Commission Meeting Materials June 6, 2017 9:00 A.M. - Discussion Paper - Child Care Market

1 Child Care Market Rate Survey and 2 a Cost-of-Care Analysis 3 Discussion Paper 4 Background

5 Requirements for a Market Rate Survey

6 Section 98.45(c) requires that at least every three years as part of the CCDF state plan1, lead 7 agencies: 8  conduct a statistically valid and reliable survey of the market rates for child care services; or 9  use an alternative methodology, such as a cost-estimation model, that has been: 10 o proposed by the lead agency; and 11 o approved in advance by the Administration for Children and Families (ACF).

12 Section 98.45(d) requires that the market rate survey (MRS) or alternative methodology takes 13 into account variations by geographic location, category of provider, and age of the child.

14 The Texas Workforce Commission (TWC) conducts an annual (MRS) through a contract with 15 the University of Texas at Austin School of Social Work. The MRS meets the CCDF 16 requirements for a statistically valid survey and reflects market rates by geographic location (that 17 is, by local workforce development area), provider category, and age of the child. It also takes 18 into account the level of care (that is, full-day and part-day).

19 A contract for conducting the MRS is being procured through a Request for Offer, which was 20 due on April 21, 2017. TWC expects to award the contract by June 1, 2017, and the vender to 21 begin collecting market rate data in September 2017.

22 Section 98.45(e)(1) requires that, before conducting the MRS or using an alternative 23 methodology, the lead agency must consult with: 24  the State Advisory Council on Early Childhood Education and Care (or a similar 25 coordinating body2), administrators of local child care programs, local resource and referral 26 agencies for child care, and other appropriate entities; and 27  organizations representing caregivers, teachers, and directors who provide child care.

28 Additional Information Required

29 Section 98.45(d) requires that the lead agency track, through the MRS or alternative 30 methodology, or through a separate source: 31  the extent to which providers are participating in the subsidy program and any barriers to 32 participation, including barriers related to payment rates and practices; and 33  whether CCDF child care providers charge families more than the required co-payment when 34 the provider’s price exceeds the subsidy payment, and how much more is charged and how 35 often.

1 1 The CCDF state plan for Federal Fiscal Year (FFY) 2019–2021 is due July 1, 2018. 2 2 Texas’ advisory council (the Texas Early Learning Council) is no longer active. TWC 3 coordinates activities with the Texas Department of Family and Protective Services (DFPS), the 4 Texas Education Agency, The Children’s Learning Institute, and TWC’s 28 Local Workforce 5 Development Boards (Boards).

DP – Market Rate Survey and Cost-of-Care Analysis - Notebook (6.6.17) 1 1 TWC’s MRS will include questions about the barriers to participation in the subsidy system, as 2 well as questions about the extent to which subsidized providers charge parents the difference 3 between the subsidized rate and the providers’ published rate.

4 Section 98.45(f)(1)(ii) requires that the lead agency track (through the MRS, alternative 5 methodology, or separate source) the estimated cost of care necessary to support the following, 6 including any relevant variation by geographic location, provider category, or age of the child: 7  The child care providers’ implementation of the CCDF requirements on health, safety, 8 quality, and staffing 9  The provision of higher-quality care, as defined by the lead agency using a quality rating and 10 improvement system (QRIS) or other system of quality indicators, at each level of quality

11 Detailed Report 12 Section 98.45(f)(1) requires that the lead agency prepare a detailed report containing: 13  the results of the MRS or alternative methodology; 14  the estimated cost of implementing the CCDF requirements on health, safety, quality 15 (that is, professional development, training and background checks), and staffing (that is, 16 group size and ratio); 17  the estimated cost of providing higher-quality care, as defined by the state’s QRIS; and 18  the lead agency’s response to stakeholders’ views and comments regarding the methodology 19 used for the MRS.

20 Reimbursement Rates 21 Section 98.45(f)(2) requires that the lead agency: 22  set payment rates in accordance with the results of the most recent MRS or alternative 23 methodology conducted for the three-year state plan; 24  establish base payment rates that are at least sufficient for child care providers to meet the 25 CCDF requirements on health, safety, quality, and staffing; 26  consider the cost of providing higher-quality child care services, including considering the 27 information at each level of higher quality required through the state’s QRIS; 28  consider the views and comments of the public regarding the methodology used for the MRS; 29 and 30  meet these requirements without reducing the number of families receiving CCDF assistance, 31 to the extent practicable.

32 Decision Point

33 Recommendation 1: Solicit public input on the MRS methodology 34 Staff recommends that TWC: 35  post the methodology for conducting the MRS on the TWC website on July 31, 2017; 36  solicit comments from the following, as required by the CCDF regulations: 37 o DFPS 38 o Texas Education Agency 39 o The Children’s Learning Institute 40 o Boards 41 o Texas Licensed Child Care Association 42 o Child care providers that serve subsidized children; and 43  incorporate the comments, as necessary, into the survey methodology before conducting the 44 survey in September 2017.

DP – Market Rate Survey and Cost-of-Care Analysis - Notebook (6.6.17) 2 1 Recommendation 2: Estimate the cost of implementing the CCDF requirements on health, safety, 2 quality, and staffing and the minimum standards required by DFPS’s Child Care Licensing 3 division for the Texas Rising Star program. 4 Staff recommends that TWC’s Workforce Program Policy department work with TWC’s Labor 5 Market and Career Information department and TWC’s Department of Operational Insights 6 department to develop a methodology for estimating the costs associated with meeting staffing 7 requirements (that is, group size and ratios).

8 Staff also recommends that this methodology include input from the DFPS Child Care Licensing 9 division, The Children’s Learning Institute, and the Texas Early Childhood Professional 10 Development System on the costs of meeting the state’s licensing standards on health, safety, 11 and quality (that is, professional development, training and background checks), as required by 12 CCDF regulations.

13 Further, staff recommends asking providers statewide to review and comment on the cost- 14 estimation methodology.

15 Finally, staff recommends working with Boards to encourage Texas Rising Star (TRS) providers 16 to complete the Provider Cost of Quality Calculator published at 17 https://www.ecequalitycalculator.com/Login.aspx and share the results with TWC and the 18 Boards to estimate the costs of providing the higher-quality care needed at each level to be 19 certified for Texas Rising Star.

20 Recommendation 3: Analyze the results of the market-rate survey and include the cost analysis 21 in the CCDF plan 22 Staff recommends that TWC analyze the results of the MRS.

23 Staff also recommends that the estimated cost analysis that will be included in the CCDF state 24 plan for FFY 2019–2021 be conducted during FFY 2019 to determine whether to increase rates 25 in compliance with §98.45(f), specifically taking into consideration: 26  base payments (that they are at least sufficient for child care providers to meet CCDF 27 requirements on health, safety, quality, and staffing); 28  the cost of providing the high-quality child care needed to meet TRS standards; 29  the views and comments of the public regarding the methodology used to conduct the 30 market-rate survey; and 31  the possibility of doing as required without, to the extent practicable, reducing the number of 32 families receiving CCDF assistance.

33 Recommendation 4: Adopt timeline for the MRS and cost-of-care report 34 Staff recommends adopting the following timeline for conducting the MRS and cost-of-care 35 analysis in conjunction with the CCDF state plan for FFY 2019–2021:

Topic Activities Start Date Completion Date MRS Post the MRS methodology n/a July 31, 2017 Obtain stakeholder comments on the MRS August 1, 2017 August 31, 2017 methodology Vendor Conduct the MRS Oct 1, 2017 January 31, 2018 Vendor Analyze the MRS Feb 1, 2018 March 31, 2018 Vendor Submit the draft results to TWC n/a April 1, 2018 Include the draft results in the draft state n/a May 1, 2018

DP – Market Rate Survey and Cost-of-Care Analysis - Notebook (6.6.17) 3 plan Submit a final report to TWC n/a June 1, 2018 Cost-of- Develop the methodology for estimating June 1, 2017 July 31, 2018 Care cost of care Analysis Collect and analyze the cost-of-care data August 1, 2017 March 31, 2018 Include draft analysis in the draft state plan n/a May 1, 2018 State Plan Solicit public comment and/or hold May 1, 2018 May 31, 2018 hearings Submit to ACF n/a July 1, 2018

DP – Market Rate Survey and Cost-of-Care Analysis - Notebook (6.6.17) 4