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)? DCYF gathered data between January 7 and March 15, 2024. The study was completed when DCYF published a report on findings on July 17, 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: At their February 2023 meeting, DCYF sought the Early Learning Advisory Council’s (ELAC) advice and feedback to selecting the provider group that would make recommendations on cost of quality care model selections (the Design Team). DCYF further consulted ELAC for advice on gathering data and spreading word about the study at their February 2024 meeting. iv. Local child care program administrators: DCYF consulted with program administrators through the Provider Supports Subcommittee of ELAC at their February 2024 meeting prior to selecting the Design Team that would make recommendations on cost of quality model selections. v. Local child care resource and referral agencies: The Design Team was facilitated by CCA, and DCYF consulted with CCA in selecting this group as the body to make recommendations on the model. CCA also participated in Design Team meetings in a facilitation, support, and advisory role. vi. Organizations representing child care caregivers, teachers, and directors from all settings and serving all ages: The Design Team recommending selection points for the model was composed of a diverse, representative group of child care caregivers, teachers, and directors from all licensed settings. Using a Liberatory Design approach, and with DCYF acting in a support and informational role, the Design Team convened several evening meetings from Spring through Fall 2023, and provided recommendations on calculator cost selection points the Legislature should assume in building subsidy reimbursement rates. They recommended that rates should be sufficient to support: - Living wage using the MIT living wage scale - 40 days per year of combined sick and vacation leave - Employer retirement contribution of 6% of salary $9,000 per employee for discretionary benefits per year - Family engagement of 3 conferences per year and a family engagement specialist staff position - Salary and benefits for a part time assistant in family child care/16 hours per week per classroom in centers for planning release time - Education materials including $100 for child assessments, plus curriculum support - 20 hours of professional development per year vii. Other. Describe: At its March 2023 meeting, DCYF sought IPEL’s advice in selecting the Design Team to make selection point recommendations for the model. 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? 7/17/2024 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)? DCYF gathered data between January 7 and March 15, 2024. iii. Describe how it represented the child care market, including what types of providers were included in the survey: DCYF surveyed all licensed center, licensed family home, and licensed school age child care programs, statewide. iv. What databases are used in the survey? Are they from multiple sources, including licensing, resource and referral, and the subsidy program? DCYF used its WACompass licensing database to create the survey contact list and to cross reference survey responses to Licensing data. v. How does the survey use good data collection procedures, regardless of the method for collection (mail, telephone, or web-based survey)? DCYF's Market Rate Survey follows ACF's "Top Ten Basic Principles of Creating A Valid Market Rate Survey" described at https://childcareta.acf.hhs.gov/sites/default/files/newocc/resource/files/designin g_market_rate_surveys_brief_2_0_1.pdf. Data collection defined the universe of providers and drew a valid sample (census survey). Our survey design and deployment ensured good response with 95% confidence and a 2% margin of error, with a large proportion of data coming from fully completed surveys. We focused on data reporting the price of unsubsidized care, collected consistent price data by avoiding pricing mode conversions, matched responses to licensing database data to allow sorting for analysis, used a simple design for the survey to ease analysis, provided clear instruction on taking the survey, tested the instrument before distributing, informed providers multiple times to prepare them for the survey, and used rigorous data cleaning methods to validate findings. vi. What is the percent of licensed or regulated child care centers responding to the survey? 27.70 vii. What is the percent of licensed or regulated family child care homes responding to the survey? 24.44 viii. Describe if the survey conducted in any languages other than English: The survey was distributed in Somali, and Spanish, as well as English. ix. Describe if data were analyzed in a manner to determine price of care per child: The survey examines the price per child care slot, recognizing that all child care facilities should not be weighted equally. Reported rates are weighted by full time enrollment to determine percentiles. x. Describe if data were analyzed from a sample of providers and if so, how the sample was weighted: Our survey used a census approach, not a sample. DCYF distributed the survey to all 5,779 licensed providers across the state. 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. DCYF surveyed all licensed and certified providers for its alternative methodology and received responses from every county in the state. Data received on all elements, including but not limited to private market prices, wages, and fixed costs therefore reflect geographic variation. 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). DCYF surveyed and received responses from licensed and certified providers, both centers and family homes. Data received on all elements, including but not limited to private market prices, wages, and fixed costs (rent/mortgage, utilities, etc.) therefore reflect variation by provider type. iii. Describe how the market rate survey or pre-approved alternative methodology reflected age of child (e.g., infant, toddler, preschool, school-age): Responses to DCYF’s survey included data on private market prices, licensed capacity and actual occupancy, and staffing patterns for classrooms, all by child age (infant, toddler, preschool, and school-age). The methodology therefore reflects variation based on age of child. 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)? DCYF conducted a cost study to inform its cost model using a census survey of licensed child care providers. Data and analysis revealed substantial variation in cost based on geography, category of provider, and child age. b. In the Lead Agency’s analysis, were there any relevant variations by geographic location, category of provider, or age of child? Variations in rates and costs were as expected, with rates for infants being the highest, and school-age being the lowest due to staffing ratios. Geographically, costs in the urban Region 4 where Seattle is located tended to be highest, whereas costs for the other regions were clustered together, with notable exceptions as to Center Region 2 (southern central Washington) preschoolers who had either the highest costs or comparable costs to Region 4, whether in center or family home care. Costs for centers were nearly always substantially higher than for family homes, except as to school age children where costs for centers were only slightly higher. 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.)? DCYF assumed default program sizes and characteristics in separate scenarios for licensed family homes and centers. The two scenarios were: • a center-based program serving 72 children, birth through school age, with one classroom of each age group (infant, toddler, preschooler, school age) • a family child care program serving 8 children, birth through school age (1 infant, 1 toddler, 3 preschoolers and 3 school age children). The default program included $6,000 per employee in discretionary benefits and a 6% contribution to retirement, as well as 10 days paid sick leave and 10 days paid vacation. DCYF used current wage and fixed cost data from the survey as well Provider Cost of Quality Care calculator data as drivers to determine cost at the base level of quality. 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). DCYF estimated cost at different levels in Early Achievers using cost model quality selection points that drive cost in addition to those associated with the base level of quality. A center rated at quality (level 3 in Early Achievers) includes the following selections: - Family engagement: 2 conferences/year - Professional Development: 15 hours per year - Planning/release time: 8 hours per week per classroom - Education Materials/Assessments: Child Assessment tools ($50) + curriculum support A family home rated at quality (level 3 in Early Achievers) includes the following selections: - Family engagement: 2 conferences/year - Professional Development: 15 hours per year - Planning/release time: equivalent to a part-time assistant position - Education Materials/Assessments: Child Assessment tools ($50) + curriculum support 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? Analysis revealed small gaps between prices paid by families in the private market and the cost of quality care assuming current wages. Cost modeling indicates major gaps between current subsidy base rates and cost of quality care when a living wage, benefits, and other Design Team recommendations are assumed. State law currently requires subsidy base rates be set at the 85th percentile of the market rate but will take up the questions of whether to fund rates based on cost of quality care, what cost model selection points to assume, and the degree of any increase to base rates, in the 2025 Legislative session. 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: 7/17/2024 ii. Provide the date the report containing results was made widely available (no later than 30 days after the completion of the report): 7/17/2024 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://www.dcyf.wa.gov/sites/default/files/pdf/reports/ChildCareMarketRateStu dy2024.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: In the report, DCYF discussed its engagement with the groups described above, the selection of the Design Team, and the recommendations of that group. DCYF also discussed recommendations on outreach for the survey from the group, as well as the group’s recommendations on reorganizing the state’s subsidy regional rate structure.