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I. STUDY BACKGROUND Child Care Market Rate Survey 2023 Page | 3

C. TERMINOLOGY AND DEFINITIONS Because North Carolina’s Market Rate Survey process goals are driven by carefully worded federal and state requirements, key terms and definitions are provided below. Terms that can have different meanings are also clarified to indicate how they are used in the context of this study. Current Market Rates - This term describes the maximum subsidy payment rates that were in place in October 2022. Child Care Center - A child care center is an arrangement in which six or more preschool children are cared for in a residential setting or three or more preschool-age children are cared for in a building other than a residence. Family Child Care Home – A family child care home is a child care arrangement located in a residence where up to five children aged infant to five-years-old, or up to eight children if three or more are school-age, receive child care. This includes preschoolers living in the home but does not include the provider’s own school-age children. Modeled Rate – The “modeled rate” is the rate assigned to a particular type of care (center or home) by age (infants through school-age) and star rating (one- through five-stars). It is the greater of the county 75th percentile rate, or the imputed rate, which is developed based on the number of children in a particular category of care. Rates can be imputed by age, type of care (center versus home), or county. 75th Percentile - The term “75th percentile” is used to describe the subsidy payment level that enables a parent to afford 75 percent of the privately purchased care of a certain type in an area. To determine the 75th percentile, the private pay rates for all children served within a category of care are ranked by child from lowest to highest. Counting from the bottom (lowest rate), rates are counted three-quarters of the way up to identify the rate that represents the 75th percentile. Private Pay - This term refers to rates or fees paid by a parent or guardian to a provider for child care services that are not subsidized. Raw County Rate – A “raw county rate” is the rate that represents the 75th percentile for a given county, regardless of the number of children in that type of care in that county. For example, if there is only one two-year-old child in a four-star facility in a county, the raw county rate would be the amount charged for that child’s care. Preschool Children – In the Market Rate Survey, “preschool children” are those zero to five years old including infants, toddlers, and young children through the age of five, but excluding five-year-