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)? The Lead Agency (DHHS, OCFS) conducted the 2024 Child Care Market Rate Survey between October 2023 and February 2024 with technical assistance from the Burns & Associates division of Health Management Associates (HMA-Burns). HMA supported the administration of the survey and HMA and the Center for Early Learning Funding Equity (CELFE) both supported the survey analysis. HMA provided the narrow cost analysis date from the survey to CELFE for the analysis. 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 presented the draft instrument to the Children's Cabinet Early Childhood Advisory Council (CCECAC) in Fall of 2023. Council members then provided feedback and had questions answered regarding the MRS. Edits were made to the draft instrument based on the feedback provided during the meeting. The ECE Business Collaboratory is a group of stakeholders in Maine including state staff and external child care stakeholders. They also informed the development of the market rate survey and narrow cost analysis, since they are the lead advisory group in the development of a cost modeling tool in Maine. iv. Local child care program administrators: Local child care program administrators are represented on both the CCECAC and the ECE Business Collaboratory Team. The Lead Agency also sent communication regarding the upcoming survey to all licensed child care programs statewide. v. Local child care resource and referral agencies: Maine does not have CCR&Rs. vi. Organizations representing child care caregivers, teachers, and directors from all settings and serving all ages: The Lead Agency began sending communications via mail and email to all licensed providers in September 2024 that the survey was coming. Key stakeholders were also notified, including the Maine Association for the Education of Young Children, the Family Child Care Association of Maine, the YMCA Alliance of Northern New England, the Maine Head Start Director's Association, Maine Afterschool Network, and Maine Roads to Quality Professional Development Network, and asked to share with providers that are in their network. These key stakeholders informed the way the survey was executed, advising and supporting the multiple forms of survey distribution. 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? 2/29/2024 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)? All of the prices of the survey were collected within a five-month time period, between October 2023 and February 2024. iii. Describe how it represented the child care market, including what types of providers were included in the survey: The Market Rate Survey (MRS) was conducted with licensed child care providers across Maine. To maximize representation, all licensed facility and family child care providers are invited to complete the survey via multiple modes, including the internet, postal survey, or by phone. iv. What databases are used in the survey? Are they from multiple sources, including licensing, resource and referral, and the subsidy program? The source of licensed child care information comes from Maine’s MACWIS database, which includes all licensed programs 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)? Contact with the providers was initiated with a prenotification letter that described the purpose and importance of the survey. Following this initial contact, the data collection was conducted in multiple phases to maximize response. vi. What is the percent of licensed or regulated child care centers responding to the survey? 62.50 vii. What is the percent of licensed or regulated family child care homes responding to the survey? 66.80 viii. Describe if the survey conducted in any languages other than English: No ix. Describe if data were analyzed in a manner to determine price of care per child: Yes, the market rate survey reflected variation in the price of cost of care per child. x. Describe if data were analyzed from a sample of providers and if so, how the sample was weighted: Yes, to account for differences in service capacity and to appropriately recognize the relative prevalence of rates associated with providers that have more licensed capacity in a given county or county grouping, reported rates were weighted by total licensed capacity. 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 2024 Maine Child Care Market Rate Survey collected information regarding current child care rates for private-pay families, provider capacity by age level and current enrollment, details regarding participation in the CCAP, and other data to help OCFS to inform CCAP policies and funding. OCFS provided HMA-Burns with a roster of all licensed providers as of October 23, 2023. In total, 1,548 providers were listed. During the administration period of the survey, four providers indicated they were no longer providing child care services, resulting in a final count of 1,544 providers, including 834 child care facilities (child care centers, nursery schools, and small child care facilities), and 710 family child care providers. Programs responded from every county in Maine. The highest participation was in Oxford County with 83% of child care facilities participating and 84% of family child care programs participating. The lowest participation was in Lincoln County with 48% of child care facilities and 40% of family child care programs. Market rate data was collected by provider type, age group, attendance frequency (part and full-time), and rate type (hourly, daily, weekly, monthly, or annually). Administrative licensing data was used to analyze market rates and reported costs by county and by quality level as measured by a provider’s Star rating from Rising Stars for ME, Maine’s quality rating improvement system (QRIS). 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 2024 Maine Child Care Market Rate Survey collected information regarding current child care rates for private-pay families, provider capacity by age level and current enrollment, details regarding participation in the CCAP, and other data to help OCFS to inform CCAP policies and funding. All licensed child care facilities and family child care providers were invited to participate in the survey. Maine supports four primary types of child care licenses: 1. Child Care Centers - which may be a house or other place that provides care for 12 or more children under 13 years old. 2. Nursery School - which may be a house or other place that provides care for three or more children between 33 months and eight years old. 3. Small Child Care Facility ￿ which may be a house (not the residence of the operator) or other place that cares for between three and 12 children under 13 years old. 4. Family Child Care Providers - which provide care in the operator’s residence to up to 12 children under 13 years old. OCFS provided HMA-Burns with a roster of all licensed providers as of October 23, 2023. In total, 1,548 providers were listed. During the administration period of the survey, four providers indicated they were no longer providing child care services, resulting in a final count of 1,544 providers, including 834 child care facilities (including child care centers, nursery schools, and small child care facilities), and 710 family child care providers. In total, 64.4 percent of providers participated in the survey, including 62.5 percent of child care facilities (including centers, nursery schools, and small facilities) and 66.8 percent of family child care providers. Market rate data was collected by provider type, age group, attendance frequency (part and full-time), and rate type (hourly, daily, weekly, monthly, or annually). Administrative licensing data was used to analyze market rates and reported costs by county and by quality level as measured by a provider’s Star rating from Rising Stars for ME, Maine’s quality rating improvement system (QRIS). iii. Describe how the market rate survey or pre-approved alternative methodology reflected age of child (e.g., infant, toddler, preschool, school-age): The 2024 Maine Child Care Market Rate Survey collected information regarding current child care rates for private-pay families, provider capacity by age level and current enrollment, details regarding participation in the CCAP, and other data to help OCFS to inform CCAP policies and funding. Market rate data was collected by provider type, age group, attendance frequency (part and full-time), and rate type (hourly, daily, weekly, monthly, or annually). The age groups included infant, toddler, preschool, and school-age children. Administrative licensing data was used to analyze market rates and reported costs by county and by quality level as measured by a provider’s Star rating from Rising Stars for ME, Maine’s quality rating improvement system (QRIS). iv. Describe any other key variations examined by the market rate survey or ACF pre- approved alternative methodology, such as quality level: The 2024 Maine Child Care Market Rate Survey collected information regarding current child care rates for private-pay families, provider capacity by age level and current enrollment, details regarding participation in the CCAP, and other data to help OCFS to inform CCAP policies and funding. Market rate data was collected by provider type, age group, attendance frequency (part and full-time), and rate type (hourly, daily, weekly, monthly, or annually). Administrative licensing data was used to analyze market rates and reported costs by county and by quality level as measured by a provider’s Star rating from Rising Stars for ME, Maine’s quality rating improvement system (QRIS). 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)? Maine’s Market Rate Survey used variation by geographic location, category of provider, and age of child for the 2024 MRS. The survey included a series of questions designed to assess the costs that providers incur in delivering child care. The survey requested details about the wages paid to staff by job type (director, assistant director, teacher, teachers’ assistant, and substitute for child care facilities, and teachers and teachers’ assistants for family child care providers), benefit packages, and other expenses such as facility costs. The survey included several questions to assess the time teaching staff spend in quality-based activities (such as curriculum development), and the availability of paid professional development days, tuition assistance benefits, and tuition discounts provided for child care provided to paid staff. The survey requested this information about provider costs and cost drivers, but analyses of the provider cost questions are not presented in Maine's 2024 MRS report. The data was sent to the Center for Early Learning Funding Equity to conduct the cost study, as OCFS is also using the results to support a future cost modeling tool and a broader child care financing analysis being performed by the CELFE. b. In the Lead Agency’s analysis, were there any relevant variations by geographic location, category of provider, or age of child? Before analyzing reported rate information, a variety of methodological decisions were made between OCFS, and contractors for the market rate survey and cost study, HMA and CELFE. A key determination was how to group counties for the purposes of analyzing data. Previous county groupings were established in the 2018 market rate survey where counties with fewer than 10 responding providers were combined with a neighboring county. As part of the cost analysis work, the Lead Agency identified two county groupings. In addition to recognizing similarities in providers’ costs across counties, the shift to two county groupings is designed to reduce geographic rate disparities. CELFE helped OCFS assess the cost of care in centers and family child care homes for each age group based on staffing patterns, wages, and other costs. The most significant cost driver, wages, did not differ significantly across the state. The cost analysis showed little difference across counties in the cost of providing care, perhaps a 5% difference from the least expensive to most expensive areas for centers and a 10% difference from the least expensive to most expensive for homes. The cost study did find higher rates being charged for preschool age children than the preschool cost of care. When setting reimbursement rates for child care, CELFE recommended the state consider the way the child care market smooths prices across the infant, toddler, preschool and school-age age groups. OCFS did not want to set rates precisely at the estimated cost of care because setting infant and toddler subsidy rates at these very high costs (as much as $467 per week) could inadvertently drive infant and toddler market rates too high for families who do not use subsidies to afford. However, the state rate setting can work incrementally to move providers away from an overreliance on profits from preschooler classrooms as the only way to support affordable infant-toddler programs. As in most states, prices charged by Maine’s child care providers differ significantly across rate regions. In 2021, Cumberland's 75th percentile of the market rate was 64% higher than in Aroostook. In 2024, this rose to the Cumberland rate being 83% higher than the rate in Aroostook, Piscataquis, and Somerset. This dramatic variation in prices charged has been driven by what parents in those communities can afford and by what the state has been paying providers through child care reimbursement rates. CELFE recommend that the state work towards decreasing the number of CCAP subsidy rate regions. Based on the results from CELFE's cost study, the cost of care across the state was similar enough to support moving to one statewide region, or at most two regions (Cumberland, York & Sagadahoc in one county group and the rest of the state in the other county group). https://www.maine.gov/dhhs/sites/maine.gov.dhhs/files/inline- files/Rate%20Setting%20Outreach%20Information%20from%20CELFE.pdf 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 survey requested information about provider costs and cost drivers, such as staffing by position type, average wages paid to each position, turnover rates, benefits offered to staff, and other expenses, including costs related to quality initiatives such as the cost of curriculum-related materials and program self-assessment tools and resources. Administrative licensing data was used to analyze market rates and reported costs by county and by quality level as measured by a provider’s Rising Stars for ME rating, Maine’s quality rating improvement system. Analyses of the provider cost questions supported the cost study. 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). Maine defined higher quality through the state's QRIS system and the costs for Head Starts to meet their program performance standards. The MRS requested information about provider costs and cost drivers, such as staffing by position type, average wages paid to each position, turnover rates, benefits offered to staff, and other expenses, including costs related to quality initiatives such as the cost of curriculum-related materials and program self-assessment tools and resources. Administrative licensing data was used to analyze market rates and reported costs by county and by quality level as measured by a provider’s Rising Stars for ME rating, Maine’s quality rating improvement system. The analysis utilized costs for Star 4 programs and Head Starts, which are Star 5 programs in Rising Stars for ME to inform higher costs for higher quality. Analyses of the provider cost questions supported the cost study. 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 Lead Agency did a cost study with the Center for Early Learning Funding Equity (CELFE). The longer term goal is to use a cost modeling tool to inform the Lead Agency’s efforts to provide reimbursement/funding for the true cost of care. In 2021, Cumberland's 75th percentile of the market rate was 64% higher than in Aroostook. In 2024, this rose to the Cumberland rate being 83% higher than the rate in Aroostook, Piscataquis, and Somerset. This dramatic variation in prices charged has been driven by what parents in those communities can afford and by what the state has been paying providers through child care reimbursement rates. CELFE helped OCFS assess the cost of care in centers and family child care homes for each age group based on staffing patterns, wages, and other costs. The most significant cost driver, wages, did not differ significantly across the state. The cost analysis shows little difference across counties in the cost of providing care, perhaps a 5% difference from the least expensive to most expensive areas for centers and a 10% difference from the least expensive to most expensive for family child care. When looking at cost overall, cost did not differ enough across the state to justify the significant variations in what providers charge. Instead, these variations are likely driven by what parents in local communities can afford to pay for care. The lack of differences in costs suggested that Maine should begin moving towards a single statewide rate (or perhaps a 2-level structure with only small differences) to more sustainably fund child care services. If Maine set the 2024 reimbursement rate at the 75th percentile of the market rate of Cumberland County, the typical center in Cumberland County￿if serving all subsidized children and operating at 85% of full enrollment￿would have total revenue that 32% higher than what the cost study estimates is the total cost of operating the center. At the same time, setting the reimbursement rate at the 75th percentile of Aroostook County would result in revenue 23% lower than the cost of care. To move toward a financing strategy that reflects this discrepancy for rural areas of the state, Maine would need to provide more significant rate increases to more rural and/or lower-income counties and substantially smaller rate increases to Cumberland and York Counties. https://www.maine.gov/dhhs/sites/maine.gov.dhhs/files/inline- files/Rate%20Setting%20Outreach%20Information%20from%20CELFE.pdf To begin this process in 2024, Maine set differentiated reimbursement rates. The cost study showed the biggest gaps between price and cost of care in the more rural counties and/or those with lower median household incomes. Maine set rates to provide higher increases in those areas. The state set the 2024 reimbursement rates for child care centers at the 50th percentile in Cumberland, York, and Sagadahoc counties and the 70th percentile for centers in all other counties. The state set the 2024 reimbursement rates for family child care at the 65th percentile in Cumberland, York, and Sagadahoc counties and the 75th percentile for all other counties. This rate structure provided a significant increase for the vast majority of age groups, types of providers, and regions of the state. There were a handful of rates, mainly some rates for preschool and school age children, and mostly in the Cumberland region, where the rate stayed the same as the 2021 rate. 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: 4/29/2024 ii. Provide the date the report containing results was made widely available (no later than 30 days after the completion of the report): 5/10/2024 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.maine.gov/dhhs/ocfs/provider-resources/child-care-subsidy- information-for-providers https://www.maine.gov/dhhs/sites/maine.gov.dhhs/files/inline- files/Rate%20Setting%20Outreach%20Information%20from%20CELFE.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 Lead Agency engaged with staff from the Governor's office, the Department of Education's Early Learning Team and contractors HMA and CELFE to consider Maine's goals in the Office of Child and Family Services, in the Preschool Development Grant systems work, and in the Children's Cabinet. We had meetings and discussions related to the market rate survey and cost study and how the data would inform Maine's rate setting approach and final reports.