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)? The most recent market rate survey data was collected in July/August 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 market rate survey work was part of a three-part process that included a compensation study and a cost of care survey as well. As part of this work, we engaged a large advisory group that consisted of over 25 members of the early childhood community, including workforce, providers, advocates, members of various committees and other state agencies. A number of these committee members were also representatives of the Early Learning Council. This advisory team was deeply involved in the entire process, and council leads and members were a part of this advisory team. We use Early Learning Council meetings to provide any updates on this work and to advise on a more general level about the plan, the players and the process. iv. Local child care program administrators: The market rate survey work was part of a three-part process that included a compensation study and a cost of care survey. As part of this work, we engaged a large advisory group that consisted of over 25 members of the early childhood community, including workforce, providers, advocates, members of various committees and other state agencies. Local child care program administrators were a part of this team. This advisory team was deeply involved in the entire process including creating and tweaking questions that are most valuable to get the information we want to report on, reiterating the importance of the work to colleagues and other providers and ensuring they complete the survey, and evaluating the results. v. Local child care resource and referral agencies: The market rate survey work was part of a three-part process that included a compensation study and a cost of care survey. As part of this work, we engaged a large advisory group that consisted of over 25 members of the early childhood community, including workforce, providers, advocates, members of various committees and other state agencies. Our local CCR&R was a part of this team. This advisory team was deeply involved in the entire process including creating and tweaking questions that are most valuable to get the information we want to report on, reiterating the importance of the work to colleagues and other providers and ensuring they complete the survey, and evaluating the results. vi. Organizations representing child care caregivers, teachers, and directors from all settings and serving all ages: The market rate survey work was part of a three-part process that included a compensation study and a cost of care survey. As part of this work, we engaged a large advisory group that consisted of over 25 members of the early childhood community, including workforce, providers, advocates, members of various committees and other state agencies. This team had representatives from multiple organizations that represent the child care community, including SEIU 1199 Union, Rhode Island Child Care Directors Association, and Business Owners of Child Care Association. This advisory team was deeply involved in the entire process including creating and tweaking questions that are most valuable to get the information we want to report on, reiterating the importance of the work to colleagues and other providers and ensuring they complete the survey, and evaluating the results. vii. Other. Describe: The market rate survey work was part of a three-part process that included a compensation study and a cost of care survey as well. As part of this work, we engaged a large advisory group that consisted of over 25 members of the early childhood community, including workforce, providers, advocates, members of various committees and other state agencies. This advisory team was deeply involved in the entire process. There were regular meetings between the vendor, the advisory group, and DHS to go through every question, ensure we were asking the correct questions, and added and deleted questions accordingly. Every question on this current survey was vetted by the entire advisory council as a pertinent question for the survey. The group was communicated with weekly to ensure they were getting out the word on the MRS and ensuring their partners and colleagues completed it. 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? 8/11/2024 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 most recent market rate survey data was collected in July/August 2024. iii. Describe how it represented the child care market, including what types of providers were included in the survey: We market the survey to every licensed child care provider in the state and encourage as many people to complete the information as possible. iv. What databases are used in the survey? Are they from multiple sources, including licensing, resource and referral, and the subsidy program? Databases used in the survey include licensing, CCAP, and data from stabilization survey information. v. How does the survey use good data collection procedures, regardless of the method for collection (mail, telephone, or web-based survey)? Rhode Island uses a vendor to collect all of the raw data in every form and provide in both a raw and clean way. Our vendor asked the questions, either verbally or in writing, the same way and documented it the same way. It was all documented together on an excel document and then sorted from there. We utilized any and all sources to obtain the information, from the web-based survey to sending the survey out to providers in the mail, to calling providers and asking them the questions over the phone. vi. What is the percent of licensed or regulated child care centers responding to the survey? 47.00 vii. What is the percent of licensed or regulated family child care homes responding to the survey? 39.00 viii. Describe if the survey conducted in any languages other than English: The survey is conducted in English and Spanish. ix. Describe if data were analyzed in a manner to determine price of care per child: Questions intended to analyze cost to operate child care businesses (program expenses, employee wages, avg. enrollments and number of classrooms in operations, etc) were included in the survey. With these data we intend to provide an estimated weighted cost per child to the program by program type (center/family child care). x. Describe if data were analyzed from a sample of providers and if so, how the sample was weighted: The survey was conducted via a census survey and all providers were invited to participate. 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. Child care prices can be examined either by Rhode Island county or urban core/non-urban core designations. 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). Rhode Island’s two main provider types ￿ child care center and family child care homes, are examined entirely separately in the data. iii. Describe how the market rate survey or pre-approved alternative methodology reflected age of child (e.g., infant, toddler, preschool, school-age): Rates were collected for each key age group using questions in the survey ￿ infants (birth up to 18 months), toddlers (18 months up to 36 months), preschool (3-5 years old and not yet in Kindergarten) and school age (Kindergarten age and above). iv. Describe any other key variations examined by the market rate survey or ACF pre- approved alternative methodology, such as quality level: Brightstars Quality level (1-5 stars) and participation in our Child Care Assistance Program are the two other key variations that will be examined. 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 Department conducted a narrow cost analysis as a limited cost survey to collect data to build a cost model. Detailed questions regarding the cost of operating child care programs were added in a separate section of the market rate survey, rather than a separate smaller survey, to boost the sample size for cost of care calculations. Important questions used to calculate the cost per child ￿ by program type and by QRIS level ￿ asked programs to provide their expenses around personnel costs, wages, and non- personnel expenses such as facility costs, utilities, transportation, and educational expenses. Average program expenses by program type and QRIS level were then compared to program enrollments and number of classrooms/teachers operated to calculate an estimated annual cost per child. b. In the Lead Agency’s analysis, were there any relevant variations by geographic location, category of provider, or age of child? Cost per child for center-based care and family child care homes show little difference between program type in terms of percentage of overall expenses. It is important to note that the cost of care, according to the most recent study, has drastically increased from the last study and while Rhode Island has increased rates pretty significantly since the last MRS, the cost of care is still outpacing the increased rates. Our base rates were at the 50th percentile until this survey, and that is only the case now for Family Child Care providers and SA children. In Rhode Island, because it is so small, there is no difference in geographic location. Cost per child by age also had a pretty significant difference, particularly in centers, where it costs about $10,000 more per child for an infant than a preschooler, and almost $13,000 more than a school age child. 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.)? QRIS / BrightStars rating was the primary variable in determining cost per child as it related to program quality. Teacher to child ratios (program enrollments compared to number of classrooms and teachers) and teacher compensation are secondary variables in these calculations. 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). The lead agency uses Rhode Island’s Quality Rating and Improvement System, known as Brightstars, to define higher quality. Rhode Island has been defining high quality as meeting 4-star or 5-star rating levels. Key components of the QRIS include: educator credentials, program leadership credentials, facilities, curriculum, and CQI. In conducting the cost of care study, the vendor evaluated based on QRIS. 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? Rhode Island's 2024 Market Rate Survey has just completed and will be posted prior to October 1. The 2024 MRS did show a jump in cost of care from the last market rate survey, particularly in infant and preschool care. The Department will use the rates and percentiles to support putting forth a decision package that increases base rates to at least the 50th percentile. At that point, the decision package goes through a number of different channels within state government for approval/denial and once it does or does not get put into the governor's upcoming budget, the advocates and GA can then take the information and try to add it into the budget for the remainder of the session. The 2024 Market Rate Survey will be used to calculate any type of payment rate increases for the next three years for both center and family child care providers. Initial findings in the 2024 survey are showing that the cost per child decreases as QRIS level increases, indicating higher-quality programs are more efficient in their operations or are better equipped to utilize economies of scale in serving children. This is different from what we have seen in past Market Rate Surveys, and also is the opposite of how we currently structure our tiered reimbursement for quality. We will use this analysis to think through our reimbursement system, and also the way we justify the higher rates for higher quality - as it would be more a financial incentive versus a a cost purpose. Cost per child for center-based care and family child care homes show little difference between program type in terms of percentage of overall expenses. It is important to note that the cost of care, according to the most recent study, has drastically increased from the last study and while Rhode Island has increased rates pretty significantly since the last MRS, the cost of care is still outpacing the increased rates. Our base rates were at the 50th percentile until this survey, and that is only the case now for Family Child Care providers and SA children. In Rhode Island, because it is so small, there is no difference in geographic location. Cost per child by age also had a pretty significant difference, particularly in centers, where it costs about $10,000 more per child for an infant than a preschooler, and almost $13,000 more than a school age child. While our average cost per child remains relatively stable at almost 10K a child - it drastically changes when you look at the age groups, which we will look at as we look at payment setting moving forward - we need to look at a stronger focus on infant and toddler age groups who have an 18K cost per child versus school age, where are rates are actually priced well for the school age market. We will also have to look at our tiered reimbursement when it comes to market rate and recognize that the higher the quality, the lower the cost per child. We can still choose to look at tiered reimbursement, but with the understanding it would be more of a financial incentive for higher quality versus a need because it "cost more to provide higher quality" - which the data does not currently support. 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: 9/16/2024 ii. Provide the date the report containing results was made widely available (no later than 30 days after the completion of the report): 9/30/2024 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://dhs.ri.gov/programs-and-services/child-care/child-care-providers/market- rate-survey 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: After drafting the survey, the vendor at the Department worked with the MRS Advisory Group made up of active providers, other state agencies and provider advocacy groups to help shape the survey further to make it more accessible and meaningful for the reader. After receiving feedback, DHS and the Advisory Group worked to further identify the various strata of the survey that we would target and take into consideration in our analysis, including provider type (center or family child care provider), location (inside or outside urban core), language (English or Spanish), county within the state (Bristol, Kent, Newport, Providence, Washington), Child Care Assistance Program (CCAP) participation, underrepresented communities and BrightStars Participation and quality rating: 1- 5. The advisory group also came together to inform next steps, as we didn't want the report to be the end of the analysis about cost of care. We talked about what to do with the information, how to continue the conversation and what steps the Department could take having the information they have.