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 1, 2024 - January 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 SAC has a Data and Evaluation Committee that focuses on early childhood data in Vermont. CDD consulted with the Data and Evaluation Committee prior to analyzing its data to determine any considerations that needed to be represented in its reporting. iv. Local child care program administrators: Child care program administrators were invited to the Data and Evaluation Committee to advise on considerations that CDD needed to represent in its reporting. In addition, several program administrators were asked to review the Cost of Care analysis for accuracy. v. Local child care resource and referral agencies: As with the program administrators, local child care resource and referral agencies were invited to the Data and Evaluation Committee to advise on considerations that CDD needed to represent in its reporting. In addition, some local child care resource and referral agencies were asked to review the Cost of Care analysis for accuracy. vi. Organizations representing child care caregivers, teachers, and directors from all settings and serving all ages: There are several organizations that represent caregivers, teachers, and directors that are part of SAC and were invited to the Data and Evaluation Committee. This includes representation from Vermont’s School Boards Association ("VSBA"), several legislators (who receive input from the early childhood professionals that they represent), the Vermont Association for the Education of Young Children ("VTAEYC"), Vermont’s Head Start Collaboration Office, the Vermont Principals’ Association ("VPA"), the Vermont Agency of Education ("AOE"), and the Governor’s office (which also represents input received from its constituency). 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? 6/30/2024 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)? CDD uses administrative data collected through CDDIS. Provider Rates are collected from all providers at the time of licensing and are requested to be updated once every three years. These rates may be updated more frequently at the providers’ request, and were most recently updated in December 2023. iii. Describe how it represented the child care market, including what types of providers were included in the survey: CDD uses administrative data collected through CDDIS. The type of providers included in the administrative data are licensed and home providers. iv. What databases are used in the survey? Are they from multiple sources, including licensing, resource and referral, and the subsidy program? CDD uses administrative data collected through CDDIS. v. How does the survey use good data collection procedures, regardless of the method for collection (mail, telephone, or web-based survey)? CDD recognizes that child care programs charge in a variety of different ways, and that rates also differ based on available discounts from the program. In an effort to gather valid data that is statically comparable, child care programs are asked to report their rates in several price modes. There are different price modes, including: part time weekly, full time weekly, and extended care weekly. These models are broken down into four age groups: infant, toddler, preschool, and school age. They are also broken out by provider type, and whether they are licensed or registered. These price modes match the CCFAP system of eligibility and payment for child care programs. Child care programs are asked to convert their own rates to the price modes paid through the CCFAP system. CDD asks them to record the rate to accurately represent what a parent who is not eligible for CCFAP would pay for the price mode based on the age category and number of hours the child attends the program. Programs that do not charge their services are encouraged to submit their rates as zero, so their information can appropriately be excluded from the Market Rate Survey ("MRS"). vi. What is the percent of licensed or regulated child care centers responding to the survey? 75.00 vii. What is the percent of licensed or regulated family child care homes responding to the survey? 75.00 viii. Describe if the survey conducted in any languages other than English: CDD uses administrative data collected through CDDIS. ix. Describe if data were analyzed in a manner to determine price of care per child: CDD uses administrative data collected through CDDIS. The analysis included the price of child care for part time weekly, full time weekly, and extended care weekly, for four age groups; infant toddler, preschool and school age. x. Describe if data were analyzed from a sample of providers and if so, how the sample was weighted: CDD uses administrative data collected through CDDIS. At the time of analysis approximately 75% of the providers had usable price data in CDDIS. 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. AHS serves the state through 12 area districts, where the data is analyzed and then reported to the statewide data collection. The rates charged by both licensed and registered programs vary by AHS district. Overall, Bennington, Brattleboro, Burlington, and Morrisville districts rates are most expensive however the statewide rate is above the provider rate. In both Licensed and Registered settings, with very few exceptions, State rates more than covered the 75th percentile of provider rates for full time care for all age groups. Conversely, in both Licensed and Registered settings, the State rates more often than not failed to cover the 75th percentile of provider rates for part time care for all age groups. This was true at both the AHS District and County 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). The data is analyzed by license type and reported separately for licensed programs and registered home programs. iii. Describe how the market rate survey or pre-approved alternative methodology reflected age of child (e.g., infant, toddler, preschool, school-age): The data was collected and analyzed by age category: infants (birth to 2nd birthday), toddlers (2 years old), preschool (3-5 years old), 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: 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)? CDD used a study of cost of care in Vermont that was a product of the Vermont Early Care and Education ("ECE") Finance Study completed in December, 2022. b. In the Lead Agency’s analysis, were there any relevant variations by geographic location, category of provider, or age of child? The study focused on regulated providers - namely, licensed centers, Head Start programs, public school prekindergarten (pre-K) programs and licensed and registered family child care homes (FCCH's). The analysis was based on family demographics including age of child, infant, toddler, preschool and school age. With Vermont being so small the study was looked at as a whole without breaking it down by geographic location. 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.)? CDD used a study of cost in Vermont called the Vermont Early Care and Education Finance Study. The study approximated the true cost of care by estimating costs associated with running a high-quality child-care program including category of provider, age of child, staff ratios, staff compensation, materials and supplies and operating cost for the physical location. RAND modeling was driven by Lynn Karoly’s previous work for other RAND clients and for national high-level expert groups. Lynn Karoly’s drew on her work for Oklahoma, Washington DC, The Brookings Institution, The Institute of Medicine/National Research Council, and the Office of Child Care within the Agency of Children and Families at the U.S. Agency of Human Services. The report also adjusted national costs for Vermont’s price level. RAND worked with the BBF Advisory Board, which includes child care providers. 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). In Vermont, high quality is defined by licensing standards and a high Star rating on the State’s Quality Recognition and Improvement System ("STARS"). These include ratios and group sizes, lead-teacher qualifications, assistant- teacher qualifications, annual professional development hours, curriculum, developmental screener, child formative assessment and independent classroom quality assessment. The study assumed salary cost for child care workers was equivalent to the same role of that of professional early childhood educators including fringe benefits. It also looked at system level costs which are costs primarily consisting of the personnel time to administer the system overall, including the mechanism for reimbursing providers to cover their costs of care for families receiving subsidies and collection of family contributions. Other system level costs are provider licensing, resource and referral services, operation of the quality recognition and improvement system and state-level provision of workforce professional development supports. 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 Vermont, high quality is defined by licensing standards and a high Star rating on the State’s Quality Recognition and Improvement System (￿STARS￿). These include ratios and group sizes, lead-teacher qualifications, assistant-teacher qualifications, annual professional development hours, curriculum, developmental screener, child formative assessment and independent classroom quality assessment. It was determined that there was an approximate $258 million dollar gap between the cost and price of the total child care system which is calculated as Total system cost of care - Family Contribution - Existing public funding. In looking at this the legislature decided not to make any changes to the family contribution amounts but to put additional state funding towards the gap, including a new child care payroll tax. Using the narrow cost analysis the Vermont Legislature looked at the gap to determine the fiscal impact that could be afforded. The first increase came back in December 2023 with a 35% rate increase for all providers and age categories. In June 2024 a second increase to the family child care providers rates increased by 50% of the differential between licensed and family child care rates in order to lessen the gap. Vermont has hired a contractor to provide a cost of care analysis each year to provide to the Governor and Legislature. 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: 6/1/2024 ii. Provide the date the report containing results was made widely available (no later than 30 days after the completion of the report): 6/30/2024 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://outside.vermont.gov/dept/DCF/Shared%20Documents/CDD/Reports/CC- MRS/CC-MRS-Report-2024.pdf 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: CDD has collected feedback on the survey methodology, cost analysis and community needs of data reported to the BBF Data and Evaluation Committee. The Data and Evaluation Committee focuses on early childhood data needs in the state. The recommendations from the committee included: 1) Using the ECE Financial Study; and 2) Estimating the Cost of High-Quality Early Care Education for Vermont. Vermont is in the process of seeking a contract with an organization to evaluate the cost of child care on a yearly basis that will readily be available for the Legislature and leadership.