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. [ ] Market rate survey. i. When were the data gathered (provide a date range; for instance, September – December 2023)? b. [x] ACF pre-approved alternative methodology. i. [ ] The alternative methodology was completed. ii. [x] 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). Data was gathered from February-April 2024. The study was completed on June 30, 2024, and the Lead Agency is analyzing the cost data. New rates based on this alternative methodology are expected to be implemented on October 1, 2024. 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: For the current rates which were set using a MRS, a survey was circulated to ask stakeholders to review and provide feedback on the 2022 Market Rate Survey (MRS). The stakeholder group surveyed consisted of 48 stakeholders which included the Nevada Early Childhood Advisory Council (ECAC) members. The survey was conducted via Survey Monkey and aggregate results with open-ended comments were included in the final 2022 MRS Report. For the Alternative Methodology that is in process, the ECAC was notified about the cost model surveys going out to providers and the move to setting payment rates using an alternative methodology during the January 2024 general meeting. A reminder about the cost model surveys for the alternative methodology was made during the March 2024 general meeting as well. iv. Local child care program administrators: For the current rates which were set using a MRS, a survey was sent to a group of 48 stakeholders which included child care program administrators from centers, family child care, group family child care, and out of school time programming. The stakeholder survey was conducted via Survey Monkey and aggregate results with open-ended comments which were included in the final 2022 MRS Report. The proposed alternative methodology approach includes engagement with program and provider groups from across Nevada. The Lead Agency’s consultant, Prenatal to Five Fiscal Strategies (P5FS), conducted listening sessions with organizations that include the early care and education workforce in their membership. Engagement with local child care program administrators is intended to ensure that constituents have a full understanding of and can contribute to the alternative methodology approach, the requests related to data collection, and the anticipated benefits of the cost- based approach to rate setting. P5FS has experience working with partners across the state and sought input from the advisors, The Children’s Cabinet, DWSS/CCDP, and NDE-OELD to ensure that child care/early education providers representing the diversity of the state are engaged. v. Local child care resource and referral agencies: For the current rates which were set using a MRS, a survey was sent to a group of 48 stakeholders which included child Care Resource & Referral (CCR&R) agencies. The stakeholder survey was conducted via Survey Monkey and aggregate results with open-ended comments which were included in the final 2022 MRS Report. For the proposed alternative methodology, P5FS convened a small technical advisory work group, the Nevada Cost of Quality Technical Workgroup, to further inform the cost model development and alternative methodology activities. This workgroup was convened monthly throughout the process to provide content input on the cost survey approach and reach; the cost estimation model; on the quality variables that frame the model; on the model’s data-gathering and analysis assumptions; on how to ensure that providers are engaged in both the data gathering process and in the review of model results; and, on any modifications the model may require based on analysis of results. Workgroup advisors included representation from CCR&R leadership from both The Children’s Cabinet and Las Vegas Urban League. vi. Organizations representing child care caregivers, teachers, and directors from all settings and serving all ages: For the current rates which were set using a MRS, a survey was sent to a group of 48 stakeholders which consisted of 48 stakeholders which included the following: Nevada Institute for Children’s Research and Policy (NICRP), Quality Rating Improvement System (QRIS), Nevada Pyramid Model, Nevada Association of Education for Young Children (NevAEYC), State Child Care Licensing, NDE-OELD, The Nevada Registry, and the Children’s Advocacy Alliance (CAA). The stakeholder survey was conducted via Survey Monkey and aggregate results with open-ended comments were included in the final 2022 MRS report. For the proposed alternative methodology, P5FS convened a small technical advisory work group, the Nevada Cost of Quality Technical Workgroup, to further inform the cost model development and alternative methodology activities. This workgroup was convened monthly throughout the process to provide content input on the cost survey approach and reach; the cost estimation model; on the quality variables that frame the model; on the model’s data-gathering and analysis assumptions; on how to ensure that providers are engaged in both the data gathering process and in the review of model results; and, on any modifications the model may require based on analysis of results. Workgroup advisors included representation from The Nevada Registry (workforce database) and NevAEYC. 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? 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)? iii. Describe how it represented the child care market, including what types of providers were included in the survey: iv. What databases are used in the survey? Are they from multiple sources, including licensing, resource and referral, 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)? vi. What is the percent of licensed or regulated child care centers responding to the survey? vii. What is the percent of licensed or regulated family child care homes responding to the survey? viii. Describe if the survey conducted in any languages other than English: ix. Describe if data were analyzed in a manner to 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: 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 list of programs for the survey and the input sessions/interview process includes those currently receiving and who could receive child care scholarship payments, both centers and family child care homes, licensed and license-exempt, serving all ages of children, birth through school-age, across all program types, and in all geographic areas of Nevada. Between the survey and the input sessions/interviews, the expert consultant team anticipates reaching programs serving over 60 percent of the state’s population of children and families receiving a child care scholarship. The P5FS team will ensure that representative survey responses are collected from all program types, from all regions of the state, and that the responses reflect the diversity of providers and programs, including considerations of location, ages of children served, program funding, mix of children served, culture, and language. Engagement response rates will be analyzed in real-time and compared to licensing data and data on license-exempt child care providers receiving child care scholarship payments to understand which providers and programs are represented in the data ￿ such as those at different quality levels or those serving infants and toddlers ￿ and where gaps exist. If certain geographic regions of Nevada, or certain provider or program types are underrepresented in the responses, additional efforts will occur to reach providers and programs in those areas. This may include direct mailings, in-person input sessions, or enlisting additional trusted partners with connections to the underrepresented communities. The cost estimation model will include functionality that allows the lead agency to run different scenarios that capture the variations in program characteristics, such as program size, location, and ages of children served, among others. Exactly which factors and characteristics will be included in the model, and their associated costs, will be based on analysis of state licensing requirements that govern all but license-exempt child care; of quality improvement activities; of input from the provider survey, interviews, and input sessions; and of feedback from the ECAC, Technical Workgroup, and other key stakeholders as appropriate. 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). Data collection under the proposed alternative methodology will ensure participation from the full universe of Nevada’s child care providers and programs including licensed child care center, group family child care home, and family child care home providers; license-exempt FFN providers; and other license-exempt providers such as out-of-school time (OST) and out-of-school recreation (OSR). To ensure diverse participation, the online survey and information about the opportunity to participate in input sessions/interviews was distributed via email by The Children’s Cabinet, Las Vegas Urban League, DWSS CCDP, Child Care Licensing, and NDE-OELD to all licensed and license-exempt providers and shared via multiple distribution channels to reach additional programs. Distribution included regular email announcements from multiple stakeholders, web bulletins, and public presentations accessible to all licensed and license-exempt child care providers across Nevada. In addition, the online survey and input session information was shared by key partners including the local early childhood advisory councils, The Nevada Registry, NevAEYC, Nevada ECAC, The Children’s Cabinet, and the Las Vegas Urban League. Partners helped distribute the survey/input session information via email as well as included it in regular emails, presentations, newsletters, and meetings during the data collection period. These outreach and engagement methods were analyzed for their efficacy and representation of Nevada’s diversity and adjusted as needed to ensure robust data collection. Survey response rates and input session participation was analyzed in real-time and compared to licensing data and data on license-exempt providers to understand which providers and programs are represented in the data and where gaps exist. If certain geographic regions of the state, or certain provider and program types were underrepresented in the responses, additional efforts occurred to reach those areas, including direct mailings to market the in-person input sessions or enlisting additional trusted partners with connections to these communities. Data from the provider survey is being analyzed to be used as the source for ￿current’ salary data. The ECAC and the Nevada Cost of Quality Technical Workgroup are reviewing these data and analyses to provide input on how these pieces are included in the final alternative methodology model. iii. Describe how the market rate survey or pre-approved alternative methodology reflected age of child (e.g., infant, toddler, preschool, school-age): The list of programs for the survey and the input sessions/interview process includes those currently receiving and who could receive child care scholarship payments, both centers and family child care homes, licensed and license-exempt, serving all ages of children, birth through school-age, across all program types, and in all geographic areas of Nevada. Between the survey and the input sessions/interviews, the expert consultant team anticipates reaching programs serving over 60 percent of the state’s population of children and families receiving a child care scholarship. The P5FS team will ensure that representative survey responses are collected from all program types, from all regions of the state, and that the responses reflect the diversity of providers and programs, including considerations of location, ages of children served, program funding, mix of children served, culture, and language. School-age care will be fully integrated into the model. Data on costs for school-age care will be collected through the provider survey and input sessions, cost drivers will be identified and validated, and school-age classrooms will be integrated into the cost estimation model. The model adjusts the estimated cost of care to account for the different schedule school-age children require, including full-time during summers and holidays, and part-time during the school year. Engagement response rates will be analyzed in real-time and compared to licensing data and data on license-exempt child care providers receiving child care scholarship payments to understand which providers and programs are represented in the data ￿ such as those at different quality levels or those serving infants and toddlers ￿ and where gaps exist. The cost estimation model will include functionality that allows the lead agency to run different scenarios that capture the variations in program characteristics, such as program size, location, and ages of children served, among others. Exactly which factors and characteristics will be included in the model, and their associated costs, will be based on analysis of state licensing requirements that govern all but license-exempt child care; of quality improvement activities; of input from the provider survey, interviews, and input sessions; and of feedback from the ECAC, Technical Workgroup, and other key stakeholders as appropriate. iv. Describe any other key variations examined by the market rate survey or ACF pre- approved alternative methodology, such as quality level: Nevada’s alternative methodology approach will analyze cost and revenue drivers. The major cost drivers include implementation of health and safety standards to meet licensing requirements, staffing requirements, and additional requirements related to meeting quality standards, as currently defined. The approach will include several stages of analysis of these cost drivers to ensure they are fully accounted for in the cost study and cost estimation model, as detailed herein. P5FS reviewed existing state licensing regulations and the current implementation of Nevada Silver State Stars (Nevada's QRIS), and identify cost drivers, such as ratio and group size, facility size, and training and professional development requirements. The cost model will address the cost of providing higher-quality care through: • Building in cost drivers associated with program standards under licensing and Nevada Silver State Stars for licensed child care center, group family child care home, and family child care home providers; license-exempt FFN providers; and other license-exempt providers. • Building in cost drivers associated with Nevada Silver State Stars quality improvement activities. • Building in cost drivers based on input from child care providers around delivering higher quality care. • Consultation from the ECAC and the Nevada Cost of Quality Technical Workgroup. The alternative methodology approach will also include revenue drivers to understand the impact of revenue on program operations and financial stability and identify any potential gap between cost and available revenue. The major revenue drivers include, but are not limited to: • Parent tuition/fees; • Third-party funding (e.g., subsidy, Head Start, Pre-K); • Participation in the Child and Adult Care Food Program; • Full collection of revenues; and • Enrollment rates. Cost drivers will be informed by deep engagement with child care providers through provider input sessions and interviews that will be conducted across Nevada. In addition, the Nevada Cost of Quality Technical Workgroup will review cost drivers and provide input on which cost drivers to include in the model and the values attributed to them. Finally, the methodology draws from extensive work completed by P5FS in other states and communities over the past decade, including on the federal Provider Cost of Quality Calculator, ensuring the Nevada model is informed by the leading work in this field. The cost estimation model will include multiple data sources providing maximum flexibility to run scenarios to understand the different costs using different data sources. 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)? For the current rates set using the 2022 MRS, the Center for American Progress Cost of Quality Calculator was used to compare Nevada's 75th percentile rate to the calculators base cost of care that meets licensing standards as well as to higher quality care that invests in the early educator workforce and improves teacher to child ratios. Pay parity in this analysis means paying teachers the same as Kindergarten teachers. Quality ratios means decreasing the number of children per teacher (center analysis only) to promote child safety and high- quality caregiving. For the alternative methodology that is in process: The alternative methodology approach is designed to determine costs across several variables, including age of child, type of care setting and geographic location, and meeting state regulations and program standards, allowing the Lead Agency to consider each of these variables from a current and potential expense perspective using a cost estimation model tool. The alternative methodology approach includes engagement with constituents and programs to guide decisions for the cost study and input on how the cost model functions. While a narrow cost analysis can estimate the current costs of operating a child care program meeting all legal requirements, it does not capture the true cost of child care, and all of the expenses necessary to operate a program that fully meets the needs of children, families, and the child care workforce. Nevada's alternative methodology approach includes analysis of both revenue and expenses, providing insight into the extent to which current revenues can support expenses under different scenarios including those which go beyond only current expense data. This alternative methodology model is designed to determine costs across the following variables: level of quality, age of child, type of care setting, geographic location and allows the Lead Agency to consider each of these variables from a current and potential expense perspective, using a cost estimation model tool. The cost model will include compensation levels above the current compensation levels paid to child care providers in Nevada. Data from extant sources, such as the Bureau of Labor Statistics, combined with primary data from provider data collection will inform model inputs related to current compensation levels. To estimate the true cost of care, additional compensation levels are being included based on feedback from provider engagement, review of additional extant sources, and input from Nevada’s Early Childhood Advisory Council (ECAC) and the Nevada Cost of Quality Technical Workgroup. A research-based living wage or self-sufficiency calculator was utilized to identify a higher salary level, to address the depressed wages based on the current market rate methodology, and health insurance estimates were drawn from the Kaiser Family Foundation data on employer contributions to health insurance. The cost estimation model will allow Nevada's child care stakeholders to better understand the actual cost of providing child care in Nevada, including how several revenue and expense variables and program characteristics impact that cost (e.g., program type, program size, current quality standards, age range of children served, and the wide variety of child populations served). By using cost estimation models, the alternative methodology approach is more robust than a narrow cost analysis alone; the data from the cost study is built into the cost estimation tool, allowing the Lead Agency to understand the cost of services for different ages of children, across program types, and at different regulatory requirements, compared to current and proposed subsidy rates. In addition to being more than just about costs, the proposed alternative methodology with a cost model includes the ability to compare scenarios that include the receipt of child care scholarships and other forms of revenue. This feature of the cost model, unlike a narrow cost study or analysis alone, will allow the Lead Agency to run scenarios with increasing rates, increasing quality standards, and other metrics to understand the impact of these potential policy choices on program operations, thus providing a valuable tool that can inform decision-making for rate-setting implementation. b. In the Lead Agency’s analysis, were there any relevant variations by geographic location, category of provider, or age of child? For the current rates set using the 2022 MRS: Yes. There are variations by geographical area, provider type, and age of child. Overall, the cost of care in urban areas exceeds the cost in rural areas, centers exceed family child care, and infant care exceeds the cost of care for older children. Generally, across all provider types, the cost of care decreases as the age of children increases with center-based infant care in urban areas being the most expensive type of care. 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.)? For the current rates set using the 2022 MRS: Licensing standards for ratios, group size, training, etc., were used for the base level of quality. Base level of quality does not have assumptions or requirements for staff compensation. For the alternative methodology that is in process: The data collected through the cost study will inform the cost estimation model(s). The Nevada Cost of Quality Technical Workgroup will provide input regarding the assumptions within the cost estimation model. The P5FS team will share results from the data collection with the Workgroup in aggregate form and make recommendations for how this data should inform the cost estimation model. The cost estimation model will model the cost of providing child care in Nevada, including how several revenue and expense variables and program characteristics impact that cost (e.g., program type, program size, current quality standards, age range of children served, and the wide variety of child populations served). P5FS will use the advisory workgroup’s input to make recommendations to DWSS CCDP to finalize the parameters of the model and variations including but not limited to: • Base rates reflecting differing program models and regulatory requirements • Geographic Region (if data indicates geographically related cost variations) • Program size • Workforce compensation • Enrollment rates and uncollected revenue rates 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). For the current rates set using the 2022 MRS: Nevada's QRIS, "Silver State Stars", is used to define the levels of quality. This is a 5-level QRIS with increasing requirements for group size, staffing, and professional development as star- levels increase. Star levels are also based on assessments using the Infant-Toddler Environment Rating Scale, Early Childhood Environment Rating Scale, and the Family Child Care Provider Rating Scale (all 3rd Editions). 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? For the current rates set using the 2022 MRS: The gap between higher quality center- based care and the 75th percentile rate was $838/month for infants, $470/month for toddlers, and $202/month for preschool. For family child care, the gap was $405/month for infants, $442/month for toddlers, and $497 for preschoolers. Nevada intends to use a cost-based alternative methodology to inform new rates for Federal Fiscal Year 2025 (effective October 1, 2024). 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: 6/30/2022 ii. Provide the date the report containing results was made widely available (no later than 30 days after the completion of the report): 7/29/2022 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: 2022 Market Rate Survey: https://www.nevadachildcare.org/static/7f5c9ce75784d311d4bd2b30038d8885/ 2022-Market-Rate-Report-FINAL.pdf. Report findings were shared at the July 13, 2022 Nevada ECAC meeting. Availability of report was shared via The Children’s Cabinet’s Constant Contact Listserv in August 2022. A training for child care providers on the Market Rate results was held on March 16, 2023. 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: Stakeholder feedback on the market rate survey design, survey questions, and MRS final report was solicited from 20 Child Care Program Administrators, both Child Care Resource & Referral program managers, 11 organizations representing the early childhood workforce, and 17 members of the Nevada ECAC. Stakeholder input was also requested on how to achieve the highest response rate possible, including what types of incentives to use and what barriers to consider to achieve a 65% or higher survey response rate from providers. Stakeholder feedback and input influenced the introduction used in the final report with 100% agreeing that the introduction used adequately communicated the importance of provider participation in the MRS; had there been disagreement, then the program would have taken stakeholder recommendations into account and edited the introduction. Stakeholder input influenced the advance notice time the program gave to providers before publishing the MRS final report with 100% agreeing that a one-week advance notice was enough time to prepare providers for the release of the report. Finally, stakeholder input influenced the methods the program used to communicate with providers about the release of the final report with email and listserv being the most popular options and therefore the options Nevada used.