate Study report was submitted on March 27, 2024. The follow up Cost Model project was submitted on June 25, 2024. Findings were shared with the CCAC on July 25, 2024. Feedback from the CCAC indicated that the committee appreciated the data-based findings that supported what has been known anecdotally for many years: the business model of child care is broken. iv. Local child care program administrators: Child Care Program Administrators are present on the CCAC. All local child care program administrators were invited to participate in the Market Rate Study. v. Local child care resource and referral agencies: This study was conducted by Child Care Aware of Kentucky (CCAKY), the statewide CCR&R for Licensed Centers. CCAKY coordinated with the Family Child Care Network (FCCN) for assistance in reaching out to all Certified Family Child Care Homes. vi. Organizations representing child care caregivers, teachers, and directors from all settings and serving all ages: Child Care Aware of Kentucky reviewed the study to ensure that it was reflective of the needs of caregivers, teachers, and directors from all licensed and certified settings that serve young children in Kentucky. 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? 3/27/2024 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)? January 16-February 14, 2024. iii. Describe how it represented the child care market, including what types of providers were included in the survey: All licensed child care centers and all certified family child care homes were invited to participate. iv. What databases are used in the survey? Are they from multiple sources, including licensing, resource and referral, and the subsidy program? The Market Rate Study was survey-based and did not rely on any databases. v. How does the survey use good data collection procedures, regardless of the method for collection (mail, telephone, or web-based survey)? The survey was Institutional Review Board (IRB) approved by the University of Kentucky. Email addresses from the January 2024 active provider list were used to send personalized invitations and an automated scheduled reminder to complete the survey one week after launch. All participants were required to review a consent form and agree to participate before completing the online survey and submitting their rates. Notices were placed on social media, messages were sent by the DCC ListServ, and technical assistance staff reminded providers that the survey was available. As an additional incentive, a random drawing for one of three $100 training credits was included to any provider who completed the survey. Those providers who did not receive or could not find the invitation link because of spam filters or other technical issues, also had the opportunity to submit a survey with a generic link once the scheduled reminder period passed. During data cleaning, surveys were matched to the original list to ensure that there were no duplicates. The overall response rate to the survey was 57.16%. vi. What is the percent of licensed or regulated child care centers responding to the survey? 58.00 vii. What is the percent of licensed or regulated family child care homes responding to the survey? 48.00 viii. Describe if the survey conducted in any languages other than English: N/A ix. Describe if data were analyzed in a manner to determine price of care per child: Market Rates were calculated statewide and by geographic region. They were calculated full- and part-time for infants, toddlers, preschool, and school age population in licensed centers and in family child care homes. x. Describe if data were analyzed from a sample of providers and if so, how the sample was weighted: N/A- All providers were invited to participate. 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. Rates are broken down by geographic region: East, Central, West; 8 Child Care Aware regions; urban & rural. Response rate per Child Care Aware region was as follows: Cumberland Region - 110 Eastern Mountain - 71 Jefferson - 192 Northern Bluegrass - 166 Salt River Trail - 210 Southern Bluegrass - 104 The Lakes - 144 Two Rivers - 137 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 response rate for the Market Rate Survey was 57.16%. (See Tables 1 & 2 in Market Rate Report, https://www.childcareawareky.org/wp- content/uploads/2024/06/2024-Market-Rate-Study-1.pdf. All types of child care providers were represented (Type I, Type II, and Certified), and all regions of the state were represented. Response rate per provider type: Licensed Type I - 57.49% Licensed Type II - 87.18% Certified - %48.80% iii. Describe how the market rate survey or pre-approved alternative methodology reflected age of child (e.g., infant, toddler, preschool, school-age): The response rate for the Market Rate Survey was 57.16%. (See Tables 1 & 2 in Market Rate Report, https://www.childcareawareky.org/wp-content/uploads/2024/06/2024- Market-Rate-Study-1.pdf. iv. Describe any other key variations examined by the market rate survey or ACF pre- approved alternative methodology, such as quality level: We examined by subsidy acceptance, subsidy acceptance (urban v. rural), quality ratings (high quality v. regulatory compliance) and quality level (urban v. rural). 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)? A narrow cost analysis was conducted in 2023 based on the Center for American Progress’ Cost of Child Care calculator Website: https://costofchildcare.org The updated Cost Model developed by CCA relies on data collected simultaneous with the Market Rate Study in January and February 2024. See report: https://www.childcareawareky.org/wp-content/uploads/2024/07/Cost-of-Care-in- Kentucky-Part-2-Cost-Model-2024.pdf b. In the Lead Agency’s analysis, were there any relevant variations by geographic location, category of provider, or age of child? This was a state-level model which examined licensed child care centers and certified family child care homes by quality level. The Cost Model report included variations based on small v. large centers. These input for these models included state median levels for costs broken down by age level with appropriate regulatory ratios. 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 based level assumptions were based on health and safety, regulatory, and licensing requirements. The cost model developed for small and large centers assumed that centers accept subsidy, participate in the food program, and charge state average market rates. The wages used to develop the cost model begin with the median wages provided by a representative sample of providers across the state. The model then uses Bureau of Labor Statistics KY data to model how higher wages will affect the cost of 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). Higher quality levels were modeled by increasing teacher compensation (salary, health, & retirement), more planning time, more physical space, decrease in ratios and groups sizes. The assumption used to model higher quality in the cost models is wage level. The median KY wages gathered from a sample of providers is the first level of the model. Then higher levels are modeled by increasing the wages based on the BLS KY wages that are included in the PCQC. 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 cost differential is detailed in Table 4 of the Narrow Cost Analysis Report at Kentucky Child Care Narrow Cost Analysis 2022. Website: https://www.childcareawareky.org/wp-content/uploads/2023/02/Kentucky- Narrow-Cost-Analysis-UK-HDI-CCA-1-27-2023-revised.pdf The 2024 Kentucky Cost Model for Licensed Centers was submitted in June of 2024 and is publicly available here: https://www.childcareawareky.org/wp- content/uploads/2024/07/Cost-of-Care-in-Kentucky-Part-2-Cost-Model-2024.pdf This more than meets the requirement of a narrow cost analysis. The Lead Agency is considering all data from the 2024 MRS and will make necessary adjustments by December 31, 2024. 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: 1/27/2024 ii. Provide the date the report containing results was made widely available (no later than 30 days after the completion of the report): 2/15/2024 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://www.childcareawareky.org/wpcontent/uploads/2024/06/2024-Market- Rate-Study-1.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: The Division of Child Care received a non-compliance notice on December 13, 2021 because the results of the Market Rate Survey were not widely available to the public. The most recent MRS results are widely available via the CCA Research website, and are shared across social media platforms. The MRS was presented at a CCAC meeting on July 25, 2024 and comments were addressed during the meeting from stakeholders. The comments that were shared during the meeting confirmed that the partners understood the research and felt that it was a valuable contribution to the state-level discussion of the cost of care. Going forward, we will continue to engage CCAC members and others when we are planning and conducting research studies for the landscape of child care across Kentucky.