The Massachusetts Early Education and Care and Out-of-School Time Quality Cost Model

Anne MitchellAndrew Brodsky

Presentation to the Massachusetts Department of Early Education and Care

January 8, 2013

Project Goals

Identify child care cost drivers of levels from licensing through QRIS levels

Create interactive model to estimate costs of child care quality in MA

Estimate cost implications of changing reimbursement rates

Identify current and potential financing strategies for child care quality

Cost Methodology

Baseline cost estimates based on cost of licensing

Cost to achieve given distribution of quality based on analysis of cost-related components of QRIS system

If data are available, costs determined separately by region

Excel Model Features

Allows user to change distribution of quality (beginning at licensing)

Allows user to adjust supports for high quality child care (such as grants) and view resulting costs

Allows user to adjust reimbursement rate structure

Excel Model Output

Current and projected enrollment by age and setting

Additional costs based on changes to enrollment and quality distribution, by setting

Additional costs based on changes to reimbursement rates

Cost of quality grants to providers

Factors Affecting Quality

Higher quality ECE costs more than most families can afford

Market-based ECE encourages price competition – low tuition fees – and discourages investments in quality

Considerations for Estimating Costs

Expense drivers: Ratios Group size Staff compensation (salary and benefits)

Revenue drivers: Parent tuition fees/other revenue Revenue collection Enrollment efficiency

Provider perspective: Iron Triangle

Full Enrollment

Full Fee Collection

Revenues Cover Per-Child Cost

Supporting Financial Stability

State can… Set family income eligibility high for entry and

higher for exit Use contracts more than vouchers Set rate ceilings as high as feasible

Providers can… Fill vacancies immediately to keep enrollment as

close to 100% as possible Collect all revenue on time Diversify revenue: Participate in CACFP, PreK &

other revenue sources

Considerations for Estimating Cost: QRIS Requirements in licensing rules QRIS expectations increase by levels Primarily better qualified staff as quality

increases (higher compensation) More staff time for assessment, family

activities and conferences, curriculum planning, staff meetings

One-time costs for equipment

Massachusetts Cost of Quality Survey (2012)

Used in the model Data confirms BLS wages, cost of

training and continuing professional development

Data informed non-personnel costs Materials and equipment Child screening and assessment

The Massachusetts Early Education and Care and Out-of-School Time Quality Cost Model – Screen Shots

Massachusetts QRIS Cost Model CENTERS

Items in yellow shaded cells ONLY may be changed to model different scenarios Please change only yellow cellsRatios in Just FYI:

SIZE # Children/Age Age Groups # of Classrooms Group Size MA regs NAEYC (max)7 Infants-15 months 1 7 1:3 2:89 Toddlers (15-33) 1 9 1:5 2:10

20 Threes 1 20 1:10 2:1820 Fours 1 20 1:10 2:2026 Fives & SA 1 26 1:1382 5

TOTAL Children TOTAL Classrooms

INCOME MIX of CHILDREN70% 185% FPL&above15% <185% FPL15% <130% FPL

TypicalEFFICIENCY Enrollment as % of total capacity 85.0% 85%

Bad Debts as % of tuition 3.0% 3%

QUALITY By age cohort Across all ages Net Annual P/L with mix of child ages Net as % Net as $$/childLevel 1 Cost per hour Overall Cost/hour

Infants $7.26 $3.78 $620,249 ExpenseOnes $6.40 $721,701 RevenueTwos $5.93 $101,452 Profit/(Loss) Rev less Exp 16.4% $1,237

Threes $3.34Fours $3.34Fives $2.88

Level 2Infants $8.10 $4.18 $685,598 Expense

Ones $7.13 $721,701 RevenueTwos $6.60 $36,103 Profit/(Loss) Rev less Exp 5.3% $440

Threes $3.68Fours $3.68Fives $3.16

Level 3Infants $9.38 $4.88 $800,652 Expense

Ones $8.37 $781,303 RevenueTwos $7.73 ($19,349) Profit/(Loss) Rev less Exp -2.4% $236

Threes $4.35Fours $4.35Fives $3.64

Level 4Infants $10.02 $5.35 $877,415 Expense

Ones $9.18 $852,363 RevenueTwos $8.47 ($25,052) Profit/(Loss) Rev less Exp -2.9% $306

Threes $4.77Fours $4.77Fives $4.16

Scenario 1: BLUE line on graphScenario 1. Center: 5 classrooms (infants, toddlers, threes, fours and fives/school-age)

Quality Net Annual P/L

Net as % of Expenses

Net as $$/child

Level 1 $620,249 Expense$721,701 Revenue$101,452 Profit/(Loss) Rev less Exp 16.4% $1,237

Level 2 $685,598 Expense$721,701 Revenue

$36,103 Profit/(Loss) Rev less Exp 5.3% $440

Level 3 $800,652 Expense$781,303 Revenue($19,349) Profit/(Loss) Rev less Exp -2.4% $236

Level 4 $877,415 Expense$852,363 Revenue($25,052) Profit/(Loss) Rev less Exp -2.9% $306

Scenario 2: RED line on graph

Scenario 2. 5 classrooms (toddlers, threes, 2 fours and fives/school-age)

Quality Net Annual P/L

Net as % of Expenses

Net as $$/child

Level 1 $639,632 Expense$813,329 Revenue$173,697 Profit/(Loss) Rev less Exp 27.2% $1,828

Level 2 $704,981 Expense$813,329 Revenue$108,348 Profit/(Loss) Rev less Exp 15.4% $1,141

Level 3 $820,230 Expense$891,989 Revenue

$71,758 Profit/(Loss) Rev less Exp 8.7% $755

Level 4 $896,993 Expense$973,836 Revenue

$76,843 Profit/(Loss) Rev less Exp 8.6% $809

Scenario 3: GREEN line on graphScenario 3. Preschool & Fives/SA only (106 children)

Quality Net Annual P/L

Net as % of Expenses

Net as $$/child

Level 1 $656,033 Expense$888,706 Revenue$232,673 Profit/(Loss) Rev less Exp 35.5% $2,195

Level 2 $721,382 Expense$888,706 Revenue$167,325 Profit/(Loss) Rev less Exp 23.2% $1,579

Level 3 $836,796 Expense$985,502 Revenue$148,706 Profit/(Loss) Rev less Exp 17.8% $1,403

Level 4 $913,559 Expense$1,076,136 Revenue

$162,577 Profit/(Loss) Rev less Exp 17.8% $1,534