February 2023 – Childcarepolicy.net

February 16, 2023

For-Profit Operators Don’t Want Child Care to Be a Public Service for Families

There’s a new Canada-wide organization of for-profit child care operators that has just been formed in Calgary. Appropriately enough, they were brought together by CIPR Communications, a PR and marketing company they have hired to state their case. They don’t like the new Canada-Wide Early Learning and Child Care system that the federal government and all provincial and territorial governments have agreed to create (to complement Quebec’s system). They don’t want you and other families to have $10 a day child care.

Instead, their new policy idea is the same as the much-tested and discredited old policy idea – fund the parents to buy child care at ever rising fees (if they can find it) instead of funding services to ensure that they are affordable and available for families. See discussion of these ideas here, here and here.

They are aggrieved that federal, provincial and territorial governments across the country have agreed that the preference should be for the expansion of not-for-profit and public child care services. These for-profit operators believe the preference for not-for-profit child care is ideologically driven. However, the Globe and Mail editorial this week told us why not-for-profits are preferred: “Research here and in other countries has consistently shown that, on average, non-profit child-care centres deliver better care than for-profit ones.” An important part of the reason is that for-profit child care has historically paid much lower wages to staff than has the not-for-profit sector.

And the private operators don’t like financial accountability. They are happy for the federal government to spend $10 billion a year on child care and for provinces and territories to pay a similar amount. But they don’t want the financial accountability that goes along with the new child care agreements. That’s why they prefer funding to go to parents – no need to report on or account for the 90% of your revenues that come from government. No limitations on profit earned. No limits on excessive spending. No need to account for the government money that buys you assets that you can then sell to others. Talk about pigs at the trough.

I recently gave a webinar presentation on behalf of Building Blocks for Child Care. Its focus was on expansion issues, but I talked quite a bit about the appropriate role of for-profit operators in building the new early learning and child care system. Let me quote at length from that presentation:

“There can be a role for for-profit operators in a universal system. Having a certain percentage of for-profits is not NECESSARILY a deal-breaker. … the key is that for-profits in our universal child care system must accept the rules of the game. What do I mean by rules of the game? Early learning and child care is becoming a public service somewhat like health and education. Child care will be largely publicly funded and must be accountable for the ways it spends public funds. Value for money received. Early learning and child care will be affordable to parents, will be of high quality, will be universally available in a wide range of forms suited to children’s and parents’ needs and will be delivered mainly by not-for-profit and public licensees, with some delivery of services by private for-profit operators.

“Something like 80%-90% of an operator’s revenues will come from government. Operators will have to be financially accountable for these funds and transparent about how they spend them. Some expenditures will not be legitimate and many will. There will be monitoring, quality evaluation, and extensive reporting requirements. That’s the way that a universal fixed-fee system has to work, but most for-profit operators seem not to accept these rules of the game.

“For-profit operators want very few controls on their spending and the costs that they can claim. They lobbied the Ministry [i.e., the Ontario Ministry of Education] successfully to get rid of most measures of financial accountability for the 2022 and 2023 funding guidelines. Yet, without financial accountability, they expect governments to compensate them for all of their costs above $10 a day. How can that work? It doesn’t. In fact, if you talk to for-profit operators for a little while, you find out that they don’t like a fixed-fee system at all. They want a tax credit scheme [i.e., funding provided to parents], in which for-profit operators charge whatever the market will bear, and governments give increasing amounts of money to parents to chase after the rising fees and try to make child care affordable. They don’t accept the rules of the game. And as long as they don’t accept the rules of the game, for-profit operators play a decisively negative role in our attempts to build a universal system of good quality child care services. “

These for-profit operators meeting in Calgary have just made clear what many of us already knew – many for-profit operators are unwilling to be participants in building an accountable, affordable, accessible, high quality system of child care as a public service for Canada’s families. They would prefer a child care funding system that enriches them without controls or accountability. Let’s ignore them and their PR company, but be willing to work with those for-profit operators that ARE willing to be part of building early learning and child care as a public service.

February 13, 2023

The Twisted Logic of the Globe and Mail Editorial Board

Let me get this straight.

On average, not-for-profit child care centres reliably deliver better care than for-profit ones.
In Canada, we need expansion of spaces as a high priority.
This expansion must be accompanied by financial accountability for public money, caps on fees, higher wages, and better quality for children.
Around the world, we have prominent experiences where for-profit child care corporations feast on public money without accountability, drive up fees much faster than inflation, and slash wages to enhance profit.
Therefore, in Canada, we must resist limitations on the growth of for-profit child care and allow more entrepreneurs to enter the market.

It’s nice when opinion columns are logical; many people think it’s a requirement of the genre. But not so for the Globe and Mail. Their most recent editorial about not-for-profit and for-profit child care is insightful, but completely illogical.

February 13, 2023February 13, 2023

WHAT COURSE-CORRECTIONS ARE NEEDED IN ALBERTA’S NEW EARLY LEARNING AND CHILD CARE ACTION PLAN?

There are many opportunities for “course-corrections” built into the provincial and territorial Canada-Wide Early Learning and Child Care Agreements. For instance, in the Alberta-Canada Early Learning and Child Care Agreement (ACELCCA), there is an Implementation Committee with federal and provincial representatives that has wide responsibilities to assess progress outlined in Section 6 of the Agreement. The major opportunity for course correction comes in the form of a new Action Plan to be proposed by the Alberta government and agreed by federal representatives by April 1^st, 2023. The initial Agreement and its accompanying Action Plan (covering the first two years – 2021-22 and 2022-23) laid out a vision, objectives and specific programs and actions that would be taken to transform Alberta’s early learning and child care system. Now, it’s time for a new Action Plan. This Action Plan will determine what happens over the next three years to child care services that parents rely on.

So what course-corrections should be included in this Action Plan? What should Alberta stakeholders and parents be insisting upon? What should be the key must-haves that federal government representatives are looking for in this new Action Plan?

IMHO, there are seven important course corrections that should be the centrepiece of the new Action Plan.

Alberta should transition towards fixed-fee child care instead of having widely varying child care fees for parents to pay.
Alberta needs to develop a new funding system that provides cost controls and financial accountability and encourages quality improvements.
Alberta needs to ensure that lower-income families are not disadvantaged by the funding system but rather are encouraged to benefit from the use of child care
Alberta needs to ensure that ECE wages are high enough to solve the staffing crisis and avoid lowering qualification requirements.
The expansion of not-for-profit and public child care spaces needs to be prioritized in practice rather than simply in words. This will require additional capital funding and support mechanisms. Expansion of early learning and child care services needs to be planned, not haphazard.
Planning of expansion should ensure that inclusion and flexibility goals are met.
Alberta needs to report now and regularly on progress or lack of progress in achieving the goals of the Alberta-Canada Agreement.

Let me try to briefly justify these priorities.

Alberta should transition towards fixed-fee child care instead of having widely varying child care fees for parents to pay.

Alberta has made a lot of progress in lowering child care fees since January 2022, moving faster than expected. Great! But it achieved this in an odd way. Instead of lowering all fees by 50% (like Ontario) or having the same fee for all child care services (Newfoundland, now $15 a day), Alberta provided a new system of operating grants to lower fees by a constant dollar figure across centres.

Operating grants per enrolled space are $635 per month for centre-based infant care, $510 per month for centre-based toddler care, and $450 for centre-based care for children of preschool age. In family day homes, there are operating grants of $350 per month for infant children, $325 a month for toddler children and $300 a month for children of preschool age. Whatever the parent fee per month was at the end of 2021, it was lowered by these amounts in every centre and family day home that joined the program.

Reducing parent fees with a fixed-amount operating grant (varying by child age category) has preserved differences in fee levels rather than eliminating them. Albertans living in Calgary, where higher costs led to higher parent fees, have had their child care fees drop by much less than 50%. In other parts of Alberta, fees have fallen more than 50%. It should be a priority in the upcoming Action Plan to move closer to a fixed-fee system, so that parents in higher cost and lower cost situations face similar parent fees. Alberta’s recently published Cost Control Framework and For-Profit Expansion Plan says that in 2023-24 parent fees for licensed child care will average $15 a day. It is unclear what variation in fees will be permitted within this average.

2. Alberta needs to develop a new funding system that provides cost controls and financial accountability and encourages quality improvements.

If the costs faced by different operators are different but the child care fee faced by parents is the same or nearly the same, operators in high cost situations will have to receive larger amounts of operating funding to offset costs that are legitimately higher. This principle is already well accepted for different age categories of children; operating grants for infant care are higher to offset the higher costs of providing child care for infants.

Providers that have higher costs because their early childhood educators have more years of experience and have higher educational qualifications should have these legitimate cost differences offset. On the other hand, higher per-child costs that are due to under-enrolment due to profit-seeking expansion in areas that are already well-served should not be fully offset. Higher costs due to exorbitant salaries for owner-administrators should not be fully offset. There should be expenditure limits. And so on.

In order to develop a system where legitimate cost differences are offset, Alberta needs to research and develop a cost control or value-for-money framework to determine which cost variations should be offset and by how much. On January 31^st, 2023, Alberta published its new agreed “Cost Control Framework and For-Profit Expansion Plan”. The Cost Control Framework might as well have been written on the back of a napkin; it provides no details about what cost variations will receive what amounts of support.

Section 6.3 of the Alberta-Canada Agreement promised that this cost-control framework would “ensure the sound and reasonable use of public funds, ensuring that costs and earnings of child care businesses are reasonable and that surplus earnings beyond reasonable earnings are directed towards improving child care services.” These words are repeated in the recently published Framework, but there are no details on amounts of funding, on which factors will be rewarded with extra funding and which behaviours will be discouraged by remaining unfunded. In short, there are insufficient details to judge whether the Cost Control Framework will have positive or negative effects. The single item on which there is clarity is that child care operators can charge extra parent fees for what are called “Enhanced Services”. Enhanced services include field trips, special programming and any other services that are innovative or creative that cost extra. We can imagine the two-tier system of early learning and child care services that may result. It’s surprising and disappointing that federal representatives on the Implementation Committee in Alberta were willing to accept it.

Have a look at these examples from Quebec and New Zealand to see what real funding systems and cost control frameworks actually look like. Alberta has a lot of work in front of it to design a new funding system and get feedback from the sector.

3. Alberta needs to ensure that lower-income families are not disadvantaged by the funding system but rather are encouraged to benefit from the use of child care

A fixed-fee child care system can make child care affordable for nearly all parents; however, even a fixed fee of $10 a day is an important barrier to child care access and labour force participation for some lower-income families.

With the fee reductions in January 2022 and accompanying changes in the child care subsidy system, lower income families have seen the smallest percentage improvement of all income groups in the fees they pay. Calgary families earning less than $60,000 annually with one preschool child and many families with more than one child will still pay out more than 10% of their after-tax income for licensed child care. Further amendments to the child care subsidy system could reduce these affordability barriers.

Further, it is desirable to provide increased child care access to lower-income families independent of activity requirements (employment, seeking employment or school). This would require some additional changes to subsidy eligibility requirements.

4. Alberta needs to ensure that ECE wages are high enough to solve the staffing crisis and avoid lowering qualification requirements.

As is true in most of Canada, early childhood educators in Alberta are paid high-school-wages not college-wages. Level 2 and Level 3 early childhood educators in Alberta require a college certificate or diploma but receive much lower hourly wages than other occupations requiring college qualifications. They receive wages similar to other occupations where only a high school education is required. That’s the main reason there is a crisis in recruiting and retaining qualified staff in Alberta child care centres.

On top of this, the hourly wages of early childhood educators and assistants in Alberta are below the Canada-wide average. And the hourly wages of competing occupations in Alberta are above the Canada-wide average. Substantially raising wage levels of ECE 2s and ECE 3s should be a priority for the upcoming Action Plan. Alberta desperately needs a wage grid for its Early Childhood Educators. This would be a wage grid of minimum acceptable wage levels calibrated by education/certification level and by amount of relevant job experience, and providing incentives for ongoing professional development. Provision of benefits is important as well.

There are three certification levels for early childhood educators in Alberta:
Level 1 ECE (3-credit course in early learning and child care or equivalent; 54 hours of online training);
Level 2 ECE (1-year ELCC Certificate or equivalent; 720 hours of training);
Level 3 ECE (2-year ELCC Diploma or equivalent; 1,445 hours of training).

Raising wage levels of Level 2 and Level 3 ECEs will be essential to maintaining quality levels and meeting the stated target of a 15 percentage point increase in their numbers. In June 2021, 60% of Alberta’s certified ECEs were at Level 2 or Level 3. An increase of 15 percentage points in these certification levels would mean that 75% of ECEs had these qualifications. The total number of certified staff envisioned in the previous Action Plan for 2025-26 is 22,243. To meet the 75% target, Alberta would need to have 16,682 ECEs at Levels 2 and 3 by 2025-26, or nearly 8,800 more Level 2 and Level 3s than it had in June 2021 – more than doubling the numbers of these ECEs.

Alberta has long had a wage top-up program. It provides all certified ECEs in licensed facility-based and home-based child care programs with a wage enhancement. As of January 2023, wage top ups are $2.64 per hour for Level 1, $5.05 for Level 2, and $8.62 for Level 3. According to Statistics Canada’s Labour Force Survey, the average hourly wage for early childhood educators and assistants in 2020-2021 was $18.80 per hour, which includes the effect of the wage top-ups that existed before recent increases. Even at the 90^th percentile of the wage distribution, this “high-paid” educator only earned $24.48 an hour in Alberta.

5. The expansion of not-for-profit and public child care spaces needs to be prioritized in practice rather than simply in words. This will require additional capital funding and support mechanisms. Expansion of early learning and child care services needs to be planned, not haphazard.

There has been very little evidence of the expansion of child care spaces in not-for-profit or public child care centres, despite the ACELCCA commitment that this would be a major priority in 2022. The current amounts of capital funding available are low – between $5,000 and $6,000 per new child care space. On a 50-space child care centre, where the capital costs could easily be in the millions of dollars, capital funding is $300,000 or less. Given restrictions that financial institutions generally place on access to borrowing by not-for-profit institutions, Alberta’s plans for not-for-profit expansion are bound to fail.

Similarly, there is no evidence of progress on the development of an expansion plan for child care services over the 2023-2026 period for not-for-profit and public child care services. Even the new Cost-Control Framework and For-Profit Expansion Plan provides not the slightest hint of the existence of any planning mechanisms to guide expansion to where it is most needed. There need to be planning tools, there needs to be consultation on planning, and for not-for-profit and public child care services there needs to be development support and capital funding mechanisms. Planning mechanisms should take into account Alberta’s persistent under-enrolment problem that drives up per-unit child care costs and should propose methods for better matching of enrolment and capacity.

There is evidence that unplanned development of child care services does not deliver equitable access. Full-day coverage rates in 2021 varied from 14.8% in Leduc to 37.6% in Lethbridge. Full- and part-day coverage rates in 2021 varied from 18.6% in Leduc to 48.7% in Medicine Hat.

Over time, there will need to be much greater expansion of licensed child care services than is currently planned (likely a doubling of current capacity). It would make sense to develop the planning mechanisms and supports now for this future expansion. The Roadmap to a Quality Early Learning and Child Care System in Alberta has many good ideas about planning a transformed early learning and child care system.

6. Planning of expansion should ensure that inclusion and flexibility goals are met.

It is unclear what mechanisms Alberta is using to achieve its commitment on inclusivity: “Alberta commits to develop and fund a plan to ensure that vulnerable children and children from diverse populations … have equitable access to regulated child care spaces, in proportion to their presence in the population.” The mechanisms should be clarified in the forthcoming Action Plan.

7. Alberta needs to report now and regularly on progress or lack of progress in achieving the goals of the Alberta-Canada Agreement.

Alberta has not yet provided reports on key child care indicators that it agreed to in the ACELCCA. Alberta was to have reported progress on a wide range of indicators by October 2022 (see Section 5.2.2 of the Agreement); unfortunately, there is no evidence that this data has been provided.

We are told in the original two-year Action Plan that “Alberta’s existing data collection is comprehensive; mechanisms are in place to monitor the growth and quality of the child care system.” This has not translated into publicly available reports that would allow us to judge progress achieved since the Alberta-Canada Agreement was signed. There is no report on baseline data apart from that provided in the original Action Plan. There is no report on progress which would allow for the determination of course-correction priorities since the agreement was signed. This mirrors the lack of progress on developing cost control (i.e., accountability) measures and the lack of progress on planning for the expansion of child care facilities.

Alberta does not currently report regularly on the number of facilities and the numbers of staff who have been granted exemptions to the certification/qualification requirements so that the facilities in which they work can continue to provide services despite not meeting the letter of the regulatory requirements. This should include reporting on the number of staff in Level 1 ECE positions that have not yet completed their required orientation training, but are nonetheless acting in a Level 1 position. This is important data to monitor the development of Alberta’s early learning and child care system.

February 12, 2023February 12, 2023

New Zealand’s Funding System for Early Childhood Education and Care Services

New Zealand has a substantial amount of supply-side funding (i.e., direct funding of operating costs) of its various types of early childhood education and care services. In that way, it’s quite different from Australia; in Australia, the large majority of funding is on the demand-side – a payment to services on behalf of parents (and varying in amount according to the circumstances of the parents) when they use certain types of regulated child care.

In Canada, we’re very interested in looking at different examples of supply-side funding. Of course, child care providers in different circumstances have different costs. An effective supply-side funding system needs to account for legitimate differences in the costs of service delivery and pay different funding rates to providers in different circumstances.

Amongst English-speaking countries, New Zealand was early in funding its child care services on the supply side and stuck with it. For that reason, and for its pioneering curriculum Te Whāriki, and for its articulate advocates, many of us regarded New Zealand as a model to follow. Some aspects of its funding model are interesting to examine, but its early education and care system has not fared well over the years. New Zealand had a supply-side funding system for child care, but it did not impose any limits on child care fees that could be charged. It turns out that was a huge mistake.

New Zealand now has child care that is amongst the least affordable in the OECD, despite supply-side funding and despite offering 20 hours of “free” early childhood education to children 3, 4 and 5 years of age (essentially to children aged 3 and 4 because schooling starts on a child’s 5^th birthday in New Zealand). The average parent fee in New Zealand for children 0-5 was calculated to be $6.89 per hour or over $60 per day if, for example, using child care for a 9-hour day.

I’m not going to try to unpack what has gone wrong with New Zealand’s education and care system in this blogpost. Instead, I want to look at some of the details of their supply-side funding system to see what we in Canada can learn from it. The point of what I wrote above is to remind you that while a supply-side funding system is desirable, it is not sufficient. There need to be controls on the fees that services can charge to parents as well and there need to be strong measures of financial accountability.

There are a range of different early education and child care services that are funded in New Zealand. There are education and care services (child care centres), kindergartens (also in centres but governed by a kindergarten association), hospital-based services and home-based services. All of these are part of what are called teacher-led services. Then there are parent-led services that also receive funding. This blogpost will focus on education and care services in child care centres; kindergartens are funded quite similarly.

Half of New Zealand’s approximately 4,700 early childhood education services are education and care services and nearly 70% of these are now for-profit enterprises (up from about 40% three decades ago). There are nearly 700 kindergartens – all of these are community-based not-for-profit organizations.

There are many factors that will affect the amount of supply-side funding a centre gets. To summarize, these are the main ones:

The type of service (education and care service vs. kindergarten etc.);
Whether the services are full-day or are part-day and perhaps part-year;
The proportion of staff hours that are covered by certificated teachers (i.e., with ECE or primary teaching qualification plus a current practising certificate). These must be staff hours that are required to fulfill ratio requirements;
The pay level relative to union-bargained kindergarten and primary teacher pay levels (i.e., supplementary funding if all teachers are paid at certain rates);
The age of children attending the service (under 2, 2 and over);
Whether the service offers parents the program for 20 hours per week of free child care for children aged 3, 4 and 5;
Whether the children attending a centre come from low socio-economic communities;
Whether the children attending a centre come from communities with a substantial population with special needs and from non-English-speaking backgrounds;
Whether a centre provides the majority of its service in a language and culture other than English;
Whether a centre is isolated from population centres;
Whether 20% or more of the children attending a service are considered to be disadvantaged (dependent of person on social assistance or other programs).

The largest portion of this regular funding for most centres would be related to the first six of these factors. These funding variations are covered by the Early Childhood Education Funding Subsidy and 20 Hours Early Childhood Education. The remaining funding variations are covered by Equity Funding, the Annual Top-Up for Isolated Services and Targeted Funding for Disadvantage. Details are available here. Of course, there are regular detailed reporting requirements for early childhood services (on enrollment, attendance, staff hours worked by teachers with different qualifications, pay levels, etc.) so that eligibility for funding can be calculated.

For reference, here is the base funding rate table from January 1, 2023. The figures in the table refer to the amount of funding per hour for each funded child hour. Funded child hours are limited to no more than 6 hours in a day and no more than 30 hours in a week. A centre may offer the 20 free hours of ECE program for 3, 4 and 5 year old children. For those hours, the 20 Hours column would apply for the first 20 hours and other columns would apply for the remainder of hours up to 30 in a week (but no more than 6 in any day). Funding under the 20 Hours ECE program is intended to cover full average costs, whereas other funding is intended to make a contribution to costs, but not cover full costs.

Base Funding Rates Per Hour for Education and Care Centres in New Zealand, 2020.

Rates vary by percent of hours provided by certificated educators

Percent of required ratio hours that are delivered by certificated educators (either ECEs or primary teacher qualification)	Funding per hour per child for children less than 2 years old	Funding per hour per child for children 2 or more years of age	Funding per hour per child under the 20 Hours ECE program for children 3, 4 or 5 years of age
100% certificated	$14.16	$8.30	$13.55
80%-99%	$13.56	$7.50	$12.79
50%-79%	$12.28	$6.47	$11.65
25%-49%	$9.91	$5.16	$10.24
0%-24%	$8.48	$4.28	$9.33

Note that these are the base funding rates. Centres that pay higher rates of pay to all of their teachers would receive higher funding rates – either the Parity Funding Rates or the Extended Parity Funding Rates. These Parity funding rates are designed to encourage centres to pay wages that are fully competitive with union-bargained wages paid to primary teachers.

On top of this supply-side funding, there is also some targeted demand-side funding paid directly to the ECE service. All the supply-side funding is provided through the Ministry of Education. Childcare Subsidy is administered through Work and Income, Ministry of Social Development.

What are the take-home messages for us in Canada? First, supply-side funding systems are complex because there are a number of key sources of cost variations for child care services. We need to do our homework in creating new funding systems. Second, it is important to account for cost variations due to factors that may affect quality, such as ECE teacher qualifications and pay levels. Third, supply-side funding is part of a new funding system; controls on fees charged to parents and strong measures of financial accountability are equally necessary.

February 8, 2023February 8, 2023

Cost Controls and Supply-Side Funding: What Does Quebec Do?

As provinces and territories move towards $10 a day child care, they have committed themselves to creating new funding systems that implement cost controls on child care operators. You’re probably wondering what the heck that means.

Well, child care in Canada outside Quebec is being transformed from being funded mostly by parent fees to being funded mostly by direct funding from the government to child care operators. In return for the provision of specific services, child care operators get operating funding, often known as supply-side funding. These child care operators also commit to lowering their parent fees, eventually down to an average of $10 a day.

$10 a day is a small fraction of the total true cost of providing child care services, which means that 80%-90% of the funding will have to come from governments. But when governments are providing the lion’s share of the money, they need to know that the funds are being spent efficiently to deliver services and not being wasted or disappearing into corporate profits. So, the federal government has insisted that provincial and territorial governments develop new funding systems that ensure that operators are only paid for service delivery costs that are reasonable and not excessive.

Designing a new funding system that controls costs while also promoting quality is not necessarily easy. After all, what is a reasonable cost and what is an unreasonable cost? Figuring this out requires a detailed knowledge of the variations in costs across providers in the licensed child care sector. And some difficult judgements.

Funding arrangements can be a bit boring and technical so most people ignore them and just complain about the results. But it is worth the investment of a bit of time to figure out some of the issues.

One approach is to look at what other jurisdictions do – the ones that already have very substantial supply-side funding and controlled fees. Quebec is one of those jurisdictions.

A large portion of Quebec’s licensed child care is available at a fixed parent fee – currently $8.85 per day. Many of these fixed-fee services are in not-for-profit Early Childhood Centres or CPEs (Centres de la Petite Enfance). Fixed-fee services are also found in for-profit garderies; others are in family child care homes.

Below, I describe how CPEs are funded currently for fiscal year 2022-23. Here’s the document (in French) that describes most of this.

Quebec’s funding model seeks to cover the legitimate costs that an operator has in the delivery of services to children. There is a base allocation of funding and then supplementary allocations; the largest share of funding is the base allocation. To be eligible for the base allocation, the service must be closed fewer than or equal to 13 days per year and must pay all of its personnel for every day.

The base funding allocation is composed of five elements: direct services, auxiliary services, administrative services, occupancy costs and service level optimization.

Direct services – This refers to the care provided for children of different ages and there is a rate of funding per day based on the enrollment in each age category. $66.49 is paid for each infant day, $41.85 for each day for a child 18-47 months of age, and $33.64 is paid for each day for a child 48-59 months of age. These amounts are adjusted regularly to take into account changes in the bargained wage scales for CPE employees.

These amounts are intended to cover the general operating costs of care provided to children, in particular the remuneration of qualified child care staff, assistants and specialized educators, training and professional development, and educational and recreational materials.

There are adjustments to these daily rates based on a couple of things. First, if the overall compensation bill in this centre is particularly high (because, for instance, many of the staff have many years of experience), the daily amount will be adjusted up. The reference rate is currently $26.62. The daily rates could also be decreased if the compensation bill in the centre is low relative to the reference rate.

Another adjustment is based on qualifications of staff in the centre relative to a reference rate. This provides some incentive to hire more qualified staff. There is another adjustment for the attendance rate of enrolled children in the centre. There is another adjustment for the number of paid days off provided to employees.

Auxiliary Services – these are services (and corresponding costs) related to food preparation, cleaning, snow removal, purchases of minor equipment, etc. To cover this, there is an allocation of $8.09 per enrolled child per day, with a supplement for small centres.

Administrative Services – to cover the administrative costs of the centre, there is an allocation of $2,217.10 per licensed space for the first 60 spaces and $1,958.85 for each space above 60.

Occupancy Costs – There is a part A and a part B to this calculation. Part A allocates $552.16 for each space. Part B, which is for leased space, varies by region and reaches its maximum at $1,823 per space in Montreal. The centre can get the sum of these allocations if its actual occupancy expenses are at least equal to this total.

The occupancy cost allocation is intended to cover rental payments, energy costs, fire and theft insurance, maintenance and repair costs, and property taxes paid by the tenant.

Service Optimization – Enrollment has to be at least 90% and attendance has to be at least 70% or else the funding allocation is reduced.

There are clear instructions in the funding guidelines about exactly how to calculate important parameters of this funding formula. For instance, it may be necessary to calculate the number of licensed spaces according to a formula if the number of spaces has changed over the course of the year. There are instructions on how to calculate the annual enrollment, the rate of annual enrollment, the annual rate of attendance and the number of weighted days of enrollment (weighted by child/staff ratios).

All of the above relates to the base allocation of operational funding. There are also supplementary allocations:

One covers Employment Insurance costs for the employer.
Another covers the Quebec Pension Plan costs for the employer.
There is a supplementary allocation to cover the missing parent fees for parents who, because of low income or other factors, do not have to pay the $8.85 per day parent fee.
There is supplementary funding for spaces that are reserved for children referred to the centre by integrated health and social services centres or integrated university health and social services centres (CISSS/CIUSS)
There is a supplementary allocation for centres that have more than 8% of their enrolled hours provided to children who come from disadvantaged environments (to cover extra costs)
There is a supplementary allocation for children of school age in the centre from April to August.
There is supplementary funding for the care of children who have disabilities.
There is a supplementary allocation for the proportion of enrollment that is for non-standard hours.
There is a supplementary allocation for enrollment for part-time child care.
There is a supplementary allocation for small centres that have fewer than 32 spaces.
There is a supplementary allocation to allow a bonus payment to cooks that have reached the maximum of the salary scale.
There is also an allocation for small investments and infrastructure (less than $50,000) for which the operator has to apply.

So, what should we in the rest of Canada conclude about the design of new funding systems?

First, in theory such a funding system is simple. It is a payment schedule for services delivered by the centre, based on the legitimate costs of this service delivery. In practice, this kind of funding system is complicated and you need a lot of data on legitimate cost variations to design a fair and workable system. That’s why I have been recommending that centres annually provide detailed expenditure data to governments as a basis for calculating and adjusting funding rules.

Second, and perhaps not obvious, this funding system is a lot easier to design if staff in all centres are paid according to a uniform wage grid for base wages because it is then easier to project the average cost of child care services per space. See also this.

Third, if you read the full document it is obvious that these funding rules have to be updated every year to account for changed costs and changed institutional arrangements.