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.  

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.

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.

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
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.