Tag: child care expansion

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ACE National’s New Proposal to Reduce Affordability, Access and Accountability in Ontario Child Care

ACE National is an organization that groups together child care operators, most of them for-profits, to lobby for reforms that serve their interests.  Their chair and most prominent spokesperson is Krystal Churcher, who owns a child care centre in Fort McMurray, Alberta, and also heads up the Churcher Group which is a consultancy firm supporting child care operators.

ACE National recently published a report recommending 10 major reforms to CWELCC in Ontario. These reforms would apparently create “A Structurally Sustainable Framework for CWELCC” for the years 2027–2031.

Unfortunately, their report is actually a slide deck – with 10 very briefly described reforms and no research or evidence evaluating their likely impacts.  So, this is more like a press release than it is a report.  Nonetheless, it is worth looking at to see what ACE National has to offer.

According to the report, their recommendations are aimed at helping Ontario continue its participation in CWELCC.  They say that their proposals would avoid the need for substantial new funding, would preserve affordability for families and would control costs structurally.   It sounds like a dream.

Unfortunately their 10-point plan would reduce services offered to children and families, increase costs to parents, and totally eliminate eligibility for some children and families. On top of this they want to reduce measures of financial accountability for the public money that providers receive, and they want to shovel public money towards the 8% of providers in Ontario that have refused to enter the CWELCC program (almost all of them for-profit operators charging high fees without any financial accountability).  None of this passes my sniff test as a useful, well thought out set of policy reforms to make CWELCC sustainable.

Let me give you a few details about their 10-point plan: 

  • ACE would adopt a “Tiered Affordability Model”.  Apparently this means parent fees that vary with income.  There would still be a fee maximum, but we don’t know how high, or how much families would pay at different income levels.  And we don’t know how it would be administered.  Would operators have to income-test parents to determine how much they would pay?  Parents wouldn’t like that.  According to ACE, a few $10 a day spaces would be available but only  to a “limited budget-controlled subset” of families.  ACE suggests that this tiered affordability system would save $300 million – $600 million per year, which is less than would be saved by simply keeping the maximum fee at its current $22 a day level while increasing subsidy funding for low-income families.  Not a very sensible suggestion in my opinion. 
  • ACE would make the standard child care day only 8 or 9 hours per day, rather than the current 10 or 11 hours.  Any family who needed to use extra hours would have to pay extra.  Of course, this means that most parents working an 8 hour shift would face extra-billing. 
  • ACE would cancel eligibility for child care for ALL children in Junior or Senior Kindergarten.  There are currently about 128,000 before-and-after-school spaces for these children in Ontario.  All these children would lose CWELCC child care assistance.  That’s close to 40% of the children currently benefiting from CWELCC in Ontario.
  • ACE wants to get rid of cost-based funding of child care in Ontario (i.e., the funding formula).  Instead, child care providers would get “standardized per space operating grants”.  And, there would not have to be detailed financial accountability for public money received.  Instead only risky operators would have to undergo audits.  Apparently, there would also be no more limits on the percent of public revenues each year that can be taken as profit, unlike with the current funding formula.
  • ACE wants the province to define clearly which services are part of CWELCC and which are not.  Services that are not included would be additional costs to parents above the daily fee.
  • ACE wants the government to provide money to operators who have refused to join the program so they can provide low-fee child care for families. Currently, government subsidies and revenues are only available to operators who are part of the CWELCC system.  But ACE wants to reverse that and subsidize the profits of these operators outside CWELCC.
  • ACE wants to eliminate local planning restrictions on expansion of child care services.  Instead of planned expansion with a priority on underserved communities, expansion would be allowed wherever shortages exist (i.e., everywhere) and whenever projects were ready to go.  Sounds like a free-for-all for the for-profit sector which would receive guaranteed future operating funding for new spaces they are willing to provide. 
  • Even when it comes to a recommendation about staff wages, ACE can’t get it right. There is currently a wage floor of $25.86 per hour for Registered Early Childhood Educators, rising over time. ACE wants to establish a wage floor for non-RECEs – program staff that are not required to have any child-related qualifications.  However, ACE proposes that unqualified program staff – Early Childhood Assistants – should have a guaranteed wage that is no less than $2.00 per hour below the RECE wage!   I wonder how many RECEs will want to spend two or more years getting qualifications and paying annual registration fees to the College of Early Childhood Educators when they could earn nearly as much with no training.

Overall, this is an incoherent mishmash of ideas designed to reduce services to families, charge extra to families for the “voluntary” services that they need, eliminate child care services for children who are in kindergarten, and reduce or eliminate financial accountability and restrictions on the amount of profit.   All of this in a proposal which is free of any evidence that supports its claims.

On top of this, government revenues would now be funneled towards the 8% of (for-profit) operators that refused to join the program initially.  And any operator who wanted to open and had the money to open a new child care centre could do so with few restrictions and then would receive government operating funding as a right.  

ACE National calls this “A 10-Point Plan to strengthen affordability, access, and accountability in Ontario childcare.” However, as we’ve seen, their plan would reduce affordability, access and accountability. Sounds like a dream scenario for some entrepreneurs and a nightmare for parents and the Ontario government.  This is policy advice the Ontario and federal governments should reject.

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My Submission to the Standing Committee on Finance, 2026

The House of Commons Standing Committee on Finance has been taking pre-budget submissions from whoever wants to contribute. I chose, unsurprisingly, to focus on funding child care, especially child care in Ontario. Here’s what I wrote:

RECOMMENDATIONS

  1. Expansion is the key priority for this next 5 year period. Provinces who are not yet at $10 a day should be allowed to get to $10 a day more slowly than originally planned to focus scarce funds on expansion. 
  2. The federal government should increase its annual amount of CWELCC funding sufficiently to allow child care capacity to continue to grow in all provinces and territories. Equally important, the federal government needs to credibly commit to maintaining and expanding the child care program.   Across Canada, an extra $4 billion to $6 billion annually would allow for maintaining the program and increasing capacity.  A clear commitment to maintaining and expanding the program can substantially reduce expansion risks for non-profit child care providers.
  3. In Budget 2024, the $1 billion Child Care Expansion Loan Program for non-profit child care was announced.  This program should now be implemented in its original or amended form. Non-profit child care operators have little access to capital funding to expand.  This would be of great assistance, especially to multi-site non-profit operators.
  4. The Child Care Infrastructure Fund of $625 million to support expansion is being sunsetted.  This has been a good model, with money distributed through provincial/territorial authorities.  It should be repeated and expanded, perhaps with some tweaks to funding rules.

TOPICS

  • The benefits of universal child care
  • How much more child care does Ontario need?
  • How is Ontario doing on expansion?
  • Why is child care expensive to provide?
  • What is the average operational cost of a child care space?
  • What could Ontario do with additional federal funding?
  • Should Ontario lower its fee to $10 a day?
  • Would income-testing help?

The benefits of universal child care

Much has been written about the benefits of universal child care.  Two recent papers are especially important.  

The first is by economists Michael Baker, Johnathan Gruber and Kevin Milligan.[1] They analyze universal child care in Quebec to show that:

  • Mothers’ employment in Québec rose by a lot and stayed permanently higher through those mothers’ lives (+12 percentage points by age 50).
  • Mothers’ incomes grew very substantially over their lifetimes as a result of maintaining attachment to the labour force and not losing skills when their children were young (+27% by age 50).
  • There was a substantial drop in the level of family poverty, particularly during childbearing years. The program was particularly important for those without a university education – the policy had a consistently strong effect on mothers with levels of education below university
  • Based on analysis of Canadian tax records over a long period, Quebec’s $5 a day child care reforms generated enough government tax revenues and reduced social benefit payments to pay for the costs of the program.  

The second paper, again analyzing universal child care in Quebec, is by economists Montpetit, Carrer and Beauregard.[2]  They uncover two important results:

  • In addition to the important gains in employment and earnings for mothers, they measure substantial additional benefits that we might describe as work-family balance.  Universal child care makes all the tasks associated with caring for children less stressful and onerous for the family.
  • This point is obvious but generally overlooked.  All of the benefits of universal child care – employment, earnings, work-family balance, etc – depend on increasing the supply (availability) of child care even more than on improvements in affordability.  The benefits depend on making more spaces available to families.

Our takeaways from these studies: Not only does early learning and child care deliver very substantial economic benefits to mothers and families, it also delivers very substantial fiscal benefits to governments.  These benefits depend on continuing to grow the child care system, making it available to all families.

How much more child care does Ontario need?

The federal government has set 59% of children 0-5 years of age as a target.  This is a reasonable definition of “universality” given that Ontario already has full-day early learning for children 4 and 5 and maternity/parental benefits and leave for children up to 12 or 18 months of age.  To reach 59%, Ontario would need to have 515,430 child care spaces for children 0-5.[3]  As of the end of December 2026, Ontario plans to have 375,111 spaces.[4] 

After December 2026, Ontario would reach the federal target if it had 140,319 additional spaces inside CWELCC and all of them were operational. 

How is Ontario doing on expansion?

In Québec’s successful child care rollout, growth happened quickly – was planned and organized.  Québec started with 18% coverage of 0-4 year old children in 1997.  By 3 years later, it had added another 11 percentage points of coverage.  By 8 years after the program started, it had added another 23 percentage points of coverage and provided enough child care for 52% of all children 0-4 by 2005.  This strong commitment to expansion of the program greatly aided its acceptance and ultimate success.

In the first 3 years, from 2022 to 2025,  Ontario’s centres grew from about 34% coverage of children 0-5 to about 39%, an increased coverage of only about 5 percentage points.  Ontario’s child care system is growing much more slowly than Québec’s did.   Without this growth, families and governments will not reap the benefits of a universal affordable child care program.

Why is child care expensive to provide?

It’s not a surprise that child care is expensive; it requires a lot of skilled labour.    Registered Early Childhood Educators (RECEs) in Ontario now earn about $27 an hour on average and Educator Assistants earn about $22 an hour. 

As an example, how much in staff salaries does it cost to provide care for toddlers in Ontario?  According to regulations, one RECE and two Assistants can look after 15 toddlers and the child care centre is open for perhaps 10 or 11 hours per day.  If these ratios need to be maintained all day, you can calculate these salary costs on a 10 hour day and add 20% for benefits (not generous).  Then the staffing costs per toddler amount to nearly $57 per day per child.

That’s without adding in the cost of food and food preparation, supplies, the costs of leasing the centre and playground, the cost of replacement staff for holidays and a share of the costs of the supervisory and administrative staff.   Or the cost of providing an allowance for profit.  So, the provision of child care can be expensive, even on the relatively low salaries and benefits that are currently paid. 

What is the average operational cost of a child care space?

Ontario has a funding formula that they developed based on evidence that the Ministry of Education collected about the cost of providing child care.  We can reverse engineer this funding formula to give us estimates of the typical operational costs of providing child care – program staff, supervisory staff, operations and accommodation.

In Ontario, this estimate based on the 2026 funding formula is $130 per day for infants, $85 per day for toddlers, $65 per day for preschoolers and $35 a day for kindergarten children.   A single cost estimate per space, irrespective of child age, is meaningless; costs vary depending on the ages of children using child care.  Note that costs in Ontario are higher than in many other provinces, for good reasons.  Typically, the quality-related regulations are stronger and better enforced in Ontario.  That’s good for children.

What could Ontario do with additional federal funding?

Many of Ontario’s child care spaces – about 80,500 – are licensed but non-operational.  The Auditor General of Ontario advises that “many of these centres operate below their capacity because of staffing shortages, including RECEs” (Auditor General of Ontario, 2025, p. 42). 

To solve staffing shortages, compensation of early childhood educators will have to rise.  Currently the average educator wage for program staff appears to be about $27 per hour and for staff without these qualifications about $22 per hour.  A rise of about 25% in compensation (wage and benefit improvements) has been called for to aid recruitment and retention of staff.[5]  

If Ontario had an extra $1 billion of operating funding, I estimate it could fund nearly 70,000 of these already licensed but non-operational spaces at rates allowing for a 25% compensation increase for educators.

Alternatively, $1 billion of new operational funding could support services in about 57,000 NEW spaces with a 25% compensation increase for educators. New spaces receive a growth supplement to operational funding in Ontario and therefore cost more. 

Ontario needs at least $2 billion additional funding in order to stay on track for building an affordable universal child care system.  Since, Ontario is about 38% of Canada’s population, an extra $2 billion annual funding for Ontario would imply about $5.3 billion annual funding for all provinces and territories combined. 

More one-time-only funding is also needed for capital grants to support expansion.  Overall, the federal commitment needs to rise by between $4 billion and $6 billion annually.  That would allow building of adequately staffed and stable child care services serving over 100,000 more children in Ontario than was true in 2025.

Should Ontario lower its fee to $10 a day?

No.  Not right now.  The parent fee of a maximum $22/day (actual average $19/day) brings in significant revenue which is needed given Canada’s current economic situation.  Ontario has had a good child care subsidy system targeted at lower income families and vulnerable children.  It subsidizes many families that cannot afford $22/day and should subsidize more.  This subsidy system should be made more accessible; it is important to retain and improve access to child care subsidies.

Would income-testing make child care more affordable for governments?

The existing child care subsidy system is a form of income-testing, helping those who cannot afford $22 a day ($5,742 per child for a full year).  Maintaining this subsidy system or improving it is very important.  However, this is not what most people mean when they advocate income-testing.

There are two other types of proposals for income-testing.  One would mimic the funding system used in Québec for several years (2015-2019) under Premier Philippe Couillard.  In Québec, everyone using a fixed-fee provider paid the provider $7.30 per day.  Then, at tax time, the family would be assessed for how much child care they had used and would pay an income-tested extra amount to the Québec government.

The scheme became unpopular very quickly.  Families were “surprised” when they had to pay a few thousand extra dollars at tax time.  And, it didn’t raise that much additional revenue for governments.  So, the incoming CAQ government cancelled income-tested fees and returned to a fixed fee, rising over time with inflation.

The other kind of income-testing is like that used by the Australian Government.[6] The trouble with this kind of scheme is that it is entirely market-based.  There are no controls on provider fees and fees tend to rise constantly.  The average total fee charged by providers in Australia, irrespective of child age, is over $130 per day. And there is no financial accountability by providers for the subsidy money they received on behalf of parents.  This results in an unaffordable and unaccountable set of funding arrangements.

Both of these income-testing alternatives take a considerable amount of administration.  Unless governments are willing to have some parents pay much higher fees, they don’t raise that much revenue from parents.  On the other hand, a fixed fee model provides certainty to parents and, arguably, is a large part of the reason why the labour force impacts of Québec’s child care program have been so large over time.

Staying at $22/day with a well-functioning subsidy system is a better alternative than dropping the fixed-fee to $10 a day and layering income-testing on top of it.

[1] Baker, M., Gruber, J. & Milligan, K. (2026) Investing in Mothers? The Long-Run Impact of a Universal Child Care Program on Maternal Work and Income.  Working Paper.  https://drive.google.com/file/d/1PqKGMyrqKMMvUEXiahcx5jbQ4JhbLsYo/view

[2] Montpetit, S., Carrer, L., & Beauregard, P-L (2026) A Welfare Analysis of Universal Childcare Lessons from a Canadian Reform.  Working Paper. https://sebastienmontpetit.github.io/WebsiteSM/MCB_QCchildcare.pdf

[3] Ontario has 873,610 children 0-5 years of age as of July 1st, 2025 (Statistics Canada table 17100005).  

[4] Auditor General of Ontario (2025) Performance Audit: Canada-Wide Early Learning and Child Care Program.  Special Report 2025.  Office of the Auditor General of Ontario, p. 15.  But also see Moran, H. (2025) Updates to 2025 Ontario Child Care and Early Years Funding Guidelines. Memo to SSMs. https://efis.fma.csc.gov.on.ca/faab/Memos/CC2025/EYCC01_EN.pdf. This memo suggests capacity at end December 2026 will be 400,881 licensed spaces.  This may include spaces outside CWELCC.

[5] A. Shariati (2024) Addressing the Early Childhood Educators Labour Shortage in Canada: Challenges, Solutions and Impacts.  Centre for the Study of Living Standards Report prepared for YMCA Canada.

[6] Cleveland (March 2025) Does Tax Credit Funding Work for Child Care: Lessons from Australia.  https://childcarepolicy.net/does-tax-credit-funding-work-for-child-care-lessons-from-australia/

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A Plea to Mark Carney and Provincial/Territorial Governments

Relying on the private sector can make sense in competitive markets.  The selfish pursuit of profit is counterbalanced by the force of competition, so that results may be socially positive.

But some pursuits don’t work well when dominated by private interests; early learning and child care is one of them.  The counterbalance of competition isn’t there and guardrails need to be established to ensure socially positive results.  Child care in Canada already has substantial amounts of for-profit child care – more than half of the providers in a majority of provinces are commercial operators.  The Canada-Wide Early Learning and Child Care program has declared that child care is more like education and less like manufacturing cars, so we should bend the curve back towards non-profit and public child care.  The care of children while parents work and study is of intense public interest and governments need to make sure it is done well.

In the last 5 years, we made a good start in transforming Canada’s child care system.  Much lower fees, expanded services, new funding systems, higher wages for educators.  Nearly a million children benefitting from better access to affordable child care. 

The provinces and territories signed agreements setting up guardrails about how the new child care system should be developed – expansion prioritizing vulnerable and underserved families, focus on improving staff wages and conditions to enable recruitment and retention, emphasis on expansion of not-for-profit and public services to prioritize quality and service stability, fees dropping to an average of $10 a day. 

But now, if rumours are right, many provincial and territorial ministers responsible for early learning and child care want to get rid of many guardrails.  And If they don’t get what they want, they might pull out entirely!  They want “flexibility” – where flexibility is code for getting rid of any of the guardrails these provinces and territories don’t like.  The biggest guardrails are restrictions on the percent of expansion that takes place in for-profit operations, restrictions on the amount of profit that can be earned, and prioritization of expansion in vulnerable and underserved communities.  The for-profit lobbyists don’t like these guardrails.  But they are important if we want a stable high quality child care system that serves those in need and everyone else.

It’s true that we have big shortages of child care spaces and of qualified early childhood educators.  And there has been considerable policy and program work for provinces and territories as new rules have been developed.  And, in particular, the system needs more money.  Federal money and provincial money.   But these are not good reasons to throw the baby out with the bathwater.

What about the “for-profit” issue?  Provinces and territories are often besieged by entrepreneurs that want to make a buck selling child care services to governments willing to provide 90% of the daily revenues.  It’s the path of least resistance to change the rules and let for-profit entrepreneurs dominate in provision of new services.  What could possibly go wrong?

We have been running a sort of natural experiment in Quebec for nearly 30 years to give us answers to that question.  Quebec faced a big shortage of child care in the early 2000s and decided to invite in the for-profit sector.  In 2022, the former Minister of Families, Mathieu Lacombe talked to the Globe and Mail’s Andrew Gee about the experience.  “Allowing for the expansion of private daycare, he said, was the ‘biggest mistake the Quebec government committed in the last 25 years.’”

Quebec’s Auditor General Report from 2023-24 provides the evidence to explain this conclusion: the quality is much worse in Quebec’s for-profit centres, and part of the reason is that for-profit centres often find ways around regulations about using fully-qualified staff.  Provinces and territories think that since regulations apply equally to for-profit and non-profit child care, both will provide the same quality of services to children.  Quebec’s experience and a mountain of academic and policy studies suggest otherwise.

Federal, provincial and territorial ministers need to find more operating money for building the system, and capital money for expansion, but keep guardrails in place in new Action Plans.  Ontario was able to double its kindergarten capacity in five years in the early 2000s.  That same kind of public effort should go into doubling child care capacity now.  Parents and children will thank you for building on a sound foundation rather than on sand.

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EVALUATING ONTARIO’S IMPLEMENTATION OF THE CANADA-WIDE EARLY LEARNING AND CHILD CARE PROGRAM

On December 3rd, I sponsored a small webinar providing an assessment of how Ontario -the province I live in – is doing in the implementation of the Canada-Wide Early Learning and Child Care program (CWELCC).

It’s a bit of a misnomer to call it “Canada-Wide” because every province and territory is implementing this program differently.  Some are making good progress, others not.  So, I wanted to figure out for myself how I would judge Ontario’s efforts so far.  

I sent out two slide decks to participants.  The first reviews the basic regulations and the structure and responsibilities of institutions responsible for different aspects of ELCC in Ontario.  The second slide deck pulls together evidence about progress implementing CWELCC in Ontario. 

SLIDE DECK #1 – ONTARIO’S CHILD CARE RULES AND INSTITUTIONS

SLIDE DECK #2 – EVALUATING ONTARIO’S IMPLEMENTATION OF CWELCC

If you click on this link, you can access the video of the hour and a bit long webinar.

There is a caveat to this presentation. A couple of days after the webinar, Ontario posted its 2025 annual report on early learning and child care in Ontario, which can be used to update some of the data I present in this webinar. I haven’t taken this new report into account in this presentation.

See you next year.

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PARENT-ONLY CARE AND CHILD CARE ATTENDANCE BY CHILD’S AGE

56% of children 0-5 years of age across Canada use some form of non-parental child care on a regular basis. This is the finding of a large parent survey – Statistics Canada’s 2023 Canadian Survey on Early Learning and Child Care. However, nearly 980,000  or 44% – are cared for exclusively by their parents. This seems surprising to many, and apparently contrary to the notion that families need child care when their children are young.  However, when the data are looked at more closely, some of the reasons become clear. 

In the first year, or sometimes the first eighteen months of a child’s life, many parents are eligible for paid maternity and parental leave in order to spend time with their newborns.  According to the Statistics Canada data about 270,000 children or 12.1% of all 0-5 year-old children have a main caregiving parent who would normally be employed during the day, but is currently on maternity or parental leave. 

There are another 235,000 children, or 10.7% of the total who are 4 or 5 years of age and currently attend a different form of early childhood education – kindergarten – for much of each weekday. Kindergarten is not considered to be a child care arrangement by Statistics Canada, but kindergarten does provide care for children.  The large majority of kindergarten arrangements across Canada now cover the full school day, and often for 4- year-olds as well as 5-year olds.  Sometimes, before-and-after-school child care is available for these children, but not always at a low parent fee.  Many parents are able to adapt their work or school schedules so their children do not need any non-parental care other than kindergarten.

Another 475,000 children – 21.1% of all 0-5 year-old children – do not have parents on leave and are not in kindergarten, but in any case are cared for entirely by their parents. Close to half of these children – about 202,000 – have a main caregiving parent who is currently employed.   Parents may cover child care needs while they are at work through off-shifting between parents (parents working or studying different shifts so one can always be with the child).  Or one parent could be providing care while working from home. About 55,000 of these children were on a waitlist for child care in 2023. 

A bit more than half of these children – about 269,000 – have a main caregiving parent who is not currently employed.  About 41,000 of these children were on a waiting list for child care.

In sum, the picture of children in parent-only care is a complex mix of different situations in which parents currently do not use child care.  Many of these children will use or have used child care and kindergarten at different ages, but are not currently using child care.



CHILD’S AGE

The likelihood that children participate in  licensed child care is strongly affected by the child’s age.  Only 24% of children who are less than two years of age (0-1 years) currently use licensed child care. This is, perhaps, unsurprising because so many parents take a year (or in some cases, eighteen months) of paid maternity and parental  leave when children are first born.

However, 55% of Canada’s children who are two or three years of age are in licensed child care. When children are four or five years of age but not yet in kindergarten, 68% currently use licensed child care.  For children who are four or five years of age and are currently attending kindergarten during the day, 33% use licensed child care.

The use of parent-only care also varies strongly by child age.  62% of children who are less than two years of age (0-1 years) are cared for only by their parents.  This falls to 30% when children are 2-3 years of age and 22% when children are 4-5 years of age and not yet in kindergarten.  For 4-5 year-olds who are already in kindergarten (full-school-day in most provinces), parent-only care is the main complement to kindergarten for about 51% of children.

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HOW MANY CHILDREN ARE USING LICENSED CHILD CARE?

According to recent data, 938,200 children are regularly attending licensed or regulated child care services across Canada (not including the Territories).  That is about 42% of Canada’s children 0-5 years of age who used licensed child care as their main care arrangement in 2023.  A much smaller proportion of these young children (6.8% and 7.4%) respectively) are using unlicensed child care provided by a non-relative or care by a relative as their main arrangement.

The data comes from Statistics Canada ‘s Canadian Survey of Early Learning and Child Care, which collected data about child care arrangements from nearly 30,000 parents in 2023.  The Public User Microdata File gives us the results shown here.

Nearly 44% of children 0-5 (982,910 children) are, for various reasons, not currently in child care.  Close to half of these are children whose parents are currently on maternity or parental leave or are 4 or 5 year-old children attending kindergarten, often for a full school day. 

Licensed child care is now the dominant type of child care arrangement that parents choose for their children 0-5.  Of children using any type of non-parental child care arrangement, 75% use licensed care. 

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Is Minister Jones Going To Take Away Your Affordable Child Care?

It’s Family Day in Alberta today (February 17th).  And Matt Jones, Minister responsible for child care in Alberta,  apparently wants to celebrate by making plans to leave the child care agreement  that will bring $15 a day child care to the province on April 1st.  And he wants to blame the federal government while he does it.  But the truth is, most decisions about child care in Alberta are entirely in the hands of the provincial government.

Take the cancellation January 30th of Alberta’s child care subsidy program that helps low-income families.  Matt Jones cancelled it, as part of the move to a flat child care fee of $15 a day.  He didn’t have to do that.  Every other province and territory outside Quebec has a child care subsidy program targeted at low-income and otherwise vulnerable families as part of their move to $10 a day. Alberta’s agreement with Ottawa committed to an “average fee of $15 a day” in 2024-25, not a flat fee of $15.   Why did Alberta have to cancel the subsidy payments?  No reason at all. 

And then Minister Jones had the gall to say that Alberta might have to withdraw from the $10 a day program because the federal government doesn’t allow him to target support to parents that need it the most. In an interview with LakelandTODAY.ca, the Minister said:  “The current federal agreement is not flexible to allow us to income test, say households earning under a certain amount of income.”  Which is plainly untrue.

In a Facebook post, Minister Jones cited other reasons for planning to withdraw child care support from Alberta families.  He said that the program is underfunded by Ottawa, by more than $4 billion over the next few years and that the child care agreement that Alberta voluntarily signed back in November 2021 is “unfair to the majority of child care providers”.

This week the federal government offered Alberta and other provinces the chance to extend existing child care agreements for another 5 years and receive more money to do so.  But, Mr. Jones wants even more money and he wants flexibility.  And if he doesn’t get it, Alberta will pull out of the $10 a day child care program.  As he puts it in government-speak, Alberta “will be forced to transition out of what is, and will be, an unsustainable program.” 

In 2025-26, Alberta will be getting nearly $1.1 billion through this agreement to support low-fee child care.  In its agreement with Ottawa, Alberta calculated that it could lower fees to $10 a day for 134,691 children for a cost of much less than that – for $829.93 million.  What changed? Unless Alberta child care costs are completely out of control, there should be enough money right now.  So, why not sign on to continue the program? 

Minister Jones real reason for being willing to take away your low-fee child care comes down to “flexibility”.  “Flexibility” is a code word.  In 2021, Alberta agreed to expand home child care and not-for-profit child care spaces by 42,500 and for-profit child care spaces by only 26,200.  Two-thirds of Alberta’s child care spaces are commercial now, so extra expansion of non-profit facilities would provide some balance and choice for families.  Minister Jones wants to wiggle out of that agreement.  That would be called “flexibility”.  Apparently, the evidence that non-profit child care services are stronger promoters of high quality is unimportant to Minister Jones. 

Frankly, Minister Jones reasons for not signing on to continue the $10 a day child care plan are flimsy.  I think he is in the pocket of that portion of commercial operators who want to be able to charge whatever fee they want, and earn whatever profit amount they can get away with.  He might call that giving money to parents in the form of a tax credit.  But we know that it means no more limits on parent fees – no more $15 a day child care or $10 a day child care.  And that would mean unaffordability for parents.  Not a good plan.

The purpose of the $10 a day agreements between provinces and territories and the federal government is to ensure that low-fee child care services are available to families and children when and where they want them.  Not every family wants to use child care throughout a child’s early years.  But most Alberta families use child care for some time as their children grow.  For instance, 61% of Alberta’s children who are 4-5 years of age and not yet in kindergarten use licensed child care.   Many more want an expansion of low-fee child care services.  In my opinion, Minister Jones should sign on to continue the $10 a day child care funding for Alberta parents and children.

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A NEW STATISTICS CANADA REPORT ON CANADA’S CHILD CARE WORKFORCE

One of the main barriers to expansion of child care supply is a widespread shortage of qualified educators.  This is mostly due to wages and benefits that are insufficiently high to attract and retain staff.  As a result, there are long waiting lists to get into licensed child care (115,000 children with mothers whose main activity is paid work). 

We do not have much good current data on our child care workforce, but Statistics Canada is attempting to begin to fill that hole.   Towards the end of December last year, Leanne Findlay and Thomas Charters from Statistics Canada published a report on child care workers who care for children 0-5 years of age.  The data is from 2021-22 and its source is the 2022 Canadian Survey on the Provision of Child Care Services (CSPCCS).

The authors restrict the sample to look only at centres who provide child care to children 0-5 years of age, and they address several issues:

  • Centre employees –  hours, training and roles
  • Typical rates of pay
  • Numbers hired, departed and staff vacancies
  • How all of the above vary by auspice and organizational structure

There are some important findings and observations in this study.   The study reports on weighted results for nearly 12,000 centres serving children 0-5.  Nearly half (48.6%) of child care centres serving children 0-5 are for-profit.  Centres employ nearly 137,000 staff, including full-time and part-time, program staff, supervisors, and support staff.  Nearly 90,000 of these employees are in Ontario and Quebec, and close to 15,000 each in Alberta and B.C. About 38% of these staff are hired in multi-site centres and about 62% in single-site centres.

A typical centre has about 56 children and close to 12 staff.  About 8 of these are front-line program staff.  There are either 1 or 2 supervisors and between 1 and 2 support staff.

Staff Qualifications

Most centres (83%) have a supervisor with an ECE certificate, diploma or degree.  For-profit single-site centres are below this average at 77%.

50% of centres have at least one staff member with no ECE training, and in those centres on average there are 3.7 staff members with no training.  47% of centres have at least one staff member with training of less than one year and on average in those centres there are 3.1 staff members with this modest level of training.  88% of centres have at least one staff member with a one-, two-, or three-year ECE certificate or diploma and these centres have on average 6.5 staff members with this level of training.  Finally, 17% of centres have at least one staff member with a four-year ECE degree or higher and on average these centres have 4 staff members with this level of training/education.

Wages

Survey respondents provided information about the most typically paid hourly wage rates for different categories of staff.  The average for supervisors was $27.80 per hour, but for-profit centres paid between $25 and $26 typically, and not-for-profit centres on average paid between $29 and $32. 

The same pattern was seen for wages of staff with an ECE credential – the for-profits paid an hourly average wage of between $20.50 and $21.50.  The not-for-profits paid between $22.50 and $23.00. 

Unfortunately, the wage question asked respondents to include wage enhancements but not provincial top-ups when reporting on staff wages.  This may have resulted in underreporting of wages in some centres.     In any case, it is obvious that typical wages in the sector are rather low.

Benefits

Amazingly, only about 76% of centres report that they provide any benefits at all to centre employees!  Those benefits include supplementary health and dental plans, life or disability insurance, pension plan contributions or group RRSPs, paid sick leave, paid vacation leave and financial assistance or paid time for training. 

The provision of benefits varies a lot by auspice and organizational structure.  Only about 62% of the single-site for-profits have any employee benefits.  Between 78% and 79% of both the multi-site for-profits and the single-site non-profits offer some employee benefits.  On the other hand, 93% of multi-site non-profit centres have at least some employee benefits. 

The biggest gap appears to be in pension benefits.  Only about 20% of for-profit centres of either kind have some pension or RRSP benefits.  About 46% of single-site non-profits have these benefits and 63% of multi-site non-profits do, as well.

Vacancies

The survey also provides information about job vacancies experienced by centres.  In April 2022, there were 7,560 vacancies in centres for ECE positions and another 2,960 vacancies for non-ECE positions.  In other words, nearly 8% of staff positions were vacant.  No wonder expansion of services has been slow and difficult.  In fact, 35% of centres had at least one vacancy for an employee with ECE credentials or training.

All of these issues are good ones to look at and the authors have done a good job with the data, but there are problems that affect interpretation and clarity.  In particular, the data is cross-Canada data; the sample size was too small to break responses down by province and territory. 

Further, CSPCCS is not a survey of members of the child care workforce, with questions answered by each staff member.  Instead, the CSPCCS is a survey of centres, so the respondent is some representative of the centre, and the responses are statements about the whole centre, not about the individual staff member.  So, there is less detail than you would like in some answers.  As an example, the categories for staff qualifications are (1) No ECE-related training, (2) ECE training of less than one year, (3) one, two or three year ECE certificate or diploma, (4) Four-year ECE degree or higher.  So, we can’t see how many staff have certificates vs. diplomas.  That’s potentially a very important difference.

The information is useful, but we still need a workforce survey where the respondents are individual supervisors, educators and assistants (and perhaps support staff as well).  That kind of survey, with a large enough sample, would allow us to get more detailed information about qualifications, remuneration, and recruitment and retention issues. 

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A Fact-Based Response to Cardus’ Odd Assertions

Since its beginning, Canada’s plan to build a system of child early learning and child care – the “$10 a day plan” –  has been panned by a handful of players. These include spokespeople for some political parties, some child care centre owners, right-wing “pundits”, and social and economic conservatives, all with their own agendas. Relying on misrepresentation of research literature, misinterpretation of public opinion polls and Statistics Canada surveys, the common agenda is to paint the $10 a day plan as a “failure” and “disaster” rather than the first largely successful phase of a Canada-wide project to build a workable child care system for all families and children over time.  (Really, it is the second phase because back in 1997, Quebec began to build a largely successful and largely universal low fee child care system of their own).

This blog comments on a policy brief published  by Cardus in November 2024.  Cardus advertises itself as a non-partisan Christian think-tank; it takes a socially conservative approach and promotes ways of thinking that pre-date the Royal Commission on the Status of Women that reported in 1970.

Cardus would have you believe that very few Canadian children and families benefit from low fee licensed child care.  Cardus’ staff members Mitchell and Mrozek have written that: “…most Canadian families receive no benefit from the billions spent – only 29% of children aged 0-12 had access to a licensed space in 2021.”  (November 2024).  It’s a pity that Mitchell and Mrozak inappropriately use data on children 0-12 years to reach this conclusion.  Most of these children (the 6-12 year olds) are not even covered by the new funding programs to make child care universally affordable for families.  Cardus should instead have informed themselves with the latest Statistics Canada data (the parent survey in 2023 that looks at children 0-5 years of age).  It’s called the Canadian Survey on Early Learning and Child Care.  Or, Cardus could have read the report entitled Giving Parents Money Doesn’t Solve Child Care Problems published by the Prosperity Project in September 2024.  It provided much of the same data we include in this blog.

Many families already benefit from low fee child care

If Cardus had consulted the appropriate data, they would find out that the truth is somewhat different from their biased conclusion.  The latest data are from 2023, two years after the beginning of the $10 a day program and about 25 years since Quebec began phasing in universal child care.  There are about 2.2 million children 0-5 years of age in Canada and close to a million of them (938,000 children or 42% of all children) are already using licensed child care. 

Families prefer to use licensed child care

In fact, 75% of the children 0-5 years of age who use any kind of non-parental child care in Canada now use licensed child care.  About 1.25 million children 0-5 regularly use some form of non-parental child care and 938,000 of them are using licensed child care.

Licensed child care provides strong support of parental employment

A major reason why governments in Canada are spending billions of dollars to provide low fee child care is to support parental employment.  And this support of parental employment is happening.  According to the recent Statistics Canada parent survey, 59% of parents (mostly mothers) whose main activity is working at a paid job or business already use licensed child care for their young children.  Many others – another 115,000 who are on a waiting list – would like to use licensed child care and will happily do so when more supply becomes available.

Child age and availability of kindergarten explain patterns of use of licensed child care

The demand for licensed child care is strongly related to the child’s age.  Parents with  children less than two years are less likely to use licensed child care, so satisfying the demand for licensed care does not mean having spaces for 100% of children.

When considering child care use, it’s important to take other family or education programs into account.  For many families with very young children, parent-only care during maternity or parental leave is their choice.  For many children who are already in full-school-day kindergarten at four or five years of age, they do not need or their parents do not want supplementary child care. 

Across Canada:

  • 24% of children younger than two years of age  are in licensed child care.  In this age bracket, 62% are in parent-only care, with many of these parents on maternity or parental leave. 
  • 55% of all children in Canada who are two or  three years of age currently use licensed care. 
  • 68% of all four- and five-year-olds who are not yet in kindergarten currently use licensed care. 
  • But, when those four- and five-year-olds reach kindergarten, the use of licensed child care drops to 33%.
Percent of Canadian Children Using Licensed Child Care by Age Group and Kindergarten Attendance, 2023

From the Public User Microdata File of the Canadian Survey on Early Learning and Child Care, 2023.

Licensed Child Care and Low-Income Families

The other main claim in Cardus’ brief is that low-income families do not get much access to child care services when child care is universally funded. The implication is that low-income families would be better served by a targeted child care program.  And that universal $10 a day child care will mostly serve affluent families rather than those who have low-incomes.

There are two problems with this.  First, the use of licensed child care by low-income families is already larger than you might imagine.  In Canada outside Quebec 36% of children with employed mothers from the lowest income group use licensed care.  And in Quebec, 68% of children with employed mothers from the lowest income group are in licensed child care.

 Second, Cardus has identified the wrong culprit for the important inequities that remain.  It is market-driven child care that disadvantages low-income families.  It is universal  child care that does a better job of welcoming the participation of low-income children to licensed child care. 

We can see this by comparing access to licensed child care for different income groups where the mother is employed in provinces outside Quebec to the same data from Quebec.  Two conclusions are obvious in the charts below.  First, in Quebec, a much greater percentage of children from these low-income families are able to access licensed child care than is the case in the rest of Canada’s provinces.  Second, the gap in access between the lowest and highest income groups is much smaller in Quebec than it is in the rest of Canada.  As before, this data is from Statistics Canada’s recent parent survey. 

What’s the explanation?  When child care fees were uncontrolled (as they were in Canada outside Quebec until 2021 or 2022) many families have found licensed child care to be completely unaffordable.  Most low-income families were squeezed out.  Targeted child care subsidies were not enough to reverse this trend.  Naturally, the majority of child care users were from more affluent families.  But this was a result of the mostly unrestricted operation of the free market in child care, not the result of a massive program to lower fees. 

Percent of Children in Licensed Child Care by Income Group in Canada outside Quebec when Mother is Employed

From the Public User Microdata File of the Canadian Survey on Early Learning and Child Care, 2023.

Note: * The vast majority of parents responding to the survey were mothers

Percent of Children in Licensed Child Care by Income Group in Quebec when Mother is Employed

From the Public User Microdata File of the Canadian Survey on Early Learning and Child Care, 2023.

Note: * The vast majority of parents responding to the survey were mothers

As Cardus would know if they had looked at the federal-provincial-territorial agreements that have brought us the $10 a day child care program, improved equity in access for children from different backgrounds is a key objective of the federal program.  There are substantial federal, provincial and territorial efforts to ensure that new child care capacity is directed towards underserved populations – low income children, vulnerable children, children from diverse communities, children with special needs, and Francophone and Indigenous children.  Still, there is too little access to licensed child care for low-income families – on this we agree with Cardus.  But eliminating funding support for child care services and instead paying money to families to stay at home is the opposite of a solution to this problem.

Cardus wants to make child care unaffordable again

Cardus does not really want financial support for licensed child care at all.  Instead, Cardus wants us to return to some version of Stephen Harper’s Universal Child Care Benefit.  They estimate that if the federal spending on the $10 a day child care program was divided equally amongst families instead of going directly to day care centres to lower fees, each family would receive $3,869 per child, per year.  But, right now, families using low fee child care are receiving $5,000 – $15,000 in child care fee reductions.  With the end of direct funding of child care, child care fees would soar and nearly a million families would be much worse off than they are currently. Child care would be unaffordable once again, and mothers would be squeezed out of employment by high fees.  How is that a sensible and affordable child care policy?  No wonder 75% of Canadians think that a Conservative government, if elected, shouldn’t end the $10 a day child care program.

There Is still a lot of work to do to build a $10 a day child care program for all the families that want to use it – especially in expanding the qualified workforce and the supply of services.  But already many Canadian children and families are much better off than they were in 2021.  The priority now is to finish the job of providing affordable, accessible, quality child

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HALLELUJAH!  ONTARIO FINALLY HAS A NEW FUNDING FORMULA

Hallelujah!  As of August 14th, 2024, there finally is a funding formula to provide some revenue-certainty for child care providers in Ontario. Not a moment too soon, in fact, a year or two too late. As of January 2025, this formula for the provision of operational funding to providers will be implemented to replace the inequitable revenue-replacement model that has existed since April 2022. As the new funding guidelines admit “[w]hile a revenue replacement approach is transparent and simple to implement, it is not responsive to the true cost of providing child care in Ontario.” (p. 7).  Revenue replacement was not equitable and it did not facilitate growth of capacity, so we will not mourn its passing.

This marks a new stage of development of the $10 a day child care program in Ontario.  And, I am sure that other provinces will be looking closely at this example to see if they should model their funding formulas on this one.  Together, we need to assess whether the funding formula is any good and what its strengths and weaknesses are.  As with any funding formula, there are many details and understanding how the system will work is not easy.  This blog post is a start.  In this post, there is a lot of description and only a small amount of opinion.  More opinion will follow soon.

I think a question and answer format will be best.  And, I will, in this blog post, only describe funding for centres, not for home child care agencies.  I will get to family child care in a later post. 

  1. B2C2 and others have called for a funding formula similar to the one in Prince Edward Island; is Ontario’s new funding formula like PEI’s?

Ontario’s funding formula is not like PEI’s.  The allowed costs in PEI are based on the provincial wage grid for child care staff with wages varying by qualification level and experience.  PEI’s formula encourages hiring of staff with higher qualifications because operating funding is increased to cover actual wage costs.  Then, PEI has an allowance of 20% for benefits and there is a provincially-funded pension plan.  And PEI’s formula provides the same revenues across the Island for similar centres.

In contrast, Ontario does not have a wage grid for child care staff.  Ontario’s new funding formula gives flexibility to a centre to spend its allocation in different ways, but does not, in particular, reward the hiring of more staff who are fully qualified RECEs.  Ontario’s benchmark for benefits is only 13.4% for staff and 16.2% for Supervisors and there is no provincially-funded pension plan.  And operational funding for centres under the new funding formula in Ontario will be highly variable across different locations.

2. How is the Funding Formula structured?

The structure of the new Ontario child care funding formula is relatively simple, getting more complex as you get into the details.  The funding formula is based on calculation of what is called a “Benchmark Allocation”.  A Benchmark Allocation, as the Ministry of Education’s funding rules make clear, is supposed to represent “the typical costs of providing quality child care in a geographic region, based on planned operating spaces.”  (p. 9) . One of the Ministry’s goals with the new funding and accountability processes is “to gradually shift the overall cost of providing child care … towards more standardized costs, as represented by the benchmark allocations.” (p. 48).  On top of the Benchmark Allocation, there is also an allocation for profit or surplus.

Benchmark Allocations, which vary across the province, are designed so that about 50% of existing licensees will have their expected eligible costs fully covered.  The other 50% of licensees will not have their costs covered by the regular (benchmark) funding allocation, but legacy centres (those currently and continuously in CWELCC) with higher costs will be eligible for a Legacy Top-Up to this funding.  This top-up formula evaluates the 2023 cost structure of centres, along with 2025 evidence of some fixed costs such as rent, insurance and property tax. There is also a provision for cost increases since 2023.

Calculation of the Benchmark Allocation for a centre involves two parts:

  • Calculation of the Unadjusted Benchmark Allocation (total of four components)
  • This is multiplied by a Geographic Adjustment Factor (GAF) which can move the total up or down. 

Once adjusted in this way, our calculation is called the “Benchmark Allocation” for your centre. 

3. What About Top-Ups?

That’s not the end of it, though.  When the Ministry canvassed existing centres about their actual costs, they found lots of variation.  To account for this cost variation, the Ontario funding formula includes a Legacy Top-Up to provide additional revenue for legacy centres with costs higher than their Benchmark Allocation. 

In addition, there is another revenue top-up that applies only to new spaces or new centres.  This is called a Growth Top-Up and recognizes that the Benchmark Allocation will not necessarily be sufficient to cover operational funding of new capacity.  The Growth Top-Up will provide some increased operating revenues to most centres that are new or growing in capacity. 

Details on the Top-Ups

  • Legacy Top-Up – If you are a legacy centre (you were signed up to CWELCC when this funding formula was born and still are) and your proven costs (according to a formula) are higher than that Benchmark Allocation, your SSM will provide a Legacy Top-Up to cover these supplementary costs. 
  • Growth Top-Up – In the first year of any expansion, you will be eligible for a Growth Top-Up which recognizes the (higher than benchmark) program costs associated with new spaces that come on stream during the year.
  • In years after 2025, a centre that received either of these two top-ups will receive a “Rolling Top-Up” based on the calculated top-ups that were received in 2025.  In other words, these top-ups will become permanent in revenue calculations after 2025.

The “Program Cost Allocation” is the name the new funding system will use to describe the sum of your Benchmark Allocation plus any top-ups for which you are eligible

All of the above calculations are based on an annual operating plan for the coming year that each centre submits to its SSM.  Funding is determined based on the plans for each centre. 

Amongst other things, the operating plan will specify the planned number of operating service days for each age group and the planned number of operating spaces for each age group.  In order to calculate the amount of operating money the SSM will give you, the SSM must then subtract the amount of fee revenue (adjusted for enrollment shortfalls) you expect to receive from parents, or on behalf of parents who receive Child Care Subsidy.

It is important to note that funding is not aggregated across centres that have the same licence-holder, so that the funding allocation for a centre has to be spent on the costs of that specific centre.  This will, no doubt, cause problems for multi-site operations who are used to planning and funding activities across the group of centres, rather than treating each centre separately.

4. More details about Top-Ups

The funding guidelines describe Legacy Costs this way: “Legacy costs are costs that are consistent with legacy centres’/agencies’ 2023 cost structures, adjusted for eligibility, cost escalation, and changes to operating practices and fixed costs.”  Legacy Top-Ups are designed to ensure that Legacy Costs are covered going forward.  In applying for a legacy top-up, centres would provide an audited 2023 Statement of Operations and other financial information to their SSMs to calculate the cost of eligible services (e.g., for children 0-5 rather than 6-12) at the level of an individual licence.  From these costs, ongoing costs would be scaled up to reflect cost increases between 2023 and 2025.   This would allow the calculation of the amount by which Program Cost revenues need to be scaled up  to cover higher costs.  This is the Legacy Top-Up.  The Legacy Top-Up will take account of changes in spaces, days and hours of service over this period.

There is also a Growth Top-Up for all centres that are adding new spaces.  Before the calendar year begins, the annual revenues of each centre are determined by their SSM based on operational plans filed with the SSM.  For centres that expand licensed capacity during the year, an adjustment needs to be made.  This is the Growth Top-Up.  The calculation of revenues for these new spaces is largely similar to the calculation of the Benchmark Allocation, but applied only to the new spaces and with the allocation raised by a Growth Multiplier.  Importantly, there is no Legacy Top-Up on new spaces, even if other centres operated by the same licensee receive Legacy Top-Ups because of elevated costs.   The new Benchmark Allocation is multiplied by a Growth Multiplier.  This Growth Multiplier may add as little as 0% to the funding for these new space (City of Cornwall) or as much as 30% (County of Lanark, United Counties of Prescott and Russell, County of Renfrew, Rainy River DSSAB), based on geography. The typical value of the Growth Multipliers is about 15%.

Once these top-ups are added to the Benchmark Allocation for an eligible centre, the total is called the Program Cost Allocation.

5. What about Profit or Surplus?

The new Ontario funding formula has one more major component.  It builds in a separate allocation which goes as profit for owners or as surplus for non-profit or public child care centres.  Profit/surplus therefore does not depend on good performance, but is a guaranteed payment.  On the other hand, the formula provides a limitation on the amount of profit that can be earned in any year out of the government portion of revenues.

There are three parts to the calculation of profit/surplus (which the Ministry guidelines call “allocation in lieu of profit/surplus”).  There is a base amount, a part that is 3.5% times the amount of the Benchmark Allocation and a part that is 4.25% times the Program Cost Allocation (which is the sum of the Benchmark Allocation and the top-ups).  These three parts are added together to get the total Profit/Surplus allocation.  Both the Benchmark Allocation and the Program Cost Allocation are influenced by the Geographic Adjustment Factor.  That means that the amount of Profit/Surplus is also affected by this GAF.

6. How are the individual parts calculated that make up the Benchmark Allocation?

There are four components that are summed together to get the Unadjusted Benchmark Allocation: the Program Staffing Component (related to the wages and benefits of program staff), the Supervisor Component (related to the wages and benefits of the Supervisor), the Accommodation Component, and the Operations Component (related to all other costs, including wages and benefits of non-program staff).  These are calculated based on the number of licensed spaces for different age groups, the operating capacity this year for different age groups, the proportion of staff in your centre that are delivering CWELCC-eligible services, the number of service-days of child care you provide to each age group over the year and a few other things.  All of these calculations are based on your plans for your child care program in the coming year, not on past numbers.

In effect, each of the four components is adjusted according to a Geographic Adjustment Factor, although this calculation is  done at the end after the four components are summed together.  In other words, if you are in what the Ministry’s data says is a high cost area, the amounts for each element of this allocation will be boosted.  If you are in what the Ministry’s data says is a lower cost area, the amounts for each element of the allocation will be lowered. 

For example, centres in Toronto have a Geographic Adjustment Factor of 1.07; centres in Kingston have a Geographic Adjustment Factor of 0.79.  So, the benchmark revenue allocation in a Toronto centre will be boosted by 7%.  The benchmark revenue allocation in Kingston will be reduced by 21%.  These Geographic Adjustment Factors are said to represent differences in the costs of providing child care services in different parts of the province.

7. Can you provide a  simple example of how the Benchmark Allocation is calculated?

(There are some helpful worked-out examples from page 55 onwards in Schedule D of the Funding Guidelines.  But, the example below provides some additional words of explanation).

As an example, think of a child care centre in a community setting in Toronto that has 48 preschoolers and no other children, just to make calculations simple.  We will assume that the licensed capacity and actual operating capacity of the centre is 48 children.  The per-diem benchmark allowed in the funding formula for 2025 for preschoolers (full day child care for children over 2.5 years) is $39.23.  Assume the centre will be in operation 261 days per year.

To get the amount of the Program Staffing component, we multiply 48 preschoolers X 261 service-days per year X a per-diem of $39.23. X an ancillary costs multiplier (13.4% to cover mandatory benefits like CPP/EI/EHT/WSIB).  In the case of our example, that gives us an amount of $557,330.88. 

To get the Supervisor component of the Program Costs, we multiply 261 service-days per year X a Supervisor per-diem of $301.38 X a Supervisor ancillary costs multiplier (16.2% to cover mandatory benefits).  That gives us a total of $91,403.13.

The allowance for Accommodation costs is based on the number of licensed spaces, independent of current operating capacity.  In our example, there are 48 licensed spaces.  The annual per-space benchmark varies according to the age category of these licensed spaces, but also by whether the centre is in a community setting or is located in a public school.  For preschool spaces in a community setting, the benchmark is $1,735.54 per space.  For this centre, the Accommodation costs component would be 48 X $1,735.54 = $83,305.92.

The Operations Costs component has both a fixed and a variable part to the calculations, and varies according to whether the centre is in a community setting or a public school. The fixed part is based on the number of licensed spaces and the annual number of days of service and this varies by age category of children.  The variable part is based on the planned operating capacity and the number of days of service and this also varies by age category of children.  The community-setting benchmark for fixed operations costs for preschoolers is $15.09 per licensed space-day.  The community-setting benchmark for variable operations costs for preschoolers is $1.64 per operating space-day.  So, for our example, the fixed part of operations costs would be 48 X 261 X $15.09 = $189,047.52.  The variable part of operations costs would be 48 X 261 X $1.64 = $20,545.92.  The total allocation for operations costs would be $209,593.44.

If we sum the allocations for the four components in our example, we get $557,330.88 + $91,403.13 + $83,305.92 + $209,593.44 = $941,633.37.  This is the Unadjusted Benchmark Allocation.

This calculation would be the same for any centre with 48 preschoolers anywhere in the province.  However, the Geographic Adjustment Factor (GAF) will change this allocation in every location.  Toronto has a Geographic Adjustment Factor of 1.07 (i.e., relatively high typical costs) so multiply the Program Costs number by 1.07 to get $1,007,547.71.  With the GAF applied this is called the “Benchmark Allocation”.  To see the importance of this Geographic Adjustment Factor: if this same centre was in Kingston, the Benchmark Allocation would be $743,890.36.

It is important to note that this allocation can be spent in any way the centre thinks best to provide services for children.  It can pay lower or higher wages,  more or less in benefits, more or less to the Supervisor, more or less in mortgage or rental costs, more or less in the costs of operations, as long as these expenditures are judged to be eligible expenditures.  The flexibility in spending is potentially positive, but without a wage grid (there is only a wage floor for RECEs), it means that unscrupulous operators could cut corners on compensation and quality in order to spend money in other ways.  That would be undesirable, of course.

8. What about the calculation of profit/surplus for this centre?

The base amount of profit/surplus is $6,000 annually.  For our example centre of 48 preschoolers in Toronto, the part based on the Benchmark Allocation would be 0.035 X $1,007,547.71 = $35,264.17.  Because we are assuming no Legacy or Growth Top-Ups for this centre, the Program Cost Allocation is the same as the Benchmark Allocation.  Therefore, the part of profit/surplus based on the Program Cost Allocation is 0.0425 X $1,007,547.71= $42,820.78.  The sum of these three parts is the allocation in lieu of  Profit/Surplus, which is $84,084.95.

The total revenue of this centre during the year would be the Benchmark Allocation of $1,007,547.71 plus the Profit/Surplus allocation of $84,084.95, which equals $1,091,632.66.  Profit/Surplus would be 7.7% of total revenue.  Another way of thinking of it: profit in this example is a markup of 8.3% over the Benchmark Cost Allocation.

Not all of this revenue would come from the SSMs of course.  The planned amount to be received from parents or on behalf of parents (adjusted for enrollment) would be subtracted from this total revenue calculation to get the annual funds received from the SSM.

9. Does the new funding formula provide enough funding?

This, of course, is the big question.  I need you to help me answer this.  I have some examples in the table below and they give calculations of the total amount of revenue centres will have, based on their size and location in the province.  The examples are simple and do not include provision of before-and-after school care for kindergarten children.  There are three centre sizes:

  • 49 children: 10 infants, 15 toddlers, 24 preschoolers
  • 73 children: 10 infants, 15 toddlers, 48 preschoolers
  • 88 children: 10 infants, 30 toddlers, 48 preschoolers

These centres are located in Toronto, Ottawa and Windsor.  Toronto has a Geographic Adjustment Factor (GAF) of 1.07.  Ottawa has a GAF of 0.94.  Windsor has a GAF of 0.80. These Geographic Adjustment Factors play a big role in the revenue totals that centres will receive and these examples are a good indication of the range of revenue values that will affect centres across Ontario, urban and rural, north and south.   The other factor that affects funding is whether the centre is located in a community or in a publicly-funded school.  This affects funding allocations for Accommodation and for Operations.

This table calculates the total annual revenue of these centres. Total revenue includes both the amount to cover costs and the amount to cover profit or surplus.  Some of total revenue will come in funding from the SSM and some will come from parent revenue (or child care subsidy revenues provided on behalf of parents).  As parent fees go down, a greater percentage of revenues will come from government and a smaller percentage from parents, but the total revenue would remain the same (unless benchmarks are changed).


Table 1: Total Annual Revenues of Centres of Different Sizes and Locations

Under Ontario’s New Funding Formula – Community-Based and School-Based Centres

Toronto Ottawa Windsor
Community-based or School-based centreCommunityCommunityCommunity
Geographic Adjustment Factor - GAF1.070.940.8
Total Revenue – 49 space centre$1.394m$1.226m$1.044m
Total Revenue – 73 space centre $1.884m$1.656m$1.410m
Total Revenue – 88 space centre$2.283m$2.006m$1.709m
TorontoOttawa Windsor
Community-based or School-based centreSchoolSchoolSchool
Geographic Adjustment Factor - GAF1.070.940.8
Total Revenue – 49 space centre$1.291m$1.135m$0.967m
Total Revenue – 73 space centre $1.731m$1.522m$1.296m
Total Revenue – 88 space centre$2.098m$1.844m$1.570m

Notes:

  • Total Revenue figures in the table are in millions of dollars of revenue annually, including both operating funding from governments and parent fees.
  • 49 space centre has 10 infants, 15 toddlers, 24 preschoolers, all full-day
  • 73 space centre has 10 infants, 15 toddlers, 48 preschoolers, all full-day
  • 88 space centre has 10 infants, 30 toddlers, 48 preschoolers, all full-day

Notice that for the same sized centre, a location in Toronto will get revenues which are hundreds of thousands of dollars higher than a location in Windsor (or many other places across the province).  Are true underlying costs that different in different locations? 

And, are these amounts of total revenue enough to operate centres and provide good quality child care?  I don’t have enough evidence yet to draw a conclusion, but I’m happy to hear from centre directors about your example and experience.

These calculations are based on Ontario’s 2025 benchmarks.  Benchmarks can change in future years.  Current centres will be potentially eligible for Legacy Top-Ups.  And, allocations for new centres will be affected by Growth Multipliers (but not Legacy Top-Ups).

10. What is the role of the SSMs?

The SSMs have many roles in relation to planning and operationalizing growth plans and assisting and communicating with child care providers in a range of different ways.

If we focus specifically on their role in relation to funding in 2025, the SSMs have to:

  • Receive operational plans from each operator/each centre.  Operating plans will include planned operating spaces for each age group, planned number of service days for each age group, number of hours of service for each age group, copy of parent handbook. 
  • Collect legacy data from those operators claiming a Legacy Top-Up.  Legacy data in 2025 will include specific evidence of any fixed costs (especially accommodation costs), the operating budget for 2025, 2023 audited financial statements and any related financial reports to support claim.
  • Calculate the Program Cost Allocations for each centre including the Legacy Top-Ups, the Growth Top-Ups and the Profit/Surplus for each centre.
  • Schedule advance payments for each centre based on these calculated Allocations
  • Select centres that will have their reported costs reviewed in a cost review (not the same as the Direct Engagements on Compliance) and carry out cost reviews
  • Accept and process applications for in-year changes in funding
  • Collect spending attestations and standardized financial reports from each centre
  • Compare Allocations to Actual Costs/Spending and promptly recover overpayments to centres and refund these to Ministry.

11. What are the key issues with this new funding formula?

The biggest issue with the funding formula is one that is not yet answered.  In new centres and new spaces, will there be enough funding available for providers to fund the provision of good quality care with educators and other staff that are fairly and reasonably compensated?

The Legacy Top-Ups in the funding formula are designed to ensure that existing centres with costs that are higher than the median will not have to close their doors; their costs will apparently be compensated by revenue supplements that become permanent through Rolling Top-Ups.  That’s obviously a good thing, but Legacy Top-Ups are not available to new centres or even to new spaces in existing centres. 

So, in judging the adequacy of revenues provided by this funding formula going forward, we need to ignore Legacy Top-Ups.  They exist for Legacy centres (i.e., current centres), but not for new centres.  The real question is “for new spaces (growth), will the revenues be adequate to provide good child care?”.   At this point, we don’t have a clear answer.  What we do know is that new spaces will only be eligible for the Benchmark Allocation  plus the Growth Top-Up plus the Allocation in Lieu of Profit/Surplus. 

As for the rest of the key issues with this new funding formula, that’s a topic for another blog.  Coming soon.