Author: Gordon Cleveland

I'm a economist and Associate Professor Emeritus at the Department of Management, University of Toronto Scarborough, Toronto, Canada. My research field is the economics of early childhood education, and I have a special interest in policy design. As you can see on this site, I have written widely on early childhood education over the last 30 years. Most of my winters recently have been spent as an Honorary Senior Fellow, Graduate School of Education, University of Melbourne, Melbourne, Australia.
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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.  

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Is Ontario About to Violate the Early Learning and Child Care Agreement it Signed?

Not-for-profit and public services are at the heart of Ontario child care.  Overall, they care for more than three-quarters of our children in licensed child care.  For children 0-5 years of age, that number has been 70% of children compared to 30% in commercial child care arrangements.

I guess that’s why Ontario didn’t fuss too much about agreeing with the federal government that this percentage – at least 70% not-for-profit and public – would stay the same when licensed child care moves to $10 a day by 2026.  In March 2022, Ontario signed an agreement with the federal government to get about $10 billion over 4 years in order to transform Ontario’s child care into an affordable, increasingly accessible service provided predominantly by not-for-profit and public providers.  

That Agreement is admirably clear on the limits to for-profit expansion.  In Section 2.1.1, Ontario commits that “at the end of this Agreement, the proportion of not-for-profit licensed child care spaces for children age 0 to 5 compared to the total number of licensed child care spaces for children age 0 to 5 will be 70% or higher.” (emphasis added)

This commitment is repeated in Ontario’s Action Plan in Section 4.4.

However, there is increasing evidence that Ontario regrets the terms they agreed to in March of 2022.  I have now heard from the Ministry of Education that Ontario no longer plans to respect this part of the Agreement.

Of course, the Canada-Ontario Agreement is a contract and payment of federal money depends on following its terms.  So, the Ministry of Education is twisting itself into a pretzel trying to justify its new intentions.  The Ministry of Education has now decided that the insistence upon a minimum of 70% not-for-profit services, despite the clear wording above, refers only to services that are in receipt of federally-provided operating funding and does not apply to all licensed child care. But – read the underlined section again – they are obviously wrong. 

Why is this happening now?  For-profit expansion was front-end-loaded by the current government.  Many for-profit operators applied for licences over the months that Ontario was dithering about whether to sign an agreement to take billions of dollars of federal child care money.  As a result in order to stick to the original 70% rule, the province could only license about 2,300 more spaces between now and 2026, according to my calculations.  All the rest of the expansion, tens of thousands of spaces, would have to come from either not-for-profit or public operators.

Apparently, the government of Ontario, and the for-profit lobbyists that appear to dictate its recent policy changes, did not like this logic.  Ontario now wants to be allowed to license dozens or hundreds more of these for-profit operators whose fees will not be controlled.

The Ministry of Education’s reinterpretation of the Agreement would mean more for-profit expansion than the current limit of 2,300 within federally-funded services.  Plus, it would allow for an infinite amount of for-profit expansion outside of the funding agreement.  Presumably, once this agreement ends in 2026, all these new for-profits outside the agreement could be welcomed by Ontario into a new five-year funding arrangement with the federal government. 

For-profit expansion outside of the funding agreement will not be planned or controlled in any way.  It will, no doubt, happen in the big population centres where most services are already located, not in priority underserved neighbourhoods.

This latest travesty comes on top of other instances of Ministry of Education fealty to Ontario’s for-profit operators.  We need to make it clear that this is unacceptable.  Parents want and need good quality, affordable child care.  They will get that in a system dominated by not-for-profit logic.  But they will not get good quality affordable child care if commercial interests are allowed to take complete control of Ontario’s child care policies.

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Wages of Early Childhood Educators and Assistants in Ontario

This table below supports the chart in my presentation to the recent (Jan 5, 2023) Building Blocks for Child Care webinar on child care expansion in Ontario. It is posted nearby on this website. The table and chart show the essential problem behind recruitment and retention problems of early childhood educators. Their wages are too low to attract many more educators. In essence, the average wage paid to early childhood educators is much lower than the hourly wages paid to workers in other occupations requiring a college education. Early childhood educators are paid as if they had only a high school education, so there is very little incentive to enter the profession. The data is from Statistics Canada, most of it from the Labour Force Survey across 2020 and 2021.

You can also compare this to data we have on Registered Early Childhood Educators in Ontario from 2019. Have a look at Figure 11 and the table below it from Ontario’s 2020 Annual Report. It shows that the median wage of RECEs in Ontario in 2019 was just a hair above $20 an hour. By the way, Ontario hasn’t yet published its 2021 Annual Report on how child care is doing in Ontario, even though they collected that data on March 31st, 2021. I wonder why.

Comparison-of-Average-Ontario-Wages-Across-Occupations-Job-BankDownload

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Are the Wages of Early Childhood Educators Competitive With Other Occupations?

Young women and men make career decisions early in life based upon their capabilities, their interests and the amount of money they might expect to earn.  If there are shortages of early childhood educators, wage levels need to be increased to recruit more educators and retain the ones you have.

Why do we have a huge problem recruiting and retaining staff in licensed child care across Canada?  Fundamentally, it is because the wages of early childhood educators and assistants are not competitive with other occupations that require a college education.  Simple as that, really.

This first table shows the latest data from Job Bank about the hourly wage levels in a range of occupations that require a college education, specialized training or apprenticeship training.  Early childhood educators and assistants appears at the top. Then, health occupations requiring a college education are grouped together, followed by occupations in education and law and in social, community and government services. The final group of occupations are in business, finance and administration. Early childhood educators and assistants across Canada earn an average wage of $20.88 an hour, which is lower than all the others.  Read and weep.

NOC CodeOccupation TitleAverage Hourly Wage
4214Early Childhood Educators and Assistants$20.88
3222Dental Hygienist and Dental Therapists$39.45
3223Dental Technicians and Lab Assistants$25.09
3232Practitioners of Natural Healing$34.41
3233Licensed Practical Nurses$28.28
3234Paramedical Occupations$34.68
3236Massage Therapists$34.36
4211Paralegal and Related Occupations$31.31
4212Social and Community Service Workers$25.18
4214Early Childhood Educators and Assistants$20.88
4215Instructors of Persons with Disabilities$28.51
4216Other Instructors$23.09
1221Administrative Officers$29.00
1222Executive Assistants$31.38
1241Administrative Assistants$24.87
1242Legal Administrative Assistants$26.22
1243Medical Administrative Assistants$22.78
1253Records Management Technicians$29.21

Where does the average wage of early childhood educators and assistants apparently fit on the ladder of occupations?  It is similar to the wages paid for occupations requiring only a high school education or on-the-job training.  Even here, many of the other occupations are paid better than child care.

See the table below that lists occupations requiring only a high-school education, except for the first occupation in which early childhood educators require a college education.

NOC CodeOccupation TitleAverage Hourly Wage
4214Early Childhood Educators and Assistants$20.88
3411Dental Assistants$25.37
3413Nurses’ Aides, Orderlies and Service Associates$21.54
3414Other Assisting Occupations in Health Services$21.83
4411Home Child Care Providers$18.03
4412Home Support Workers, Housekeepers and Related$19.02
4413Elementary and Secondary School Teacher Assistants$23.51
1411General Office Support Workers$23.30
1414Receptionists$19.79
1415Personnel Clerks$25.79
1422Data Entry Clerks$22.54
1511Mail, Postal and Related Workers$22.49
1513Couriers, Messengers and Door-to-Door Distributors$19.38
1521Shippers and Receivers$20.66

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The message is clear.  If we want to expand early childhood education as a profession and have enough educators to offer good quality care at $10 a day, there is no real alternative to raising the wages.  Simple as that.

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How much do Early Childhood Educators earn?

How much do Early Childhood Educators earn?  Everyone knows that their wages are low – too low – but it’s hard to find a reliable source of data to make wage comparisons. 

One very interesting data source is a Government of Canada web site called Job Bank (www.jobbank.gc.ca).  It’s a web site designed to help people find jobs and plan their careers by providing information.  And it has a lot of data on many different occupations in many different geographic locations in Canada.

The data on Early Childhood Educators comes from the Labour Force Survey, a monthly survey conducted by Statistics Canada that produces well-known updates of unemployment rates in Canada, but also collects detailed information about wages and occupations.  Each month there are about 54,000 households that respond to the survey about members of their household.

Early Childhood Educators are part of an occupation called Early Childhood Educators and Assistants.  You might know it as occupation 4214 in the National Occupational Code.  However, there is a new revision of this coding system and in future Early Childhood Educators and Assistants will be known as NOC 42202. 

The chart below shows the latest data available for the wages of Early Childhood Educators and Assistants from the Job Bank web site.  We get information on the average hourly wage rate (grey line), the “low wage” level (blue line; this is the 10th percentile of the wage distribution), and the “high wage” (orange line; this is the 90th percentile of the wage distribution).  The exact number for the average wage is shown as a set of data labels on the chart.

The data seems very precise and useful.  It tells us that the average wage across Canada is $20.88 per hour.  However, hourly wages range from about $15 an hour to about $26.50 per hour when we look at the range from the 10th percentile to the 90th percentile.  We can also see that some jurisdictions have  lower wages (the Atlantic Provinces, Manitoba, Saskatchewan and Alberta)  compared to other jurisdictions.  We could download similar data from other years and see how wages have changed over time. 

Hourly-wages-of-ECEAs-Canada-wide-2020-21Download

Hourly-wages-of-ECEAs-Canada-wide-2020-21Download

However, the precision of this data is somewhat illusory.  We are, perhaps, interested in finding out the hourly wages of program staff with certificate, diploma or university qualifications (early childhood educators) separately from the hourly wages of early childhood educator assistants who don’t have this level of qualifications.  This data source does not allow us to do this; both educators and educator assistants are grouped together in the same occupation.  Similarly, we can’t get data separately on supervisors and directors as opposed to ECEs that are exclusively employed in direct contact with children.

There’s another problem as well.  We might well be interested only in program staff working in licensed child care centres.   However, this occupation (NOC 42202) includes early childhood educators that work in kindergartens and other early childhood services as well as those in licensed centres.[1]  Elementary School Teachers’ Aides are in a different occupation, as are family home care providers, but still NOC 42202 does not give us a wage for licensed child care centre employees only.

A major alternative source of data is available for Ontario.  This comes from a census survey of all licensed child care providers in the province that is conducted annually by the Ministry of Education.  The last data that has been released on wages is from 2019 (!) https://www.ontario.ca/page/ontarios-early-years-and-child-care-annual-report-2020.

It is likely that the Ministry of Education has data from 2022, but this has not yet been published.  Here is the data from the 2019 Ontario survey. 

Hourly-wages-of-fullDownload

This Ontario wage data is collected from centres, so reflects only the wages that are paid to staff in licensed child care centres.  Centre directors are asked to report how many staff with different qualification levels have hourly wages in a number of different ranges.  Wages for early childhood educators with an RECE are reported separately from wages for staff in an RECE position but who needed a director’s approval because of lack of full qualification.  Wages for other program staff (without formal qualifications) are also reported.  Because the data is collected in ranges, it is not possible to calculate either the average wage or the median wage for RECEs and other program staff. 

The median wage is, however, the wage of the staff member in the 50th percentile position.  With 47% of RECEs having hourly wages of $20 or less and 53% of RECEs having hourly wages of over $20, it would appear that the median wage of RECEs in child care centres in Ontario in 2019 was very close to $20. By the same logic, we can say that the median wage for staff with a director’s approval and for other program staff was between $15.01 and $20.

If I use the Job Bank web site to get data on Early Childhood Educators and Assistants for Ontario in 2019, I find that the median wage in 2018-2019[2] was $19.75 and for 2019-2020 was $20. Interestingly, this median is very close to the estimate for RECEs in Ontario that comes from the Ontario annual census survey.

In my next blog post, I will look at wage comparisons based on the Job Bank data.

[1] For example, the Annual Report of Ontario’s College of Early Childhood Educators for 2020-21 tells us that only 56% of Registered Early Childhood Educators (RECEs) in the province are actually employed in licensed child care.  Another 32% are employed in the education sector and 12% elsewhere.

[2] Job Bank uses two years of Labour Force Survey data to get its wage estimates for NOC 42202, averaging the wage reports over the surveys from that two-year period.

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Child Care Wages and Workforce Strategies – Looking at Australia: What Do They Have That We Need?

Canada has a crisis on its hands – a child care workforce crisis.  Already, child care operators across the country are unable to find staff; rooms are closing and centres are closing because of the inability to attract and retain early childhood educators.  That’s BEFORE the estimated need for 60,000 new early childhood educators as we move to $10 a day child care. 

Australia is not the first country that springs to mind when looking for child care policies to emulate.  For instance, Australia funds child care with vouchers that encourage the growth of the for-profit sector and lead to ever more expensive child care services.  This kind of funding has made the buying and selling of child care real estate into big business.   

However, Australia does have a wage grid and a strategy for workforce development, which jurisdictions in Canada do not have.  We can learn from their example. 

Australia has something called a Fair Work Commission whose job it is to design the wage grid and set the minimum wages and minimum conditions of employment in different sectors.  Children’s Services is one of those sectors, and the award made by the Fair Work Commission is a legal document that child care employers have to follow.  Employees can bargain for more than the minimum, but employers cannot pay less than the minimum award rate. 

Here’s a link to the Fair Work Commission award for Children’s Services workers updated in November 2022.  There’s a detailed classification structure of qualifications and responsibilities that forms the basis of the wage grid.  The wage grid lays out the minimum hourly and weekly rates that can be paid for different classification levels in children’s services occupations.  The two most frequent qualification levels are for staff with a Certificate III in Children’s Services (typically a 6-month course) and a Diploma in Children’s Services (typically an 18-month course).  The current award sets the starting hourly rate for less qualified staff (Certificate III) at $24.76 per hour and for qualified educators with a Diploma at $29.17 per hour.  Wages rise above these starting rates with increased experience.  Minimum hourly rates for a Director of a child care centre (called long day care) range from about $35 to $40 depending on the size of the centre and experience.

The Children’s Services Award covers many but not all ECEC employees – most others are covered by the Educational Services (Teachers) Award. That award sets out the wage grid for Early Childhood Teachers (ECTs) who have a Bachelor degree qualification (typically a 4-year course) or higher. All ECEC services in Australia must engage or have access to an ECT for a particular amount of time per week, determined by the number of children in attendance. Entry-level pay for an ECT is $32.20 per hour and increases with experience.

Since late 2019, Education Ministers across Australia have led a process involving extensive consultation to develop a ten-year strategy to build up and support the children’s education and care workforce.  It lists 21 actions – short, medium and long term – to be implemented over the ten-year period.  There is an implementation and evaluation plan to shape and ensure progress of this workforce strategy.

On top of all that, Australia is collecting detailed data about its workforce from all service providers (response rate of 99%).  There is a National Workforce Census, which is a population survey of early childhood education and care service providers across Australia.  It collects data on service usage, children with additional needs, access to programs and staffing.  On the workforce specifically, the census collects information about hours of work, qualifications, exemptions from qualification requirements, experience and tenure, professional development, gender, age, and Indigenous status of staff members.  The survey also collects data about whether these staff members earn the award-level wage (as determined by the Fair Work Commission) or a higher wage, and if higher by how much.  So, for instance, in the 2021 Workforce Census report we find that 57% of contact staff in child care centres earned the award rate, 34% earned above the award rate and for 9% of staff the wage rate was unknown.

None of this is perfect, of course.  Early childhood educators in Australia still receive low wages relative to many other workers and there is a movement for an immediate wage rise to keep educators in the sector.  However, many of the elements necessary to know about and improve wages and working conditions are in place in Australia.  I wish I could say the same about Canada.

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Do You Want to Know How to Make Child Care Expansion Happen in Ontario?

I’m done some work recently with Building Blocks for Child Care (B2C2) on how to facilitate the expansion of not-for-profit and public child care in Ontario. They are an organization that knows a lot about all the different steps necessary to expand child care services – planning, design, rules and regulations, financing. With their advice, I wrote a primer called How to Make Child Care Expansion Happen in Ontario, giving 10 recommendations for action in Ontario to make not-for-profit and public child care grow.

Briefly, they are:

  1. A system of capital grants and loan guarantees for not-for-profit and public operators
  2. Creating public planning mechanisms with provincial, municipal, school board and community members
  3. An inventory of publicly-owned lands and buildings suitable for child care expansion
  4. Mandate where possible the co-location of licensed child care services whenever business and housing developments happen
  5. Explore the use of Land Trusts to preserve the preservation of child care assets in public hands for future generations
  6. Use provincial legislation and regulations to control transfers of child care assets and ensure they are not controlled by big-box corporate child care chains
  7. Early guarantees of operational funding and licensing of not-for-profit and public operators that plan expansion following public plans.
  8. Development and implementation of a province-wide salary and benefits grid and much more funding to increase compensation of educators and other staff. Recruitment and retention of qualified educators is Job #1.
  9. Transparent and effective future funding guidelines to support expansion. Assistance to municipalities to implement financial accountability measures in a long-term funding model.
  10. Public funding of organizations such as B2C2 that support not-for-profit operators to negotiate hurdles associated with expansion of child care services.

It’s not rocket science. These are some obvious steps to help the necessary expansion of not-for-profit and public child care services. Parents and children will suffer when expansion doesn’t happen. Soon there will be long waiting lists to get into child care facilities in Ontario if the government does not act now.

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Accessibility and Quality of Child Care Services in Quebec

These (link below in next paragraph) are slides from a recent webinar presentation I made along with colleagues from Équipe de recherche Qualité des contextes éducatifs de la petite enfance at UQAM. You can listen to the French version of my talk  https://youtu.be/R-JIAjvfQew or the whole webinar https://qualitepetiteenfance.uqam.ca/evenement/leducation-a-la-petite-enfance-sinvite-dans-la-campagne-electorale-27-septembre-2022/

But, I have also reproduced most of that talk in English here:

Click to access English-Version-of-the-Quebec-Presentation.pdf

Christa Japel has also done similar work here https://childcarecanada.org/blog/learning-experience-access-and-quality-qu%C3%A9bec%E2%80%99s-profit-child-care

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Give Them an Inch and They’ll Take a Mile: The Story of For-Profit Child Care in Ontario

The Ministry of Education in Ontario is beginning to understand that they really can’t satisfy for-profit child care providers with anything less than the full cake and eat it too.  The Ontario government has bent over backwards to accommodate the for-profit child care operators; they want them to opt into the Canada-wide Early Learning and Child Care (CWELCC) system.  What has the Ministry done so far for the for-profit operators?

  • It changed the regulations so that municipalities (mandated to be Service System Managers) no longer have the discretion to sign purchase-of-service agreements only with not-for-profit providers (16 of the 47 had this type of provision);
  • It changed regulations so that measurement of quality in a centre could not be used as a criterion for eligiblity for CWELCC sign-up;
  • It completely gutted the new Management and Funding Guidelines for 2022 which the Ministry itself had established back in April.  The April version of the guidelines affirmed that municipalities should judge whether the funds given to operators in 2022 were based on actual costs.  In other words, the municipalities should judge whether operators had ineligible expenditures or excesssive profit claims.  The August Guidelines eliminated these provisions.
  • It ordered municipalities to collect very little financial data from operators.  The April version of the Guidelines said that “CMSMs/DSSABs are required to collect sufficient and detailed financial information from Licensees…. CMSMs/DSSABs will review all financial components including cost and expense line items for reasonability and eligibility, while ensuring CWELCC System objectives will be achieved….”  The August version of the Guidelines said “Information collected from Licensees to support implementation should be kept to the minimum amount necessary to meet the reporting requirements outlined in the CWELCC Guidelines….”

As of October 18th, the Ministry of Education has announced that the August 2022 Guidelines will continue for 2023; there will be few controls over how child care operators spend the revenues they receive from the CWELCC program.  Information collection will be kept to a minimum.  All of this despite the fact that, with a 50% cut in fees at the end of 2022, more than twice as much government money will be going to operators.

Ontario’s Action Plan (part of the CWELCC Agreement with the federal government) said there would be a revised allocation methodology in 2023.  That didn’t happen. Now, the new costs-based funding system will be in place for 2024.

But that’s not enough concessions as far as the for-profit operators are concerned.  They want more.  Sharon Siriboe, the director of the Ontario Association of Independent Childcare Centres wants guaranteed funding rules before for-profit operators will join the system.  “How can any small business remain viable and be asked to make such significant changes with only 14 months of clarity?”

What is the problem here?

Ontario signed an agreement with the federal government back in late March of 2022 – the Ontario-Canada Canada-wide Early Learning and Child Care Agreement.  In it, Ontario committed itself to the vision of building a largely not-for-profit system of accessible, affordable, inclusive child care services of high quality with federal money – $10 Billion of it over 4 years.

In Section 4.1 of that agreement, it states that “Ontario intends to maintain and build upon its existing robust accountability framework by introducing a further control mechanism. Ontario proposes to implement a cost control framework following the signing of the agreement that will be in place for all providers that opt into the Canada-wide ELCC system. The Parties are interested in approaches to ensure the sound and reasonable use of public funds, ensuring that costs and earnings of child care licensees that opt-in to the Canada-wide ELCC system are reasonable and that surplus earnings beyond reasonable earnings are directed towards improving child care services.”  

I don’t really like calling it a “cost control framework”.  It would be better to call it a “wise spending of public dollars” framework.  The objective is not to have costs that are as low as possible; the objective is to spend public dollars sensibly to achieve the objectives of affordability, accessibility and quality.  Ontario has agreed with the federal government that there will be a mechanism that ensures that all providers spend public funds wisely and that both the costs claimed by these providers and the earnings (profit) claimed by these providers are reasonable in achieving the objectives of this new child care system.

What is this new cost control/wise spending of public dollars framework?   Ontario tries to claim they have one already, but they don’t.  They have what we could call a fee control framework.  In other words, base fees for every operator are frozen at whatever their value was on March 27, 2022.  Each operator will get revenue from government equal to 25% of this base fee if they join CWELCC in 2022.  The operator will use these funds to backdate a 25% fee reduction to parents.  There will be another cut to fees at the end of December.  This will take fees down by 50% compared to the level they had in 2020. And, in 2023, operators will get revenues from government to cover these fee reductions for parents.  These rules control the fees charged by operators, but they in no way validate the costs and earnings that are covered by the new government revenues.  There is effectively no reporting on what these costs and earnings are.  There is no way to calculate the amount of surplus taken by operators, or to see how it is used.

That’s the way the for-profit operators like it.  No requirement for reporting on how the public funds they receive are spent until well into 2024.  Even then, only a requirement for an annual audit. No need to justify the salaries paid to management.  No need to justify the profits they claim each year, which are built into the fees they charge.  We know from the CCPA fees survey that for-profit operators in cities across Ontario charge higher fees than not-for-profits.  Their median fees are between 8% and 40% higher than the not-for-profits, depending on the municipality. Why?  Are these fee (and revenue) differentials justified?  The for-profit sector would prefer not to tell.  They don’t want detailed accountability for the public funds they receive.

I have recently argued that the Ministry of Education should be requiring all operators in 2023 to submit detailed budgets of planned expenditures.  These would be reconciled against actual spending (and profit) at the end of the year.  This, along with related operating data, could provide the detailed costs and spending information the Ministry of Education would need to design a new costs-based funding system.  But the Ministry doesn’t want to do that.  Instead they are giving the for-profit child care operators a free pass for another year.  The Ministry plans to develop a new costs-based funding system for 2024 with virtually no costs data upon which to build it.  And, the for-profit operators are even objecting to this.  They apparently want the free pass to continue for ever.

Why, you might wonder?  From an economic point of view, the position of the for-profit operators is quite rational.  They have a licence to provide child care services in Ontario and many of them make good money providing these services.  From now on, having a licence to provide child care services to children 0-5 in Ontario is going to mean receiving hundreds of thousands of dollars a year in guaranteed government funding; by September 2025, government-provided revenues will cover over 80% of the per-child costs of most centres. Access to this kind of government funding is scarce; not everyone can get a licence   In a similar situation in Quebec, some fixed-fee centres have been able to sell their licences to new operators for over a million dollars.  That’s not selling equipment or real estate; that’s just the price of buying the licence.  In Ontario, the fewer the reporting requirements, the fewer the controls over how operators spend their money, the fewer the controls on profit, the higher will be the price when you come to sell your licence.  Large big-box for-profit child care chains may be willing to pay top dollar for existing licences of small for-profit operators if there are very few controls on the reasonableness of costs and earnings.  So, the demands of the for-profit operators are rational; they’re just not very good for Ontario children, families and for the building of a financially accountable child care system.