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. [ ] Market rate survey. i. When were the data gathered (provide a date range; for instance, September – December 2023)? b. [x] ACF pre-approved alternative methodology. i. [ ] The alternative methodology was completed. ii. [x] 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). On January 5, 2024, EEC received OCC approval to use a cost-informed alternative methodology to set payment rates by no later than July 1, 2025. As an update, EEC recently procured a contract to work with an external contractor to update, refine, and expand EEC’s current cost estimation models. We anticipate that plan refinement, data collection, data analysis, ongoing reporting, and stakeholder engagement will occur throughout the remainder of the 2024 calendar year. The plan is for further planning and protocol development to take place during the spring of 2024, and for data collection and data analysis to take place during the spring and summer of 2024. Stakeholder engagement will take place throughout the process, and at a minimum will occur during the design, data collection and analysis, and findings and reporting stages. EEC intends for child care financial assistance rates to be adjusted based on the alternative methodology process by January 2025 and for the final report to be finalized and published by March 2025. A more detailed estimated timeline is provided below. -March 2024: EEC provides update and seeks preliminary input on alternative methodology plan from EEC’s Advisory and Workforce Councils and EEC’s Board. -June 2024: Contractor finalizes project workplan and develops research protocols. -June/July 2024: Contractor and EEC seek additional input on design from various stakeholders. -June 2024 ￿ October 2024: Contractor collects and analyzes data from EEC and other sources to refine cost model assumptions/model structure. -June ￿ September 2024: Contractor and EEC seek input on cost model assumptions from external stakeholders through individual/group engagement sessions led by the contractor. -September/October 2024: Contractor seeks input on cost model outputs/findings from external stakeholders through individual/group engagement sessions led by the contractor. -September/October 2024: EEC develops proposal for FY25 rate increase/adjustments based on cost model findings. October/November 2024: EEC presents proposal for FY25 rate increases/adjustments to EEC Board, should funding be available. November 2024 - January 2025: EEC Board votes on adjustments to rates using alternative methodology, if appropriate and pending available resources. -By March 2025: Finalize and publish alternative methodology report 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: As a part of implementing the pre-approved alternative methodology plan, in 2024, EEC and the external contractor will engage existing stakeholder groups, including the EEC Board which serves as the State Advisory Council for this plan, to gather feedback at multiple stages of the process. In the summer of 2024, EEC and the external research partner will seek input from members of the State Advisory Council on the project design and detailed workplan. Throughout 2024, EEC and the external research partner will seek input from the State Advisory Council on the cost model assumptions and findings. iv. Local child care program administrators: As part of implementing the pre- approved alternative methodology plan, EEC and/or the external research partner will engage program administrators through group sessions, individual sessions, and other modes of input to get feedback on the project design, cost model assumptions, and outputs of the model during the summer of 2024. v. Local child care resource and referral agencies: As part of implementing the pre- approved alternative methodology plan, EEC and/or the external research partner will solicit input from child care resource and referral agencies on the project design, cost model assumptions, and outputs of the model during the summer of 2024. vi. Organizations representing child care caregivers, teachers, and directors from all settings and serving all ages: As part of developing and executing the alternative methodology, EEC and/or the external research partner will solicit input from child care provider associations and child care provider networks on the project design, cost model assumptions, and outputs of the model during the summer and fall of 2024. vii. 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? 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)? iii. Describe how it represented the child care market, including what types of providers were included in the survey: iv. What databases are used in the survey? Are they from multiple sources, including licensing, resource and referral, and the subsidy program? v. How does the survey use good data collection procedures, regardless of the method for collection (mail, telephone, or web-based survey)? vi. What is the percent of licensed or regulated child care centers responding to the survey? vii. What is the percent of licensed or regulated family child care homes responding to the survey? viii. Describe if the survey conducted in any languages other than English: ix. Describe if data were analyzed in a manner to determine price of care per child: x. Describe if data were analyzed from a sample of providers and if so, how the sample was weighted: 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 pre-approved alternative methodology will update, refine and expand cost models that reflect geographic variation across different regions. 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 pre-approved alternative methodology will reflect at least two program types: center-based and family child care programs. As part of developing and refining the cost models, costs for informal child care (also known as Family, Friend, and Neighbor Care) will also be explored. The alternative methodology will also pay particular attention to before and after school programming costs, which could lead to creating a separate cost model for this program type. iii. Describe how the market rate survey or pre-approved alternative methodology reflected age of child (e.g., infant, toddler, preschool, school-age): The pre- approved alternative methodology will reflect costs associated with serving different ages of children including infants, toddlers, preschoolers, and school age children. iv. Describe any other key variations examined by the market rate survey or ACF pre- approved alternative methodology, such as quality level: In addition to variations in cost by region, program type, and child age, the pre-approved alternative methodology will also take into account variations such as licensed capacity, enrollment, and program size. The cost estimation models will also account for key indicators of program quality such as staff compensation, benefits, and professional supports such as planning time. As noted above, the alternative methodology will also aim to explore the unique costs associated with informal child care and before and after school programs. 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)? As noted above, EEC was approved to use a cost-informed alternative methodology for setting rates for the FFY 2025-27 state plan and will be implementing the alternative methodology in 2024-25. EEC’s prior narrow cost analysis was completed and reported on in 2022. EEC procured a contract with a research organization to update, refine, and expand existing cost estimation models developed in 2022-23. The updated models will meet and exceed the requirements of the narrow cost analysis by modeling operating costs using a more comprehensive definition of higher quality that incorporates costs associated with a competitively compensated and professionally supported workforce. b. In the Lead Agency’s analysis, were there any relevant variations by geographic location, category of provider, or age of child? EEC’s cost estimation models will account for different program characteristics, including geographic location, program type, and age of children served. 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.)? As part of implementing the pre-approved alternative methodology, EEC will determine the cost of care at a base level of quality by utilizing its robust licensing regulations including staffing ratios and group sizes as well as professional development expectations. EEC will also engage stakeholders to understand the staffing patterns commonly used to meet required staffing ratios in addition to analyzing EEC data from the Commonwealth Cares for Children (C3) program on group sizes and classrooms. Through C3, EEC also collects data on the highest and lowest wages reported by providers for certain roles such as FCC Assistants, Lead Teachers, and Center Directors. These data, along with any other available data from other sources, will continue to inform the salary assumptions in the cost models at the base level of quality. 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). As part of implementing the pre-approved alternative methodology, EEC’s cost models will focus on the current cost of care given EEC’s robust licensing standards as well as the cost at higher levels of quality including increased staff compensation, benefits, and professional supports. EEC is in the process of developing a new educator credentialing system to better identify and measure the competencies of educators and provide more structure around compensation increases. The credential will identify expected competencies for multiple levels of skills and compensation recommendations for each level. Information from the credentialing system and aligned compensation levels will be used to develop cost estimates associated with a higher level of quality when this information is available. The models will also account for quality indicators such as instructional supports, professional learning opportunities, and materials needed for quality interactions and instruction. 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? As a part of implementing the pre-approved alternative methodology, EEC will partner with an external research organization to not only further develop robust cost estimation models, but also collect and analyze tuition rates by program type, child age, and geography. This will help EEC understand how prices have changed since the last market rate survey in 2022 and recent rate increases and the gap between cost and price. This information may also be used to inform decisions about future rate increases. 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: 9/30/2022 ii. Provide the date the report containing results was made widely available (no later than 30 days after the completion of the report): 10/28/2022 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.mass.gov/lists/department-of-early-education-and-care-general- reports 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: EEC’s last market rate survey was completed in 2022. EEC was approved to move forward with using an alternative methodology for this state plan so did not conduct another market survey in 2023-24. EEC will share more details as the alternative methodology work is completed.