How ECCE cost studies can contribute to policy

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Research on the Cost of Quality Early Childhood Care and Education (ECCE) in Oklahoma: Implications for the ECCE Workforce

Lynn A. Karoly, RAND Corporation

Building Equitable Futures for Oklahoma’s Children, Oklahoma

Partnership for School Readiness Webinar

January 13, 2021

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How ECCE cost studies can contribute to policy

• Important to understand “true” cost of early childhood care and education (ECCE)– Market rate survey prices do not necessarily reflect costs– Better understanding of ECCE costs can be obtained through cost

data collection and cost modeling

• ECCE cost studies can inform various policy issues– Estimate how costs vary with quality– Estimate how costs vary with ECCE workforce supports– Inform Child Care Subsidy program reimbursement rates

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Program features that can support ECCE workforce and the associated cost implications

Program feature Relationship to cost

Ratios and group sizes Direct, classroom costs

Salaries/benefits for classroom staff Direct, classroom costs

Salaries/benefits for administrative staff Indirect, administrative costs

Staff professional development May be a system-level cost

Coaching and technical assistance May be a system-level cost

Other working conditions (e.g., non-contact time with children for planning)

Direct, classroom costs

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But there may be cost implications when ECCE workforce supports are absent

Program feature Relationship to cost

Ratios and group sizes Direct, classroom costs

Salaries/benefits for classroom staff Direct, classroom costs

Salaries/benefits for administrative staff Indirect, administrative costs

Staff professional development May be a system-level cost

Coaching and technical assistance May be a system-level cost

Other working conditions (e.g., non-contact time with children for planning)

Direct, classroom costs

Staff turnover Indirect, administrative costs

Diminished learning environment Opportunity cost

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Today’s presentation

Overview of RAND OK ECCE cost study

Key cost study findings

Broader policy issues and implications

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Key study questions

• What is the estimated per-child cost of ECCE in the state for infants, toddlers, and preschool-age children?

• What are the fundamental ECCE cost drivers?

C O R P O R A T I O N

LYNN A. KAROLY, STEPHANIE J. WALSH

Estimating the Cost of Quality Early Childhood Care and Education in Oklahoma

Sponsored by the Oklahoma Partnership for School Readiness Foundation

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ApproachCost data collection

•Collect program and cost data for 25 diverse ECCE providers in OK (varying by setting type, geography, quality tier)

•Estimate ECCE cost per child by setting type, age group, and quality

•Examine cost structure and variation across observed providers

Cost model

•Develop a cost model to estimate cost per child by setting type, age group, and quality

•Establish baseline assumptions

•Perform sensitivity analyses (e.g., to underenrollment, program size, and cost of living differences)

Analysis

•Compare observed data with model estimates

•Compare observed estimates with the Child Care Subsidy program reimbursement rates

•Compare model estimates with the Child Care Subsidy program reimbursement rates

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Findings: Provider survey data

• There is tremendous variation in program operations

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Variation in supplemental services offeredAdditional services provided Centers (13) FCCHs (12)

Height and weight measurement 2 2Vision screening 3 0Hearing screening 2 0Dental screening 0 0Speech screening 2 0Speech services 0 0Developmental assessment 9 1Meals 13 12Referrals 9 6Transportation 3 3

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Findings: Provider survey data

• There is tremendous variation in program operations

• A common feature was low compensation

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Few providers offered more costly benefitsBenefit offered for full-time staff Centers (13) FCCHs (12)

Paid to attend staff meetings 10 1Professional development 9 6Paid to attend professional development 4 1Reduced tuition 8 1Over time pay 8 1Sick pay 6 4Vacation pay 8 6Retirement savings 2 0Health insurance 2 3Dental insurance 3 0

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Findings: Provider cost data• Estimates of per-child cost for the sampled providers varied

widely– Within the same provider type– Within the same Reaching for the Stars rating tier

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Weekly per-child cost variation

Type Center age group / FCCH sizeMinimum (2018 $)

Maximum (2018 $)

Number of cases

Cent

ers

Birth to 11 months 172 307 8

12 to 23 months 106 218 13

2 years 96 177 11

3 years 84 186 15

4 years 85 134 8

FCCH

s Large FCCH 98 216 6

FCCH 87 213 6

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widely

• Personnel costs consistently represent the largest share of expenditures– Classroom personnel represent 50% or more of expenditures for

typical provider

– Similar finding using model-based estimates

– Share of personnel costs is even higher for programs following higher-quality standards

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widely

• Personnel costs consistently represent the largest share of expenditures

• FCCH providers varied in the reported compensation for the owner/operator and the extent that housing costs were deducted

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Varied compensation for FCCH owner/operator

Indicator

Large FCCH Min

Large FCCH Max

FCCH Min

FCCH Max

Reported owner salary or profit ($) 0 33,600 11,315 49,600

Reported percentage of housing cost assigned to business (%) 10 100 21 60

Reported combined compensation ($) 13,720 51,436 18,192 62,310

Number of cases 6 6 6 6

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widely• Personnel costs consistently represent the largest share of

expenditures• FCCH providers varied in the reported compensation for the

owner/operator and the extent that housing costs were deducted

• Variation extends to the extent that costs would be covered by subsidy reimbursement rates– Rooms serving infants were less likely to be fully reimbursed

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Findings: Cost model

• Teacher-child ratio is a key cost driver of lower per-child center cost as children age from infants to preschoolers

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Two Star center: Effect of ratio on per-child cost

5,267

5,908

7,508

9,109

12,351

0 5,000 10,000 15,000 20,000

Age 4 years(1:15)

Age 3 years(1:12)

Age 2 years(1:8)

Age 12 to 23 months(1:6)

Age 0 to 11 months(1:4)

Annual per-child cost (dollars)

Age

grou

p (te

ache

r-chi

ld ra

tio)

Two Star

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Findings: Cost model

• Teacher-child ratio is a key cost driver of lower per-child center cost as children age from infants to preschoolers

• Cost recovery given subsidy reimbursement rates vary

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Percentage of cost recovered varies by age group and quality tier: Centers

IndicatorBirth to 11

months

12 to 23

months 2 years 3 years 4 years

One Star: 100% attendance 50.5 67.9 70.6 89.2 98.6

One Star: 80% attendance 40.4 54.3 56.5 71.4 78.9

One Star Plus: 100% attendance 55.3 71.2 77.3 97.8 103.2

One Star Plus: 80% attendance 44.3 56.9 61.9 78.2 82.5

Two Star: 100% attendance 80.0 95.9 109.1 138.6 112.5

Two Star: 80% attendance 64.0 76.7 87.3 110.9 90.0

Three Star: 100% attendance 68.5 86.6 74.4 101.2 71.0

Three Star: 80% attendance 54.8 69.3 59.5 80.9 56.8

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Alignment of shifts in ratio vs. rates

Center age group

Teacher-child ratioDaily reimbursement

rate: full-day ($, 2020)

One Star through Two Star

(licensing)Three Star (NAEYC) Two Star Three Star

Birth to 11 months 1:4 1:4 38.00 44.00

12 to 23 months 1:6 1:6 33.60 41.80

2 years 1:8 1:6 31.50 35.90

3 years 1:12 1:10 31.50 35.90

4 years 1:15 1:10 22.80 25.20

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Challenges for ECCE workforce supports• ECCE workforce members practice in diverse settings with

varying levels of resources for compensation and other supports

workforce supports may not be reflected in reimbursement rate

• Moving up quality tiers may result in higher reimbursement but usually not be required to use those funds for workforce supports– Higher compensation

– Improved workplace practices

• Need alignment between reimbursement policy and level where workforce supports are provided

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• Varied recognition of workforce supports in QRIS

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Few states tie ECE workforce supports to QRIS

QRIS Standards Include… Oklahoma (Y/N) Other States (Y)Paid time for professional development N 13Paid preparation/planning time N 13Salary schedule/benefits Centers only 22

SOURCE: 2018 Early Childhood Workforce Index, Center for the Study of Child Care Employment.

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Few states have ECCE workforce compensation policies more generally

QRIS Standards Include… Oklahoma (Y/N) Other States (Y)Salary parity for pre-K or child care Y 22 Compensation requirements N 0 Compensation guidelines (in place/planned) N 13Earmarks for ECE compensation N 2Stipend or tax credits to supplement pay N 14Bonuses to supplement pay N 33

SOURCE: 2018 Early Childhood Workforce Index, Center for the Study of Child Care Employment.

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• Moving up quality tiers may result in higher reimbursement but usually not required to use those funds for workforce supports– Higher compensation

– Improved workplace practices

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Reaching for the Stars requirementsDomain One Star One Star Plus Two Star Three Star

Max teacher-child ratio Licensing Licensing Licensing [Lower]

Max group size Licensing Licensing Licensing [Lower]

Min teacher education Licensing Licensing Higher [Higher]

PD registry – ✓ ✓ ✓PD – ↑ Follow ELG Follow ELG

National accreditation – – – ✓Learning environment – ↑ ↑ [ ↑ ]

Family engagement – ↑ ↑ [ ↑ ]

Program evaluation – ↑ ↑ [ ↑ ]NOTE: Items in brackets are expected to require further quality improvement based on accreditation standards.

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• Moving up quality tiers may result in higher reimbursement but usually not required to use those funds for workforce supports

• Cost of workforce supports may not be reflected in reimbursement rate

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• Moving up quality tiers may result in higher reimbursement but usually not required to use those funds for workforce supports

• Cost of workforce supports may not be reflected in reimbursement rate

• Need alignment between reimbursement rates and level required to cover costs of workforce supports

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Study is available on www.rand.org

…/pubs/research_reports/RRA280-1.html

C O R P O R A T I O N

LYNN A. KAROLY, STEPHANIE J. WALSH

Estimating the Cost of Quality Early Childhood Care and Education in Oklahoma

Sponsored by the Oklahoma Partnership for School Readiness Foundation

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Questions and discussion

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Documents

How ECCE cost studies can contribute to policy