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)? September-October 2023 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: DHS/DFD is represented on the State Advisory Council and presented the MRS to the council in August 2023 for input and recommendations, which were incorporated into the final survey instrument. iv. Local child care program administrators: The draft MRS instruments were distributed to a group of program directors for feedback and recommendations in August 2023. These were incorporated into the final survey instrument. v. Local child care resource and referral agencies: The draft MRS instruments were presented to the CCR&Rs for input and recommendations in August 2023, which were incorporated into the final survey instrument. vi. Organizations representing child care caregivers, teachers, and directors from all settings and serving all ages: The draft MRS instruments were distributed to a group of providers for feedback and recommendations in August 2023, which were incorporated into the final survey instrument. 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? 11/1/2023 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)? The MRS was distributed to licensed child care centers, Family Child Care providers, and summer youth camps from September-October 2023. iii. Describe how it represented the child care market, including what types of providers were included in the survey: The survey data was fully representative of the State’s child care market. The MRS was distributed to the entire universe of fee-charging child care providers in the state, including licensed centers, registered family child care providers, and youth summer camp providers. iv. What databases are used in the survey? Are they from multiple sources, including licensing, resource and referral, and the subsidy program? Data sources for the MRS include the CCR&Rs, the DCF Office of Licensing (OOL), the NJ Department of Education (DOE) and the NJ Department of Health (DOH) databases. To obtain the entire list of providers in the state, licensing data were used as a sampling frame for the survey. The survey data were also merged with other administrative and public data for detailed analyses. For example, administrative data on Grow NJ Kids (GNJK) programs, public pre-K programs, and Head Start/ Early Head Start programs were merged with MRS data. Zip code level population data from the U.S. Census Bureau were also merged with the MRS data. v. How does the survey use good data collection procedures, regardless of the method for collection (mail, telephone, or web-based survey)? Online surveys were used to maximize the providers’ participation. Regular follow-ups with nonrespondents were done to increase survey participation while not burdening those who already responded. The survey instruments were prefaced with detailed instructions and state staff followed up with any inquiries from participants. The data collection period was lengthy enough to reduce providers’ burdens while maximizing participation. vi. What is the percent of licensed or regulated child care centers responding to the survey? 65.38 vii. What is the percent of licensed or regulated family child care homes responding to the survey? 67.61 viii. Describe if the survey conducted in any languages other than English: Family Child Care Providers received the survey in both English and Spanish. ix. Describe if data were analyzed in a manner to determine price of care per child: Yes, analysis included weighing the price (rate) data with providers’ capacity in generating the market rate. The estimation process ensures that the resulting price (rate) is per child. x. Describe if data were analyzed from a sample of providers and if so, how the sample was weighted: As stated above, our survey data were from more than 65% of entire providers, and we used weighting procedures to estimate the representative market rate (e.g., 75th percentile rates). 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 Market Rate Survey instrument was designed in a way that covered providers’ geographic locations (city, county, and zip code). Therefore, variations in child care prices are reflected by each of these geographic criteria. 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). A separate MRS instrument was used for licensed child care centers, Family Child Care providers and summer youth camps. iii. Describe how the market rate survey or pre-approved alternative methodology reflected age of child (e.g., infant, toddler, preschool, school-age): The MRS instrument captured variations in child care prices by each age group: Infants, Toddlers, Preschool-aged, School-aged. iv. Describe any other key variations examined by the market rate survey or ACF pre- approved alternative methodology, such as quality level: The Market Rate Survey instrument also captured variations in child care prices by provider size (licensed capacity), frequency with which they charge their prices (weekly or monthly), hours of care offered (regular and/or non-traditional hours), whether or not the provider cares for children participating in the CCAP, accreditation status and participation in New Jersey’s Quality Improvement System, Grow NJ Kids. 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)? DHS/DFD conducted a narrow cost analysis survey, separate from the market rate survey, using a sample of providers to determine providers' costs of delivering child care services to families. The narrow cost analysis survey instruments were developed based on the Provider Cost of Quality Calculator (PCQC), a tool made available by the U.S. Office of Child Care, to collect providers’ cost and revenue information comprehensively. The instruments were designed to allow us to estimate narrow cost rates and examine how the rates vary by geographic location, provider category (center vs. family providers), and child age group. The narrow cost analysis survey was distributed to a sample of center providers (N=1,080) and a sample of family providers (N=507) during December 2023. Of those invited, 23% of center providers (n=249) and 17.55% of family providers (n=89) participated in the surveys. b. In the Lead Agency’s analysis, were there any relevant variations by geographic location, category of provider, or age of child? Yes, the analyses suggested that the narrow cost rates varied by category of providers and age of child. The rates also differed by quality indicators and program sizes. In general, narrow cost rates were higher for center providers, smaller programs, and programs of higher quality. 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.)? Assumptions and data for estimating the costs of the base level quality are made by: (1) including only licensed and registered providers in the analyses, and (2) closely following all the cost items specified in the Provider Cost of Quality Calculator (PCQC), made available by the U.S. Office of Child Care. 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). As the quality indicator of the narrow cost analysis, we used providers’ star ratings in New Jersey’s Quality Improvement System, Grow NJ Kids (GNJK). We examined how the estimated narrow cost rates varied by providers' ratings or participation status in the GNJK program. 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? DHS/DFD estimated the 75th percentile monthly child care rates based on the narrow costs obtained by dividing the total annual costs by the number of enrolled children (referred to as narrow cost rates). To convert the annual prices to monthly prices, the amounts were further divided by either 10 or 12 depending on the number of months per year providers operated. DHS/DFD then compared the monthly narrow cost rates to our payment rates as well as the market rates we obtained to observe the gaps between (1) narrow cost rates and market rates and (2) narrow cost rates and our payment rates. Our analysis found that narrow cost rates are similar to market rates and both are higher than our payment rates. 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: 6/14/2024 ii. Provide the date the report containing results was made widely available (no later than 30 days after the completion of the report): 7/15/2024 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: Reports and Statistics - Child Care In New Jersey (childcarenj.gov) 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: DHS/DFD is represented on the State Advisory Council and presented the MRS to the council in August 2023 for input and recommendations, which were incorporated into the final survey instrument. In addition, the draft MRS instruments was distributed to program directors, CCR&Rs and providers for feedback and recommendations in August 2023. The feedback and recommendations were incorporated into the final survey instrument.