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)? October 2023-January 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 Subsidy Advisory Committee was involved in reviewing the 2023 Market Rate Survey and provided feedback on the survey questions prior to the surveys going to providers. The Committee also reviewed the final survey results. Upon meeting, there was an opportunity to ask questions and have ongoing discussion. iv. Local child care program administrators: CCR&R agencies, as part of the Subsidy Advisory Committee meeting, were involved in reviewing the 2023 Market Rate Survey and viewed the survey results. Upon meeting, there was an opportunity to ask questions and have ongoing discussion. v. Local child care resource and referral agencies: CCR&R agencies, as part of the Subsidy Advisory Committee meeting, were involved in reviewing the 2023 Market Rate Survey and viewed the survey results. Upon meeting, there was an opportunity to ask questions and have ongoing discussion. vi. Organizations representing child care caregivers, teachers, and directors from all settings and serving all ages: The Subsidy Advisory Committee includes child care program administrators as well as provider association leadership. Information and updates about the MRS were shared in select statewide meetings, conferences and with the Child Care Commission. 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? 10/1/2023 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)? October 2023 ￿ January 2024 iii. Describe how it represented the child care market, including what types of providers were included in the survey: All regulated child care centers and family child care homes were included in the survey population except Head Start centers, Developmental Day Centers, and providers that offer only part-time care for children (ages 0 to 5 for less than 32 hours a week in September 2023). Head Start programs were excluded from the survey because their financing is different from those of other child care facilities. Certified Developmental Day Center rates were also excluded because their rates are captured through a different process. Centers and homes that served only children receiving subsidy services in September 2023 (no care for children of private-paying parents) were included in the survey with the stated private-pay rates charged by the facilities used in the calculation of updated market rates. iv. What databases are used in the survey? Are they from multiple sources, including licensing, resource and referral, and the subsidy program? DCDEE Regulatory Database v. How does the survey use good data collection procedures, regardless of the method for collection (mail, telephone, or web-based survey)? Three methods were offered for completing the market rate survey: return mail, online, or by telephone. A Market Rate Survey packet was mailed to 5,035 child care centers and family child care homes in North Carolina in October 2023. The survey packet included a letter from the Director of DCDEE asking child care providers to complete an online survey at a secure site hosted by Centers for Urban Affairs and Community Services (CUACS). The secure website allowed respondents to download a PDF of the survey if they preferred to complete the survey on paper and return by mail. The survey package also included instructions, a prepaid business reply envelope, and a postcard that could be returned if respondents believed they were ineligible to participate in the survey. Three weeks after the initial survey packet was mailed, trained interviewers made telephone calls to non-responding child care providers in an attempt to complete the survey. These telephone calls were conducted over a period of nineteen weeks. Using an established protocol, telephone interviewers reminded survey non-respondents of the importance of the survey and assured confidentiality of their information. Providers who chose not to complete the survey via internet or telephone were reminded of the option of using mail or fax to return the survey form. Based on outcomes of the telephone calls, survey packets were mailed or faxed to respondents who had not completed the survey online, who had lost or discarded the survey packet, or who reported not having received a survey packet. vi. What is the percent of licensed or regulated child care centers responding to the survey? 86.60 vii. What is the percent of licensed or regulated family child care homes responding to the survey? 86.60 viii. Describe if the survey conducted in any languages other than English: The survey document was only composed in English, but interpreters were available if needed. ix. Describe if data were analyzed in a manner to determine price of care per child: Data was collected by survey from child care providers. This data was used to help determine where existing market rates are inconsistent with the price of care in the private market. The analysis did 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: A regression analysis was performed for each county in order to ensure an increase in rates with an increase in star levels, and the new rates were set as the rates determined by the regression. The regression models were weighted by the number of children at each star level. If there were no children at a star level, the weight was set as 1 in order to include the imputed value in the regression. Even though all imputations were based on more children than the individual category, the imputed rates were determined using the number of children at each star level. It therefore made sense to weight a star rating with many children more than a star rating with few children when performing the regression. 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. All regulated child care centers and family child care homes, statewide, were included in the survey population except Head Start centers, Certified Developmental Day Centers, and providers that offer only part- time care for children (ages 0 to 5 for less than 32 hours a week in September 2023). Head Start programs were excluded from the survey because their financing is different from those of other child care facilities. Certified Developmental Day Center rates were also excluded because their rates are captured through a different process. Centers and homes that served only children receiving subsidy services in September 2023 (no care for children of private-paying parents) were included in the survey with the stated private-pay rates charged by the facilities used in the calculation of updated market rates. 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 study involved the use of a single survey form for child care centers and family child care homes. As in the previous surveys, the 2023 survey was designed to capture information on child care enrollment and rates for the month of September 2023 and for summer care for school-age children during July 2023. A pretest of the survey and instructions was conducted with a random sample of six child care programs statewide. Providers were encouraged to participate based upon the assurance that information collected via the pretest survey would be used for the official survey, with limited follow-up for any additional information needed. Based on respondent input during the pretest, minor changes were made to the final survey form and instructions. iii. Describe how the market rate survey or pre-approved alternative methodology reflected age of child (e.g., infant, toddler, preschool, school-age): County market rates are specified for child care centers and family child care homes and by age for infants up to children aged 13 for center and home-based care. County market rates are established by star level (from NC's QRIS) and age group for center and home-based care. The age groups for centers are infant-toddler, 2-year olds, 3-5- year olds, and school age children. The age groups for home-based care are infants,1- year olds, 2-year olds, 3-5-year old, 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: Not applicable 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)? NA b. In the Lead Agency’s analysis, were there any relevant variations by geographic location, category of provider, or age of child? NA 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.)? NA 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). NA 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? NA 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: 7/25/2024 ii. Provide the date the report containing results was made widely available (no later than 30 days after the completion of the report): 8/5/2024 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://ncchildcare.ncdhhs.gov/Provider/Child-Care-Subsidy/Market-Rate-Study In addition to posting the Market Rate Study to the DCDEE website, it will also be shared widely in the Raising NC Newsletter which reaches the majority of child care providers. The Subsidy Advisory Committee also shares the report among their stakeholders. 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: DCDEE considered stakeholder views and comments in the detailed Market Rate Survey report through consultation with the Subsidy Advisory Committee, which includes providers, county staff (local purchasing agency) representatives and multiple other partner groups to ask for their input on the survey design and analysis, and final results. The design of the survey questions especially those related to providers charging the difference between private rate and subsidy rate were amended based on feedback from partners and the changes are reflected in the final report. There was also significant feedback from partners about economic conditions on quality child care and this input was also included in the final report.