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 current Market Rate Survey data collection period was March 7th, 2024 ￿ April 8th, 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: Child Care staff were members of the Child & Family Services workgroup, a group that was made aware of federal changes for child care. Input and suggestions were solicited at each meeting. That information was used in the development of the Market Rate Survey questions and guides decisions about Child Care policy and practice. iv. Local child care program administrators: Child Care Provider input, whether gathered during survey result presentations, gathered at the time of survey response, or during informal communication, is reviewed and incorporated as necessary. v. Local child care resource and referral agencies: NA vi. Organizations representing child care caregivers, teachers, and directors from all settings and serving all ages: NA 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? 6/4/2024 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 current Market Rate Survey data collection period was March 7th, 2024 ￿ April 8th, 2024. iii. Describe how it represented the child care market, including what types of providers were included in the survey: The South Dakota Market Rate Survey collects data that represents the child care market by surveying all registered and licensed child care providers across the state, regardless of their participation in the subsidy program. iv. What databases are used in the survey? Are they from multiple sources, including licensing, resource and referral, and the subsidy program? All survey data is collected directly from surveyed child care providers identified through a Licensing database. v. How does the survey use good data collection procedures, regardless of the method for collection (mail, telephone, or web-based survey)? Providers were sent email notifications and reminders regarding the Market Rate Survey using the email address they provided to CCS. If an email address was found to be incorrect during this process, the cause was researched, and the email address corrected, and emails resent. If a provider did not have an email address on file, or if they requested a paper survey, a hard-copy version was mailed along with a postage- paid return envelope. Contracted staff completed follow-up calls to providers to clarify or complete missing survey information. vi. What is the percent of licensed or regulated child care centers responding to the survey? 75.25 vii. What is the percent of licensed or regulated family child care homes responding to the survey? 68.09 viii. Describe if the survey conducted in any languages other than English: NA ix. Describe if data were analyzed in a manner to determine price of care per child: South Dakota analyzes the Market Rate Survey data using averages and various percentiles which are weighted by available market slots. x. Describe if data were analyzed from a sample of providers and if so, how the sample was weighted: NA 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 collects data by surveying all registered and licensed child care providers across the state. Response rates are actively monitored during data collection, including by geographic area, to ensure data collected represents expected targets including geographic coverage. To account for geographic variation, rates are calculated at a county level and blended in geographic groups with similar population and rate levels. 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 collected through the Market Rate Survey is analyzed by provider type to reflect the variation that exists in price. iii. Describe how the market rate survey or pre-approved alternative methodology reflected age of child (e.g., infant, toddler, preschool, school-age): Rates and enrollment are collected for the following age groups: Infant (birth up to age1), Toddler (1 to 2 years), Preschool (three to five years, not yet attending kindergarten), and School age (kindergarten and older). iv. Describe any other key variations examined by the market rate survey or ACF pre- approved alternative methodology, such as quality level: NA 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)? DSS contracted with ICF to prepare child care cost models using the Provider Cost of Quality Calculator and data inputs from the 2024 child care market rate survey, 2024 child care workforce survey and interviews with child care providers. b. In the Lead Agency’s analysis, were there any relevant variations by geographic location, category of provider, or age of child? The analysis examined how cost varied by geographic location, provider type (day care centers, family day care, and school-age programs) and the age of the child (infant, toddlers, preschool and school-age). The analysis found that: Rates for infants and toddlers were lower than the modeled costs in all regions Rates for preschool were lower than the modeled costs for rural regions, but above in urban and suburban regions School-age rates for center-based providers were above the modeled costs in all regions Out-of-school-time rates were below the modeled costs in rural and suburban regions, but above in the urban region Family child care rates were above the modeled costs in all regions 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 for Centers and School-Age Staffing Ratios - The analysis assumes that the staffing ratios for centers and school-age programs will be: Five children to one staff for children up to three years of age Ten children to one staff for children three years through four years Fifteen children to one staff for children five years and over Assumptions for Centers and School-Age Group Size - The analysis assumes that the maximum group size for centers and school-age programs will not exceed 20 children per room. Assumptions for Family Day Care Staffing Ratios and Group Size - The analysis assumes that the maximum group size for family day care providers will not exceed twelve children. The analysis further assumes that family day care providers will have on average only one provider present (and no assistant), and be caring for no more than four of the children under the age of two years, and no more than three children under the age of one. Assumptions for Staff Compensation ￿ The analysis assumes staff compensation for center and school-age staff, based on a combination of compensation data collected through the 2024 child care workforce survey and the most recent data available from the Bureau of Labor Statistics and commercially available occupational data. The analysis assumes that family day care programs, in general, do not have any paid staff to meet basic state health, safety, staffing and quality standards. Assumptions for Staff Training ￿ The analysis assumes that providers will meet the minimum annual requirements for staff training, as defined by state regulations, for day care centers and school-age programs (10 hours per director and provider annually), and for family day care programs (6 hours per provider annually). 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 purposes of the narrow cost analysis, DSS defined higher quality as Level 4 on the Quality and Recognition Information System (QRIS), which is currently in the pilot phase. DSS determined the cost of care for this level of quality by modeling the cost impacts for each of the following standards categories, using the assumptions and data sources described below: Health and Safety- Additional staff hours for implementing health and safety checklist annually, completing Environmental Rating Scale (ERS) self-assessment tool for the relevant age groups and building in feedback from ERS observations for this category. Interviews with providers and technical assistance experts, and wage data from workforce study Learning Environments- Additional staff hours for implementing space and materials checklist annually, completing ERS self-assessment tool for the relevant age groups and building in feedback from ERS observations for this category. Interviews with providers and technical assistance experts, and wage data from workforce study Activities and Experiences- Additional staff hours for completing ERS self-assessment tool for the relevant age groups and building in feedback from ERS observations for this category, and staff time, materials and equipment required for developing enhanced interest centers and activities. Interviews with providers and technical assistance experts, and wage data from workforce study Relationships and Interactions- Additional staff hours and licensing costs for conducting ERS classroom observations and supporting a process for building in feedback from ERS observations. Interviews with providers and technical assistance experts, and wage data from workforce study, and average provider cost of purchasing assessment tool(s), and staff enhancements to support best practices Program Management Additional staff hours for completing application to participate and development of written policies, completion and implementation of continuous quality improvement plan, and completion of professional development plan and performance appraisal for all staff Interviews with providers and technical assistance experts Workforce Development and Support Additional staff hours for attending required trainings for fitCare, early learning guidelines, lesson planning, social and emotional wellness, relevant ERS training, and leadership practice training for directors and family day care providers Interviews with providers and technical assistance experts, and wage data and professional development data from workforce study 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? DSS examined the per-child costs that providers incur for each type of care, age group served, and geographic region. DSS identified instances where the reimbursement rates set for providers was less than the actual cost of care, which can be noted in the instance of infant and toddler care in all areas. Another DSS identified area was pre-school and school rates. Some areas of the state were below, but others were above the actual cost. The majority of the rates in these two instances fell above. Effective July 1st, 2024, South Dakota implemented a historic rate increase which included infants and toddlers. In addition, infant and toddler enhanced grant funding is provided to child care providers across South Dakota. Future considerations include further enhancing rates or grants for providers serving infants and toddlers. 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: 6/4/2024 ii. Provide the date the report containing results was made widely available (no later than 30 days after the completion of the report): 7/1/2024 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: report was posted online at the following link: https://dss.sd.gov/childcare/stateplan/default.aspx. This report is posted in the same location on the DSS website where other information relevant to providers including the State Plan is posted making it easily accessible for providers. 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: stakeholders from Early Childhood Enrichment programs, the Child & Family Services workgroup, Child Care Providers, members of associations, as well as additional caregivers, teachers and directors as needed. Their views and comments were considered in the drafting of the survey. Views and comments are solicited throughout the year at meetings, conferences, through additional surveys, etc., and are used to guide survey development and program changes.