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)? MSDE anticipates having market rate survey and narrow cost analysis data entered no later than September 15, 2024. 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: Office of Child Care met with members of the Office of Child Care (OCC) Advisory Council to get feedback and to assist with the design of the Market Rate Survey Form. iv. Local child care program administrators: Office of Child Care met with members of the Office of Child Care (OCC) Advisory Council to get feedback and to assist with the design of the Market Rate Survey. OCC is open to program administrators and has a child care program administrator on the board. v. Local child care resource and referral agencies: Office of Child Care met with members of the Office of Child Care (OCC) Advisory Council to get feedback and to assist with the design of the Market Rate Survey. OCC is open to the public and has a representative from the child care resource and referral agency on the board. vi. Organizations representing child care caregivers, teachers, and directors from all settings and serving all ages: Office of Child Care met with members of the Office of Child Care (OCC) Advisory Council to get feedback and to assist with the design of the Market Rate Survey. OCC has a representative that represents caregivers, teachers and directors on the board. 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? 5/31/2024 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)? MSDE anticipates having market rate survey and narrow cost analysis data entered no later than September 15, 2024. iii. Describe how it represented the child care market, including what types of providers were included in the survey: MSDE anticipates having market rate survey and narrow cost analysis data entered no later than September 15, 2024. iv. What databases are used in the survey? Are they from multiple sources, including licensing, resource and referral, and the subsidy program? MSDE anticipates having market rate survey and narrow cost analysis data entered no later than September 15, 2024. v. How does the survey use good data collection procedures, regardless of the method for collection (mail, telephone, or web-based survey)? MSDE anticipates having market rate survey and narrow cost analysis data entered no later than September 15, 2024. vi. What is the percent of licensed or regulated child care centers responding to the survey? 0.00 vii. What is the percent of licensed or regulated family child care homes responding to the survey? 0.00 viii. Describe if the survey conducted in any languages other than English: MSDE anticipates having market rate survey and narrow cost analysis data entered no later than September 15, 2024. ix. Describe if data were analyzed in a manner to determine price of care per child: MSDE anticipates having market rate survey and narrow cost analysis data entered no later than September 15, 2024. x. Describe if data were analyzed from a sample of providers and if so, how the sample was weighted: MSDE anticipates having market rate survey and narrow cost analysis data entered no later than September 15, 2024. 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. MSDE anticipates having market rate survey and narrow cost analysis data entered no later than September 15, 2024. 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). MSDE anticipates having market rate survey and narrow cost analysis data entered no later than September 15, 2024. iii. Describe how the market rate survey or pre-approved alternative methodology reflected age of child (e.g., infant, toddler, preschool, school-age): MSDE anticipates having market rate survey and narrow cost analysis data entered no later than September 15, 2024. iv. Describe any other key variations examined by the market rate survey or ACF pre- approved alternative methodology, such as quality level: MSDE anticipates having market rate survey and narrow cost analysis data entered no later than September 15, 2024. 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 Narrow Cost analysis was completed by Prenatal to Five Fiscal Strategies. The methodology used was to use the Provider Cost of Quality Calculator (PCQC). The PCQC is a web-based tool that calculates the cost of quality child care based on site-level provider data. The PCQC relies on Excel spreadsheets that are aligned with the State’s unique reimbursement rate variations including a range of quality and other funding factors. The PCQC helps users understand the discrete costs of delivering child care services at different quality levels, along with differences in cost related to the type of provider, the age of the children served and the geographic region of the state, when regionalized expense data is entered. The PCQC is the federally approved tool to support narrow cost analysis and alternative methodology for subsidy rate setting. The PCQC demonstrates if a gap exists between the provider’s cost of producing services at a given quality level and the revenue sources that are available to support service delivery. The data used is from: - Bureau of Labor Statistics (personnel data) - Averaged cost data for non-personnel, found in the PCQC - Salary data collected as part of the Market Rate Survey done with Maryland providers b. In the Lead Agency’s analysis, were there any relevant variations by geographic location, category of provider, or age of child? MSDE anticipates having market rate survey and narrow cost analysis data entered no later than September 15, 2024. 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.)? MSDE anticipates having market rate survey and narrow cost analysis data entered no later than September 15, 2024. 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). MSDE anticipates having market rate survey and narrow cost analysis data entered no later than September 15, 2024. 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? MSDE anticipates having market rate survey and narrow cost analysis data entered no later than September 15, 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: 5/31/2024 ii. Provide the date the report containing results was made widely available (no later than 30 days after the completion of the report): 5/31/2024 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 weblink will not be available until September 2024, when the market rate survey and narrow cost analysis data is complete. 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: MSDE anticipates having market rate survey and narrow cost analysis data entered no later than September 15, 2024.