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)? 2/1/23 through 1/31/24 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 Lead Agency shares the content of the State Plan and its requirements with the Early Childhood Advisory Committee. Since the Lead Agency surveys 100% of providers as a part of its licensing activities, and always has, no change to the process has been deemed necessary. iv. Local child care program administrators: West Virginia's child care program is State administered. v. Local child care resource and referral agencies: Child Care Resource and Referral agencies share the market rate survey instrument with child care providers. vi. Organizations representing child care caregivers, teachers, and directors from all settings and serving all ages: The Lead Agency communicates with child care provider associations through annual and local meetings. vii. Other. Describe: There are no other agencies involved in this process. On 12/13/21 the lead agency received a notice of preliminary non- compliance for not consulting partners. Through the Preschool Development Grant, the lead agency was able to conduct focus groups with parents and providers on all aspects of the early child care system. There were no comments on the market rate survey, but parents and providers now better understand why the data is collected and how it is used. 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? 4/26/2024 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)? Data was pulled from the licensing data base in March 2024. iii. Describe how it represented the child care market, including what types of providers were included in the survey: All child care providers are required to fill out the market rate survey document on a yearly basis or as they change their rates and data is entered into the data system by child care regulatory and licensing specialists and captures the time period of February 2023 through January 2024. 100% of child care providers complete the document. Data is collected through the child care regulatory database as part of annual licensing or registration reviews, dependent upon type of care and age of child. Child Care providers can also call in to report rate changes between review periods, to ensure that the most current information is always in the system. This method ensures a 100% response rate, as new certificates of registration or license cannot be issued without completion of the market rate screen in the data system. Because the market rate information is based on the whole regulated child care population in the state and not a sample of the population, reliability and validity concerns do not exist, and the regulated child care market of the entire state is captured. iv. What databases are used in the survey? Are they from multiple sources, including licensing, resource and referral, and the subsidy program? The licensing and subsidy program reside within a single data system. In order to issue a license, market rate information must be entered first. v. How does the survey use good data collection procedures, regardless of the method for collection (mail, telephone, or web-based survey)? As licenses cannot be issued without first entering or updating market rate survey information, 100% of providers must provide the necessary information if they wish to operate within the state. vi. What is the percent of licensed or regulated child care centers responding to the survey? 100.00 vii. What is the percent of licensed or regulated family child care homes responding to the survey? 100.00 viii. Describe if the survey conducted in any languages other than English: The survey is not conducted in other languages. ix. Describe if data were analyzed in a manner to determine price of care per child: Data was analyzed to determine the 75th percentile of rates per age of child, (infants, toddlers, preschoolers, school age) and type of setting (family child care, family child care facility, and child care center.) x. Describe if data were analyzed from a sample of providers and if so, how the sample was weighted: The market rate survey did not use a sample. 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. Market rate information is collected on 100% of licensed and regulated child care providers in the state. 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 market rate survey collects data by each type of child care provider, family child care homes, family child care facilities, and child care centers. iii. Describe how the market rate survey or pre-approved alternative methodology reflected age of child (e.g., infant, toddler, preschool, school-age): Rates are collected and sorted by type and age of child: Infant ￿ 0 month to 24 months, Toddler ￿ 25 months to 36 months, Preschooler ￿ 37 months ￿ 59 months, School age ￿ 60 iv. Describe any other key variations examined by the market rate survey or ACF pre- approved alternative methodology, such as quality level: Not applicable. 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)? Public Consulting Group (PCG) developed and administered an online survey to the West Virginia Child Care Resource & Referral (CCR&R) child care provider listserv. The survey was open for approximately four weeks, from February 14, 2024 to March 19, 2024. After cleaning the data submitted by providers, PCG aggregated and analyzed the data for trends in revenue and expenses for child care providers. A total of 110 Licensed Child Care Centers, 106 Licensed Family Child Care Facilities, 59 Registered Family Child Care Homes, and five Out of School Time Programs responded to the Narrow Cost Analysis survey. This represents 21 percent of the provider population. While a statistically significantly representative sample is not required for this analysis, this level of response rate represents a confidence level of 95 percent with a margin of error of +/-5.11 percent. The lead agency received a preliminary notice for not completing a Narrow Cost Analysis in the FY22-24 CCDF Plan cycle on 10/27/22. b. In the Lead Agency’s analysis, were there any relevant variations by geographic location, category of provider, or age of child? Costs vary by age of child. Costs are higher in the eastern panhandle of the state, due to its proximity to Washington D.C. Registered Family Child Care Homes have the lowest expense per child at $3,740.21. In contrast, Licensed Family Child Care Facilities incur a much higher expense per child of $6,830.19. Licensed Child Care Centers, while having the highest total expenses at nearly $49.83 million and the largest enrollment at 8,117, manage a lower expense per child ($6,138.87) compared to family care facilities but higher than family care homes. 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 Lead Agency's vendor, Public Consulting Group, used the following: 1. Age Group Variance: Analyzing how child care costs differ across various age groups, including infants, toddlers, and preschoolers, recognizing the unique care needs and associated expenses for each age cohort. 2. Quality Affordability: Examining the influence of quality (i.e., tier rating) on cost of care. 3: Operational Expenses: Investigating the various costs associated with operating a child care facility, including rent or mortgage payments, utilities, insurance, staffing, supplies, and equipment. 4. Licensing and Compliance Costs: Analyzing the financial implications of meeting licensing requirements, maintaining compliance with state regulations, and investing in professional development for staff members. 5. Staffing costs and Retention Strategies: Examining the challenges related to recruiting and retaining qualified staff members and exploring strategies to offer competitive wages and benefits while maintaining affordability for families. 6. Facility Maintenance and Upkeep: Assessing the costs associated with maintaining a safe, clean, and stimulating environment for children, including repairs, renovations, and investments in age- appropriate equipment and resources. 7. Financial Assistance Programs and Subsidies: Exploring the impact of government subsidies, grants and financial assistance programs on the financial sustainability of child care providers, as well as the accessibility of affordable child care for families. 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). The Lead Agency has three tiers in its quality rating system: Tier I ￿ basic licensing, Tier II ￿ enhanced ratios, additional professional development, documentation of curriculum and appropriate child development supports, Tier III ￿ national accreditation from an accrediting body. The narrow cost analysis found that ￿a comparative analysis of average costs per child across different quality tiers of Licensed Child Care Centers. Tier I programs, which represent a baseline or standard level of quality, have a substantial total enrollment of 3,917 children and an expense per child of $6,304.49. In contrast, Tier II centers, possibly indicating a higher quality or more resource-intensive program, have a higher cost per child at $6,821.13, despite a lower total enrollment of 2,406 children, suggesting that increased quality might correlate with higher per-child costs. Interestingly, Tier III programs, which represents the highest quality level, show a significantly lower expense per child ($5,032.83) despite having the smallest enrollment (1,794), which could indicate more efficient operations or differing funding mechanisms that allow for lower costs while maintaining or enhancing quality. This table reflects the complex interplay between quality, cost, and scale in child care provision, highlighting how higher quality standards can impact financial expenditures in nuanced ways.￿ 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? The results of the narrow cost analysis provide evidence that current payment rates support the costs of meeting licensing requirements as well as support the cost of providing higher quality care. Narrow Cost Analysis by Provider Type; Provider Type Narrow Cost Monthly Cost per Child January 2024 ACF 801 Expenditure Report Family Child Care Home $312 $504 Family Child Care Facility $569 $587 Child Care Center $512 $620 Narrow Cost Analysis Child Care Centers by Tier Level Tier Level Monthly Cost per Child Tier I $525 Tier II $568 Tier III $419 The Narrow Cost analysis currently demonstrates that reimbursement rates exceed the cost of providing care, even in high quality settings. 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: 5/28/2024 ii. Provide the date the report containing results was made widely available (no later than 30 days after the completion of the report): 6/7/2024 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://dhhr.wv.gov/bfa/ece/policies/Pages/default.aspx The Division of Early Care and Education shared narrow cost analysis information through the public hearing process and through the Child Care Resource and Referral agencies and list servs. The Division also collected public comments through June 23, 2024. 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: The lead agency did not receive any comments on the narrow cost analysis. The lead agency received a preliminary notice of non-compliance from the Office of Child Care for not making a detailed report regarding the results of the previous market rate survey available on 12/31/21.