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)? January 10-March 31, 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 Office of Child Care (OCC) Advisory Committee participated in the development of Utah’s 2024 Market Rate Study from the beginning of the research planning process. In March 2023, the Committee met to discuss the advantages of cost estimation models and review the results of Utah’s spreadsheet-based childcare cost estimation model. This discussion included consideration of the advantages of cost models and market rate surveys. Feedback from the March meeting was incorporated into the state’s cost model and informed a follow-up meeting in May 2023. At the May meeting, the Advisory Committee supported a research plan that included a market rate study and a cost estimation model. This meeting also included discussion of a survey approach that would rely on the existing provider reporting platform and database managed by the state’s child care resource and referral network, Care About Childcare. Members of the Committee agreed that utilizing the existing reporting infrastructure would reduce the burden on providers and potentially result in higher response rates. At the end of this meeting, a request for comments on any portion of the research plan was announced and would remain open until the beginning of the survey period in January 2024. iv. Local child care program administrators: Local childcare program administrators, owners, and licensees were also invited to a discussion of the cost estimation model at the Annual Utah Early Childhood Conference on March 8, 2024. The individual attendees used the cost model and provided feedback on the structural features and assumptions in the model. This feedback provided support for the existing data inputs related to wages, benefits, and other types of investments in higher quality care. v. Local child care resource and referral agencies: Updates to the market rate survey for 2024 reporting required close collaboration with Utah’s child care resource and referral network, Care About Childcare (CAC). Discussions with CAC related to the potential database update began in April of 2023. After finalizing the survey methodology, the Office of Child Care worked with CAC to develop survey language and update the provider portal. Before updates went into effect, the Office of Child Care met with CAC data specialists to provide guidance and ensure consistency in survey implementation. Throughout the process, CAC provided feedback that was incorporated into the survey development process, the inclusion of specific questions and the language used. vi. Organizations representing child care caregivers, teachers, and directors from all settings and serving all ages: The Utah Private Child Care Association (UPCCA) and the Utah Private Family Child Care Association (UPFCCA) both had representation at the OCC Advisory Committee meetings and participated in the planning and development process. 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? 3/31/2024 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)? All price and capacity data in the survey were collected during a survey period spanning less than three months (11.5 weeks). iii. Describe how it represented the child care market, including what types of providers were included in the survey: The market rate survey includes the priced, regulated, arm’s length market for childcare in Utah. All priced and regulated providers in the state were targeted for inclusion. Every active child care program in the state received an email link to the survey, a description of the market rate study, and an incentive for filling the survey during the response period. Analysis focused on the population of providers that meet the criteria for the priced and regulated market. These include four types of providers: Center Licensed, Family Licensed, Commercial Preschool, and Residential Certificate. iv. What databases are used in the survey? Are they from multiple sources, including licensing, resource and referral, and the subsidy program? This market rate study relies on administrative data managed by Utah’s child care resource and referral network, Care About Childcare (CAC). CAC includes six regional agencies that work directly with providers in their area to maintain a central database that includes current price, capacity, and attribute information for regulated child care facilities. The CAC database combines licensing data, data from the CCQS, and data entered directly by providers. The database provides a record of the population of all active programs in the state. v. How does the survey use good data collection procedures, regardless of the method for collection (mail, telephone, or web-based survey)? The target population of the 2024 market rate survey was the population of priced, regulated child care providers in Utah. Survey implementation, facilitation, and outreach from CAC provided standardized data collection for improved data quality and high response rates. Although the primary modality of the survey was online, providers seeking assistance could work with CAC to complete the survey via telephone, including opportunities for Spanish language support. More than 80 percent of all providers in the study population completed the survey. This includes broad geographic representation for Center Licensed, Family Licensed, and Residential Certificate providers. The survey used the following procedures to ensure valid and reliable data: The survey population is defined by up-to-date records of all licensed providers, maintained in a validated database. The survey was conducted during a three-month survey window that excluded major holidays and reflects school-year prices for 2024. The survey was framed within a routine (annual) price data collection period. New survey language was evaluated for clarity and validity by the Office of Child Care, CAC data specialists who work directly with providers, and the external consultant hired to analyze and report the survey results. CAC allocated resources to facilitate provider response. Routine price data collection is facilitated by a team of CAC data specialists who answer provider questions and support accurate reporting. For the Market Rate survey, in addition to their standard training on the reporting platform, the Office of Child Care provided training to these specialists on new survey questions that were added to meet the requirements of the MRS. A script providing common language for explanation of new survey questions and answers to anticipated provider questions accompanied this training. These practices promote the consistency and reliability of the data. CAC provided ongoing monitoring of survey responses and targeted outreach throughout the survey period to promote the completeness and representativeness of the data. vi. What is the percent of licensed or regulated child care centers responding to the survey? 88.70 vii. What is the percent of licensed or regulated family child care homes responding to the survey? 85.20 viii. Describe if the survey conducted in any languages other than English: The survey was conducted in English within the Care About Childcare website. The website includes a translate feature, which translates information on the website to over 130 languages. Data specialists from CAC were available to facilitate data entry for Spanish speakers. ix. Describe if data were analyzed in a manner to determine price of care per child: Data analysis utilized providers’ reported monthly per-child price of care. All market rates reported in the study represent per-child prices. x. Describe if data were analyzed from a sample of providers and if so, how the sample was weighted: Analysis relied on the sample of providers that responded to the survey with updated market rates and capacities during the three-month survey window. This sample represents 83.5 percent of all providers in the state. All analysis of the data at the state level utilizes sample weights to promote the representativeness of the results. These weights adjust the frequency distribution of the sample to reflect the distribution of childcare providers in the population. Weights are constructed using provider type, geography, and licensed capacity. In this way the weights account for underrepresented geographic areas and potential nonresponse bias in the sample. Sample weights are calculated as weight = Nij/nij, where Nij = percentage of population total capacity (defined by childcare slots) for all providers of type i within geographic region j, and nij = percentage of sample total capacity of type i within geographic region j. In addition to the sample weights described above, all analysis in this study follows the Administration for Children and Families recommendation to weight reported prices by childcare slot (Administration for Children and Families, 2018). A slot indicates one unit of available enrollment at a childcare program. Weighting by slots adjusts estimates to reflect the market presence of programs, proportionally increasing the representation of larger providers. Capacity weighted price estimates better represent the influence of large providers on market rates and the prices encountered by families seeking care. The capacity measure used for weighting by slot is the provider’s desired operating capacity for enrollment of each age group. Desired operating capacity describes the number of children in an age group that are cared for when a program is fully staffed and operating at its preferred group sizes and caregiver- to-child ratios. Some providers in the sample updated their capacity information in the CAC database without providing desired operating capacity. For these providers, the weight instead represents the sum of current enrollment and vacancies for the age group or facility. 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 presents data on market rates, subsidy acceptance, registration fees, and the availability of care on non- traditional schedules for geographic regions including Utah as a whole and the rural and urban portions of the state. Further geographic variation is explored for market rates and subsidy acceptance with local markets defined by Utah’s 5 metropolitan statistical areas (Logan, Ogden-Clearfield, Provo-Orem, Salt Lake City, and St. George) and 2 nonmetropolitan regions (Central Nonmetropolitan Region and Eastern Nonmetropolitan Region). In addition, the narrow cost model includes analysis for the 7 metropolitan and nonmetropolitan areas. The administrative data used for the market rate study and narrow cost analysis provides county of operation for all active providers in the state. Due to small provider populations in some counties, geographic analysis is presented at the higher levels of aggregation, including metropolitan and nonmetropolitan areas and the urban/rural portions of the state. At the geographic level of metropolitan and nonmetropolitan areas, response rates were between 70 and 100 percent for Licensed Centers (88.7 percent statewide), between 80 and 94 percent for Licensed Family providers (85.2 percent statewide), and between 50 and 100 percent for providers with a Residential Certificate (79.1 percent statewide). Response rates were lower for Commercial Preschools, where the statewide response rate was just 25 percent and two metropolitan and nonmetropolitan areas did not have any observations. 2024 marks the first year that Commercial Preschools are included in the market rate study, and targeted outreach to nonrespondents focused on the other three provider types for most of the survey period. More attention to the inclusion of Commercial Preschools will be a priority for future studies. Due to the variation in response reported above, the market rate study utilizes sample weights to promote the representativeness of the sample data results. These weights adjust the frequency distribution of the sample to reflect the distribution of childcare providers in the population. Weights are constructed using provider type, geography, and licensed capacity. In this way the weights account for underrepresented geographic areas and potential nonresponse bias in the sample. Finally, the geographic variation assessed in the narrow cost analysis reflects the inclusion of data available at the metropolitan and nonmetropolitan geographic level for housing and commercial real estate costs, variation in wages, and other regional price differences. This data includes data from the Bureau of Labor Statistics, the Bureau of Economic Analysis, and the state of Utah 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). Market rates are analyzed and reported separately by provider type for Licensed Centers, Commercial Preschools, Licensed Family, and Residential Certificate providers. iii. Describe how the market rate survey or pre-approved alternative methodology reflected age of child (e.g., infant, toddler, preschool, school-age): The Market Rate Survey analyzed and reported prices by child age, using age categories that align with subsidy payment rates set: ages 0-23 months, 2 years, 3 years, 4 years, 5 years and school age (6-12 years). iv. Describe any other key variations examined by the market rate survey or ACF pre- approved alternative methodology, such as quality level: N/A 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 narrow cost analysis used a cost estimation model. b. In the Lead Agency’s analysis, were there any relevant variations by geographic location, category of provider, or age of child? The narrow cost analysis shows variation in the cost of care by age of child, type of provider, geographic location and quality rating. This analysis shows that the cost of care is highest for younger children and higher quality care. Center-based care is more expensive than home-based care at all quality ratings. Geographic variation has declined as wage and price increases over the past three years reduced variation at the level of metropolitan and nonmetropolitan areas. The remaining variation by region is driven by differences in the median wage and in rent and mortgage costs across the state. 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 inputs to the cost estimation model at the base level of quality reflect Utah’s minimum licensing standards for group sizes and ratios. Wages at the base level are set to the median wage of childcare workers in the lowest certified quality rated facilities reported in Utah’s 2022 Workforce Bonus survey. Additional staffing for non-classroom time of caregivers is set at the minimum of 25% to accommodate business hours at a facility that cares for children 50 hours per week. Spending on professional development is set at the default value included in the Provider Cost of Quality Calculator (PCQC). 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). Higher quality care designations in the cost model meet the standards set for higher quality ratings in Utah's quality rating and improvement system, the Child Care Quality System (CCQS). The Building Quality, High Quality and High Quality Plus certified quality rating levels in the cost model represent more caregivers per child, reduced group sizes, more investments in professional development and the higher wages necessary to attract more qualified teachers and administrators. Ratios and group sizes directly reflect the elevated standards for these characteristics in CCQS. Compensation for teachers and administrators is based on the median wage reported in these categories for each tier of CCQS-rated providers in Utah’s 2022 Workforce Bonus survey. 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? A comparison of cost estimates and market prices at the 75th percentile was completed to identify the gap between cost and price to assist in setting new market rates. The findings for licensed centers are as follows: 1. Providers are least likely to recover costs through market revenues for children ages 2 and under. 2. Significant gaps exist between price and cost for higher quality-rated center-based care for any age group under 6 years old. 3. Market prices are most likely to cover the costs of providing care for school-aged children. The data collected for licensed family providers indicated the following: 1. Certified Foundation of Quality rated family licensed providers fully recover the cost of care for all age groups 2. Significant gaps exist between price and cost for higher quality-rated home-based care. The Lead Agency compared the market rate data and the estimated cost of quality care analysis when setting new subsidy rates. Each age group received a subsidy rate increase to narrow the gap between price and cost. 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: 4/25/2024 ii. Provide the date the report containing results was made widely available (no later than 30 days after the completion of the report): 5/23/2024 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://jobs.utah.gov/occ/plans.html The report was also shared with the Lead Agency’s Office of Child Care Advisory Committee. 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: Utah’s detailed 2024 Market Rate report is based on survey design and implementation that is the product of collaboration with stakeholders throughout the development period. The key elements of collaboration included the development and use of cost model for the narrow cost analysis, the choice to rely on administrative data for the market rate study, updates to the administrative database to meet the requirements of the study, and survey monitoring and facilitation in partnership with local childcare resource and referral agencies throughout the period in which the survey was open. The development of Utah’s cost estimation model for use in the narrow cost analysis included conferral with the Office of Child Care Advisory Committee, a sample of local childcare program administrators, owners, and licensees, and presentation of the model to a local advocacy organization. The Advisory Committee first discussed the use of cost modeling in May of 2022. Attendees at that meeting provided feedback on the cost modeling approach, details about age group distinctions in the model, and a review of non-personnel expenses. This discussion informed the development of the model. In spring of 2023 the Advisory Committee met twice to discuss the model results and its potential use for the narrow cost analysis informing subsidy rates. At these meetings, attendees suggested additional cost and revenue elements for inclusion in the model and provided feedback on the wage estimates available at that time. As a result of this feedback the model was adapted to incorporate the Committee’s suggestions. At the second meeting, in May 2023, the Committee agreed to use the cost estimation model for the 2024 narrow cost analysis. Prior to the publication of the market rate study and narrow cost analysis, results of the cost model were introduced to a group of local child care program administrators, owners, and licensees at the Annual Utah Early Childhood Conference in March of 2024. Feedback from this meeting supported the data inputs and results, providing validation for use of the model in the upcoming report. The Office of Child Care brought a proposal to update the state’s child care resource and referral data for use in the market rate study to the OCC Advisory Committee in May of 2023. Members of the committee supported the proposal, indicating that it would reduce the reporting burden on providers and lead to better data collection practices. Following this meeting, the OCC worked closely with the childcare resource and referral network, Care About Childcare, to implement necessary updates to the data and train CAC data specialists to provide guidance to providers related to the new survey questions. Throughout this collaboration, CAC partners made important contributions to developing the language of the survey instrument and the best practices for working with providers to complete the survey. The collaboration and input from the Advisory Committee, the state’s resource and referral network, and local providers improved the data inputs to the cost model and facilitated the use of a validated source of complete and reliable data for the market rate survey. These are essential contributions that enabled the analysis provided in the detailed report.