What alternative methodology can be used instead of a market rate survey?
Answer
The law allows for an alternative methodology, such as a cost estimation model, that has been developed by the State. While a market rate survey measures prices charged by child care providers, a cost estimation model would document the full cost to providers of delivering quality child care, or various levels of quality, such as the levels of a Quality Rating and Improvement System. Many child care providers report that they are unable to set published prices that reflect the full cost of providing quality services because parents would be unable to pay these prices. As a result, the published prices that are reflected in market rate surveys are not always adequate to cover the providers' full costs, particularly for high quality care.
Cost estimation models should account for key factors that impact the cost of service delivery such as: staff salaries and benefits; training and professional development; curricula and supplies; group size of children and staff-child ratios; enrollment levels; program size; facility costs (rent/mortgage, utilities); and other factors. Such models should also take into account that costs vary across submarkets, such as by: provider category (e.g., center, family home); geographic groupings (e.g., by locality, urban/rural); age of child (e.g., infants and toddlers, preschoolers, school-age); and other considerations (e.g., care for children with disabilities or special health needs).
The Provider Cost of Quality Calculator (PCQC) is an easy-to-use, Web-based tool that calculates the cost of quality—based on site-level provider data—to help State policymakers understand the costs associated with delivering high-quality child care services. The tool can demonstrate whether there is a gap between the cost of providing quality services and the revenue sources available to support a program. Knowing the size of the gap at different quality levels for various provider types can inform the design of financial support and incentive packages. States and Territories can use the PCQC to take into account the cost of quality and to inform an alternative methodology for setting payment rates. The PCQC is publically available on OCC Technical Assistance Network Web site.
Any payment rates established using an alternative methodology or market rate survey must be reviewed and approved by ACF as part of the CCDF Plan review process. Because the alternative methodology is a new basis for setting payment rates, we highly encourage any State considering an alternative methodology to submit a description of its proposed approach to the ACF Regional Office in advance of the Plan submittal—in order to avoid any delays with Plan approval. Any alternative methodology or market rate survey that results in stagnant or reduced payment rates will result in increased scrutiny by ACF in its review, and the State will need to provide a justification for how the changes result in improving the availability of higher quality child care. At a minimum, any alternative methodology or market rate survey must:
- Use current data and rigorous methods;
- Be conducted no earlier than two years before the date of submission of the CCDF Plan;
- Be developed and conducted only after consultation with the State Advisory Council, local child care program administrators, local child care resource and referral agencies, and other appropriate entities;
- Include a detailed report containing the results, which must be made widely available no later than 30 days after completion, including by posting the results on the Internet.
- Be the basis for setting CCDF subsidy payment rates.
(Reference: Section 658E(c)(4)(B))