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)? Data was gathered from June 13, 2022 through August 17, 2022, for the current rates being utilized. The 2024 market rate survey is currently out for response with data collection ending in late May to early June 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 Department of Children and Youth (DCY) captured feedback through the Early Childhood Advisory Council (ECAC) and the Child Care Advisory Council (CCAC). The councils include representation from a diverse array of stakeholders from early childhood programs, schools, health, social services, unions, philanthropy, parents, and other groups. The draft questions were shared in October 2023. In January 2024, Strategic Research Group, the third-party vendor, attended ECAC and CCAC to inform and gather input on the questions, process, and provided background for administering cognitive interviews to a select group of providers. Comments were incorporated into the survey content. iv. Local child care program administrators: The Department of Children and Youth (DCY) captured feedback through the Early Childhood Advisory Council (ECAC) and the Child Care Advisory Council (CCAC) members. Program Administrators serve on the CCAC. The draft questions were shared in October 2023. In January 2024, Strategic Research Group, the vendor who administered the survey, attended the ECAC and CCAC meeting to inform and gather input on the questions, process, and provided background for administering cognitive interviews to a select group of providers. Comments were incorporated into the survey and interview content. v. Local child care resource and referral agencies: The Department of Children and Youth (DCY) captured feedback through the Early Childhood Advisory Council (ECAC) and the Child Care Advisory Council (CCAC) members. Child Care Resource and Referral (CCR&R) staff serve on the CCAC. The draft questions were shared in October 2023. In January 2024, Strategic Research Group, the vendor who administered the survey, attended the CCAC meeting to inform and gather input for administering cognitive interviews to a select group of providers. Comments were incorporated into the survey content. vi. Organizations representing child care caregivers, teachers, and directors from all settings and serving all ages: The Department of Children and Youth (DCY) captured feedback through the Early Childhood Advisory Council (ECAC) and the Child Care Advisory Council (CCAC) members. The Councils include representation from each of these categories. The draft questions were shared in October 2023. In January 2024 Strategic Research Group, the vendor who administered the survey, attended the CCAC meeting to inform and gather input for administering cognitive interviews to a select group of providers. Comments were incorporated into the survey content. 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? 11/29/2022 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)? All rates were collected between June 13, 2022 through August 17, 2022. iii. Describe how it represented the child care market, including what types of providers were included in the survey: The sampling frame used for the 2022 Market Rate Survey included all Ohio Department of Job and Family Services (ODJFS) regulated child care centers, Type A family child care (FCC) homes, Type B FCC homes, approved day camps, and preschool and school age child care programs licensed by the Ohio Department of Education (ODE) that are not regulated by ODJFS, but with whom they have a publicly funded child care provider agreement. For the 2022 survey, 6,396 unique provider locations were identified and included in the sample within the following categories: • Type A FCC Home - 284 • Type B FCC Home ￿ 1,955 • Child Care Center ￿ 4,008 • Approved Day Camp - 21 • ODE Licensed Preschool - 74 • ODE Licensed School Age Child Care ￿ 54 iv. What databases are used in the survey? Are they from multiple sources, including licensing, resource and referral, and the subsidy program? Two databases are used to conduct the survey: the Ohio Child Licensing Quality System (OCLQS) and the Subsidy Program Time, Attendance & Payment (TAP) system. Ohio's licensing database, OCLQS, is used to identify licensed programs of all setting types to determine who should receive the survey. The Time, Attendance & Payment (TAP) system is also used to provide quality control assurances to compare rates by settings. The surveys are completed by providers and then compared to the rates entered into the TAP system as required by licensing regulation. v. How does the survey use good data collection procedures, regardless of the method for collection (mail, telephone, or web-based survey)? Contact with providers was made through a variety of modes during the different phases of data collection and consisted of five components: mail and email survey invitations and reminders, non-response prompting telephone calls, paper survey follow-up clarification calls, rate sheet follow-up calls, and narrow cost analysis interviews. Over the course of the data collection period a prenotification email, an invitation email, eight reminder emails, and a reminder postcard were sent. Paper surveys were also mailed to a select group of providers from low responding subgroups. Strategic Research Group (SRG) used the email addresses entered by child care programs in the Ohio Department of Job and Family Services system. Letters were mailed in place of emails to providers for which emails were undeliverable or invalid. Two rounds of telephone non-response prompting were conducted: one from July 5, 2022, through July 30, 2022, which included all provider types, and one at the end of the data collection period (early to mid- August) which focused on Type A and Type B family child care (FCC) home providers and providers from specific counties, who had lower response rates. vi. What is the percent of licensed or regulated child care centers responding to the survey? 58.10 vii. What is the percent of licensed or regulated family child care homes responding to the survey? 46.40 viii. Describe if the survey conducted in any languages other than English: The survey is conducted in English Only. For licensing purposes, The Ohio Department of Children and Youth (DCY) utilizes interpreters when necessary. ix. Describe if data were analyzed in a manner to determine price of care per child: Data were analyzed to establish the weekly rate per child by setting, age, and program qualifications (i.e., rating). x. Describe if data were analyzed from a sample of providers and if so, how the sample was weighted: Data was reviewed and cleaned prior to analysis. Data entry for rates was restricted to numeric values and decimal points to ensure that data were collected in a consistent fashion. Dollar sign symbols were placed in front of the data entry fields for each rate, and rate definitions (e.g., hourly, weekly, monthly) were provided as drop-down selections after each rate field. These restrictions minimized the amount of data cleaning required. Several steps were taken to clean the rate data to prepare these data for analysis; these included: • Data were reviewed for obvious missing decimal points (for example, an hourly rate of $480 was corrected to $4.80). • Rates with missing billing periods were reviewed and billing periods that were obvious were assigned. This was often the case with a series of similar entries where a single billing period was missed, and it was obvious that the missing billing period was the same as the other entries. However, if there was any doubt about the missing billing period, the rates were excluded. • Similarly, obviously incorrectly selected billing periods were corrected when they were in line with other rate entries or were discernible (e.g., $4 monthly was corrected to $4 hourly). • Entries of zero for any rates were excluded. All data Hourly and weekly rates were weighted by the capacity of each of the providers that fell into a particular subgroup. For example, for the rate distributions of child care centers in a given cluster, each rate for each provider was weighted by the capacity of that provider, with the weights for each subgroup adjusted so that the sum of the weights is equal to the number of providers in the subgroup. In all, 180 weighting variables were calculated for each set of percentiles; 45 sets of percentiles were calculated at the state-wide level (3 provider types × 15 child care service categories), and 135 sets of percentiles were calculated at the county group level (3 provider types × 15 child care service categories × 3 county clusters). Principal Component Analysis and Cluster Analysis were used to establish categories and 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 geographical component of the Market Rate Survey is reflected through a cluster analysis. Counties with similar rate structures were placed into groups through a process called cluster analysis. The percentile distributions of the hourly, part-time, part-time weekly, and full-time weekly rates, weighted by enrollment capacity, are shown for the three main provider types (child care centers, family child care (FCC) type A home, and FCC type B homes). These rate distributions are presented both statewide and broken out by county group (cluster). Ohio has 88 counties; three groupings were established with similar payment points. 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 sampling frame used for the 2022 Market Rate Survey included Ohio Department of Job and Family Services (ODJFS) regulated child care centers, Type A family child care (FCC) homes, Type B FCC homes, and approved day camps, as well as preschool and school age child care programs licensed by the Ohio Department of Education ( ODE) that are not regulated by ODJFS, but with whom they have a provider agreement. iii. Describe how the market rate survey or pre-approved alternative methodology reflected age of child (e.g., infant, toddler, preschool, school-age): Categories included infant, toddler, preschool, and school age iv. Describe any other key variations examined by the market rate survey or ACF pre- approved alternative methodology, such as quality level: Summer school age was also included in the market rate survey. 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 Provider Cost of Quality Calculator (PCQC) is very comprehensive, requiring a large amount of information for cost drivers from personnel and non-personnel expenses, which can be very burdensome on the providers who are asked to provide data for the narrow cost analysis. A simpler approach can be used to estimate many of these costs. The bulk of the expense in operating a child care facility is staff payroll that comprises 70 -80 percent of the total operating costs in the child care facility, with child care centers spending approximately 70 percent of their total operating costs on payroll and home providers spending 80 percent of their total operating costs on payroll. Additional operating costs include additional staff training, administrative staff, insurance, accreditation, and licensing, along with healthy food and snacks. Considering this, it would be a much less burdensome request to ask child care providers for the annual payroll and use that to approximate the total operating costs instead of a more extensive, and intrusive, request of the various expenses associated with providing their service. Using the information collected from the provider interviews, the total annual operating costs were pulled from the appropriate line on the provider’s income tax form that was filed. Using the staff information from the provider interviews with the total operating costs, the operating costs per age group were calculated using t_i=s_i/S∙T where ti is the operating costs in age group i, si is the staff in that age group, S is the total number of staff, and T is the total operating costs. Finally, using the enrollment information from the provider interviews, the operating costs per Iarge group, per child were calculated using k_i=t_i/c_i where ki is the operating costs per age group per child, ci is the enrollment in age group i, and ti is the operating costs for that age group. b. In the Lead Agency’s analysis, were there any relevant variations by geographic location, category of provider, or age of child? Ultimately, the narrow cost analysis involves calculating a cost per child and determining the cost of care at different levels of quality. Some providers are single staff providers for which the owner/operator is the staff member and, thus, do not pay themselves a ￿salary,￿ but rather pay themselves out of the operating profits. For these providers, instead of collecting salary/payroll information and using the 70-80 percent adjustment, the data collected were the reported total expenses before expenses for business use of home and, if operating out of their home, the expenses for business use of their home. In this case, the total operating expenses would be the sum of these two numbers. Additionally, for facilities that file IRS Form 990, total expense was collected in place of salary/payroll information. In addition to payroll and/or operating costs, in order to calculate the cost of care, data on staff assigned per age group, total staff, and the enrollment per age group was also collected. The cost analysis found that, among home care providers, providers with higher star ratings incurred higher costs. For center-based providers, infants had the highest per child costs, followed by toddlers for both quality categories. Age-based results among home providers was mixed. This analysis really was a mix because of the small numbers and some providers having few children in care, inflating the cost per child. The 2024 MRS, which is in the process now, will provide additional data regarding geographic location using urban and rural as categories. 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 bulk of the expense in operating a child care facility is staff payroll that comprises 70 -80 percent of the total operating costs, with child care centers spending approximately 70 percent of their total operating costs on payroll and home providers spending 80 percent of their total operating costs on payroll. Additional operating costs include additional staff training, administrative staff, insurance, accreditation, and licensing, along with healthy food and snacks. Considering this, it would be a much less burdensome request to ask child care providers for the annual payroll and use that to approximate the total operating costs instead of a more extensive, and intrusive, request of the various expenses associated with providing their service. 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). A subset of providers who completed the 2022 Market Rate Survey was selected for a follow-up cost interview. To establish estimated costs of care in different settings and at different quality levels (as measured by Step Up To Quality star rating), narrow cost data were collected from three providers from each provider type (Type A family child care (FCC) homes, Type B FCC homes, and child care centers) across two quality ratings: low (0-2 stars) and high (3-5 stars), for a total of 18 providers. The 2024 MRS, which is in the process now, will provide additional data regarding geographic location using urban and rural as categories which will be used. The 2024 Market Rate Survey is expected to be completed by October 1, 2024. This information will be used to in the process to determine costs at all levels of quality determine cost and inform provider payments in fiscal year 2025. 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? In order to calculate the cost of care, the following data is needed from each provider: total operating costs; staff assigned per age group; total staff; and the capacity per age group. A simple survey was created to collect this information with a selection of type A homes, type B homes and child care centers across three quality ratings: 0 stars, 1-2 stars, and 3-5 stars. Using the information collected from the survey, the total operating costs could be calculated from the annual payroll expense reported. This information would then allow the breakdown of operating cost per age group per child. Based on the narrow cost analysis results, the cost reported by participating child care programs in some cases was less than what is provided by the lead agency and, in some instances, exceeded the payment provided through the publicly funded child care program. The difference was dependent on the providers rating in Ohio’s QRIS, Step Up To Quality, which offers an increased base rate and an additional enhanced rate based on star rating. This narrow cost analysis did not take into consideration other funding sources the provider may be receiving. Cost and price vary widely across the State of Ohio which is why Ohio has maintained three clusters for payment categories. Additionally, Ohio has worked to provide additional support, when possible, to assist with mitigating costs. For example, stabilization grants, free curriculum and assessments, support for professionals through Teacher Education Compensation Helps (TEACH) and Powering Optimal Wages and Encouraging Retention (POWER) Ohio. T.E.A.C.H. Early Childhood® OHIO is a compensation and retention program for Child Care professionals. T.E.A.C.H. is designed to address education, compensation and turnover issues that affect the early childhood field. Assistance is available for the cost of tuition, books, and related education expenses. Professionals and programs participate in T.E.A.C.H. OHIO by partnering in the professional’s goal, fiscal responsibility, and retention. The Program commits to provide higher pay each year to their employees that earn credentials or college credit toward early childhood education degrees. Professionals commit to stay working at their programs while in school and for a period of time afterward. POWER Ohio was created by a subcommittee of state agencies and early childhood stakeholders. The program purpose is to provide additional funds to professionals and increase these trained professionals’ retention in their programs. 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: 11/22/2022 ii. Provide the date the report containing results was made widely available (no later than 30 days after the completion of the report): 12/14/2022 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: The report was posted on the Ohio Department of Job and Family Services (ODJFS) website: MarketRateSurvey2022.pdf (ohio.gov)- https://jfs.ohio.gov/child- care/resources/market-rate-survey and presented at both the Early Childhood Advisory Council (ECAC) and Child Care Advisory Council (CCAC) meetings for representatives to learn about results and ask questions. 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: The Ohio Department of Job and Family Services captured feedback through the Early Childhood Advisory and the Child Care Advisory Council members. The Councils include representation of child care program administrators, child care resource and referral agencies, and organizations representing child care caregivers, teachers, and directors from all settings and serving all ages. Comments were incorporated into the survey content and data requested. The input received regarding the market rate survey influenced provided guidance on cognitive interviews and questions included in the survey to allow a more robust analysis of data collected. This more robust collection of data was used in the final report.