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 most recent market rate survey was completed April 1, 2024. The survey was available for providers to respond to from February 1, 2024, through April 1, 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: The Lead Agency created a MRS stakeholder group to help develop the 2024 survey. A representative from the Early Childhood State Advisory Council was included in the group and given an opportunity to review and provide feedback to the Lead Agency. iv. Local child care program administrators: The Lead Agency created a MRS stakeholder group to help develop the 2024 survey. The group consisted of 18 child care program owners or directors who were given an opportunity to review and provide feedback to the Lead Agency. v. Local child care resource and referral agencies: The Lead Agency created a MRS stakeholder group to help develop the 2024 survey. A representative from the current ECER&R agency at the time the group was formed was included in the group and given an opportunity to review and provide feedback to the Lead Agency. vi. Organizations representing child care caregivers, teachers, and directors from all settings and serving all ages: The Lead Agency created a MRS stakeholder group to help develop the 2024 survey. There were 7 representatives in the group from family home and six or fewer programs who were given an opportunity to review and provide feedback to the Lead Agency. vii. Other. Describe: The MRS stakeholder group also included one parent, Child Care Aware of Missouri, and a representative from an advocacy organization, Kids Win Missouri, who were given an opportunity to review and provide feedback to the Lead Agency. 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? 4/1/2024 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)? The survey was available for provider to respond from February 1, 2024, through April 1, 2024. iii. Describe how it represented the child care market, including what types of providers were included in the survey: The Lead Agency conducted a survey for licensed and license exempt child care providers, with a target of approximately one-third of all child care providers in the state completing the survey, in order to be considered statistically valid. Together with its vendor and advisory group, the Lead Agency drafted a survey instrument that captured information on rates, enrollment, general demographics, subsidy participation, other fees, salaries and wages, education level, and program accreditation. iv. What databases are used in the survey? Are they from multiple sources, including licensing, resource and referral, and the subsidy program? To administer the 2024 MRS, the Lead Agency contracted with an agency, Public Consulting Group (PCG), who used a list of active licensed and license-exempt child care providers maintained by the Lead Agency as the primary source of providers to contact. This list was supplied to PCG’s call center in Microsoft Excel, which were maintained and updated in a secure Microsoft 365 cloud environment, and accessible through Microsoft Teams. Staff made calls to providers using a telephony platform, which tracked calls and their respective results. Survey responses were collected in a survey platform for analysis. All data in these third- party platforms were maintained in their respective secure cloud environments. v. How does the survey use good data collection procedures, regardless of the method for collection (mail, telephone, or web-based survey)? In partnership with a stakeholder group formed to review and revise the Market Rate Survey, the Lead Agency piloted and launched an updated Market Rate Survey in February 2024. Survey questions were designed and organized to be easily understood by the provider community and to collect the most critical information first in case a user ended the survey before the completion of all items. Communications promoting the survey were sent through narrow channels specifically to providers that are regulated by the Lead Agency. To submit a survey, a provider had to submit a unique identifier to start the survey, and additional information was collected in the survey to further verify the response. All data collected through the survey were ultimately entered into a web portal that standardized responses within specifically laid out formats to allow for common analysis for various types of care and other variables. Responses have been reviewed for reasonableness based on a set of standard measurements, and statistical outliers were removed from analysis. vi. What is the percent of licensed or regulated child care centers responding to the survey? 43.00 vii. What is the percent of licensed or regulated family child care homes responding to the survey? 31.00 viii. Describe if the survey conducted in any languages other than English: The survey was conducted in English and Spanish. The Lead Agency offered translation services for those participants who required additional languages through the Lead Agency’s contractor, Language Link. ix. Describe if data were analyzed in a manner to determine price of care per child: The annual program expenses and average enrollment data gathered from the survey were used to estimate the annual cost to a program per child. The report includes the approximate cost per child for a family child care home, child care center, and group child care home during the school year and during the summer. x. Describe if data were analyzed from a sample of providers and if so, how the sample was weighted: The data collected from the survey was analyzed in its completion; however, data was only collected for licensed and license exempt providers and did not include providers caring for six or fewer children. 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 survey data includes the rates reported by licensed and license exempt providers across the state. Responses were received from 18 of the 19 geographical regions in the state. The analysis of the data shows a variation in price by geographic location, which is reflected in the current rate structure. 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 survey collected rates and cost of care data from licensed and license exempt providers, which includes family child care homes, child care centers, group child care homes. iii. Describe how the market rate survey or pre-approved alternative methodology reflected age of child (e.g., infant, toddler, preschool, school-age): The survey reflected variation in price and cost for infants and toddlers, preschool, 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: The survey collected data on accreditations by provider type. 260 providers reported being accredited, and out of those there were 242 child care centers, nine family child care homes, three group child care homes, and six license exempt providers. 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 Lead Agency collaborated with PCG and the stakeholder group to develop detailed cost of care questions for child care providers to supply information on key cost drivers associated with operating their programs as part of the market rate survey. b. In the Lead Agency’s analysis, were there any relevant variations by geographic location, category of provider, or age of child? The narrow cost analysis showed relevant variations in cost of care reported by child care centers, group child care homes, family child care homes, and license exempt. The analysis shows child care centers reported the highest cost of care, likely due to additional expenses related to accreditation, staff training, and educational and curriculum support expenses. Group child care homes reported the lowest cost of care per child, likely due to their smaller scale and lower overhead and non- personnel costs. 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 Lead Agency collected data on program expenses, revenues, wages, staff education levels, to determine the cost of care 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). The Lead Agency has a Quality Assurance Report (QAR) which is a voluntary continuous quality improvement approach to assess, improve, and communicate the quality of early care and education programs that serve children from birth to age five. Currently, QAR is statewide in child care programs, including both family and center-based programs throughout Missouri. Previously, the pilot QAR had 90 programs, but during FY 24, this increased to support 364 programs. The QAR was not considered in the MRS since the QAR was still in the piloting stages while the survey was being developed. In the survey, the Lead Agency used accreditation data such as the investments to meet and maintain accreditation requirements as a way to determine costs at higher levels 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 Lead Agency’s narrow cost analysis estimates the cost of care per child per year, however; the cost of care was not considered when setting payment rates. The Lead Agency sets payment rates based on the market rate analysis. Rates were analyzed for infants and toddlers, preschool, and school-age children across five geographic groupings. The current payment rates are based on the 2024 market rate survey, where infant and toddler rates are paid at the 100th percentile of the market rate and preschool and school-age rates are paid at the 65th percentile. 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: 2/1/2025 ii. Provide the date the report containing results was made widely available (no later than 30 days after the completion of the report): 2/28/2025 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://dese.mo.gov/media/pdf/2024-child-care-market-rate-survey 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: Child care providers, ECER&R agency, and other advocates were consulted prior to creating the survey, as part of the MRS stakeholder group. The group reviewed and revised the questions and structure of the survey prior to the Lead Agency disseminating the survey. The group also reviewed rate structures used in other states in comparison to the current structure and provided feedback to the Lead Agency on how to simplify the state’s current rate structure. These suggestions will be incorporated into the implementation of the 2024 MRS, once data collection and analysis is complete.