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District of Columbia The District of Columbia was the first Lead Agency to seek and receive approval to move to alternaDve methodology for rate senng. The District developed a cost esDmaDon model and used it to inform rate senng starDng in 2016 and has conDnued to use the cost model for rate senng under alternaDve methodology, updaDng the model in 2018 and 2021 and is in the process of a third update.xlvii In moving to a cost-based approach to rate senng, the District retained higher payment rates for programs meeDng higher quality standards (using their quality raDng and improvement system) and serving children with special needs.

Six years of rate senng under alternaDve methodology has had several impacts on the District: 1. The payment rates reflect the full cost of care at each quality level, and have since the 2018 rate senng. 2. The 2021 cost model included a salary for family child care provider owners and the subsequent rate set in 2021 included the full cost of operaDng with this salary in place. 3. D.C. has seen increases in the child care worker wage reporDng through the Bureau of Labor StaDsDcs, ranging between an 8-10 percent increase. With the high turnover of the child care industry, the child care worker posiDon in the BLS database generally stays flat year over year or goes down. A 10 percent increase in a region, when no previous increase has been reported, is significant and while causality is not confirmed, the main change to the child care industry in the District has been payment rate increases based on cost of care, instead of the market rate. In 2022, D.C conducted a provider survey to gather data on tuiDon prices and cost of care, to ensure that the results of the cost esDmaDon model conDnue to reflect the reality faced by providers in the District. Family co-payments are set based on a sliding scale.xlviii If a family is assessed a co-payment, families below 100 percent of FPL are not charged a co-payment, the amount is based on the adjusted gross income and family size. The co-pay applies to the two oldest children receiving subsidized child care.

New Mexico New Mexico moved to using an alternaDve methodology for CCDF rate senng in 2021. The alternaDve methodology process and development of the cost esDmaDon model included deep intenDonal consDtuent engagement to ensure the model was informed by the diversity of child care providers across the state. The model embedded higher salaries than currently paid to the ECE workforce, including a salary floor aligned with the highest regional minimum wage, as well as benefits and a robust staffing paFern, to ensure the results reflected the resources needed to operate a quality and sustainable child care program. xlix The cost esDmaDon model included sufficient resources for family child care providers to pay themselves a salary equivalent to lead teachers in a child care center senng. These elements begin to reflect the true cost of care as opposed to the price of care that families can afford.

New Mexico used its cost esDmaDon model to inform subsidy rate senng with their CCDF state plan in 2021. Rates were set at 100 percent of the cost of care for family child care homes and an average of 94 percent for child care centers.l In addiDon to the rate increases, New Mexico increased subsidy eligibility significantly to ensure that families who would struggle to afford the cost of tuiDon at the cost of care rates, if providers elected to raise tuiDon, could also access assistance to cover the cost of child care.li New Mexico also used recovery funding to waive parent co-pays and has retained this hiatus of co-pays into FY24. A new approach to assessing co-payments is under development and will be employed at the Dme of reinstaDng co-payments. This approach acknowledges that other market forces exist within the