Quality Cost Model

Report
The Massachusetts Early
Education and Care and Out-ofSchool Time Quality Cost Model
Presentation to the Massachusetts Department
of Early Education and Care
January 8, 2013
Andrew Brodsky
Anne Mitchell
Project Goals

Identify child care cost drivers of levels
from licensing through QRIS levels

Create interactive model to estimate
costs of child care quality in MA

Estimate cost implications of changing
reimbursement rates

Identify current and potential financing
strategies for child care quality
Cost Methodology



Baseline cost estimates based on
cost of licensing
Cost to achieve given distribution of
quality based on analysis of costrelated components of QRIS system
If data are available, costs
determined separately by region
Excel Model Features



Allows user to change distribution of
quality (beginning at licensing)
Allows user to adjust supports for
high quality child care (such as
grants) and view resulting costs
Allows user to adjust reimbursement
rate structure
Excel Model Output


Current and projected enrollment by
age and setting
Additional costs based on changes to
enrollment and quality distribution, by
setting

Additional costs based on changes to
reimbursement rates

Cost of quality grants to providers
Factors Affecting Quality


Higher quality ECE costs more than
most families can afford
Market-based ECE encourages price
competition – low tuition fees – and
discourages investments in quality
Considerations for Estimating Costs

Expense drivers:




Ratios
Group size
Staff compensation (salary and benefits)
Revenue drivers:



Parent tuition fees/other revenue
Revenue collection
Enrollment efficiency
Provider perspective: Iron Triangle
Full Enrollment
Full Fee
Collection
Revenues Cover
Per-Child Cost
Supporting Financial Stability

State can…




Set family income eligibility high for entry and
higher for exit
Use contracts more than vouchers
Set rate ceilings as high as feasible
Providers can…



Fill vacancies immediately to keep enrollment as
close to 100% as possible
Collect all revenue on time
Diversify revenue: Participate in CACFP, PreK &
other revenue sources
Considerations for Estimating
Cost: QRIS

Requirements in licensing rules

QRIS expectations increase by levels



Primarily better qualified staff as quality
increases (higher compensation)
More staff time for assessment, family
activities and conferences, curriculum
planning, staff meetings
One-time costs for equipment
Massachusetts
Cost of Quality Survey (2012)



Used in the model
Data confirms BLS wages, cost of
training and continuing professional
development
Data informed non-personnel costs


Materials and equipment
Child screening and assessment
The Massachusetts Early Education and
Care and Out-of-School Time Quality Cost
Model – Screen Shots
Massachusetts QRIS
Cost Model
CENTERS
Items in yellow shaded cells ONLY may be changed to model different scenarios
SIZE
# Children/Age
7
9
20
20
26
82
TOTAL Children
Age Groups
# of Classrooms
Infants-15 months
1
Toddlers (15-33)
1
Threes
1
Fours
1
Fives & SA
1
5
TOTAL Classrooms
Group Size
7
9
20
20
26
Please change only yellow cells
Ratios in
Just FYI:
MA regs
NAEYC (max)
1:3
2:8
1:5
2:10
1:10
2:18
1:10
2:20
1:13
INCOME MIX of CHILDREN
70% 185% FPL&above
15% <185% FPL
15% <130% FPL
EFFICIENCY
QUALITY
Enrollment as % of total capacity
Bad Debts as % of tuition
85.0%
3.0%
Typical
85%
3%
By age cohort
Across all ages Net Annual P/L with mix of child ages
Level 1 Cost per hour
Overall Cost/hour
Infants
$7.26
$3.78
$620,249 Expense
Ones
$6.40
$721,701 Revenue
Twos
$5.93
$101,452 Profit/(Loss) Rev less Exp
Threes
$3.34
Fours
$3.34
Fives
$2.88
Level 2
Infants
Ones
Twos
Threes
Fours
Fives
$8.10
$7.13
$6.60
$3.68
$3.68
$3.16
$4.18
Level 3
Infants
Ones
Twos
Threes
Fours
Fives
$9.38
$8.37
$7.73
$4.35
$4.35
$3.64
$4.88
Level 4
Infants
Ones
Twos
Threes
Fours
Fives
$10.02
$9.18
$8.47
$4.77
$4.77
$4.16
$5.35
Net as %
Net as $$/child
16.4%
$1,237
$685,598 Expense
$721,701 Revenue
$36,103 Profit/(Loss) Rev less Exp
5.3%
$440
$800,652 Expense
$781,303 Revenue
($19,349) Profit/(Loss) Rev less Exp
-2.4%
$236
$877,415 Expense
$852,363 Revenue
($25,052) Profit/(Loss) Rev less Exp
-2.9%
$306
Scenario 1: BLUE line on graph
Scenario 1. Center: 5 classrooms (infants, toddlers, threes, fours and fives/school-age)
Quality
Level 1
Level 2
Level 3
Level 4
Net Annual P/L
Net as %
of
Expenses
Net as
$$/child
$620,249 Expense
$721,701 Revenue
$101,452 Profit/(Loss) Rev less Exp
16.4%
$1,237
$685,598 Expense
$721,701 Revenue
$36,103 Profit/(Loss) Rev less Exp
5.3%
$440
$800,652 Expense
$781,303 Revenue
($19,349) Profit/(Loss) Rev less Exp
-2.4%
$236
$877,415 Expense
$852,363 Revenue
($25,052) Profit/(Loss) Rev less Exp
-2.9%
$306
Scenario 2: RED line on graph
Scenario 2. 5 classrooms (toddlers, threes, 2 fours and fives/school-age)
Net as %
of
Net as
Quality
Net Annual P/L
Expenses $$/child
Level 1
Level 2
Level 3
Level 4
$639,632 Expense
$813,329 Revenue
$173,697 Profit/(Loss) Rev less Exp
27.2%
$1,828
$704,981 Expense
$813,329 Revenue
$108,348 Profit/(Loss) Rev less Exp
15.4%
$1,141
$820,230 Expense
$891,989 Revenue
$71,758 Profit/(Loss) Rev less Exp
8.7%
$755
$896,993 Expense
$973,836 Revenue
$76,843 Profit/(Loss) Rev less Exp
8.6%
$809
Scenario 3: GREEN line on graph
Scenario 3. Preschool & Fives/SA only (106 children)
Quality
Level 1
Level 2
Level 3
Level 4
Net Annual P/L
Net as %
of
Expenses
Net as
$$/child
$656,033 Expense
$888,706 Revenue
$232,673 Profit/(Loss) Rev less Exp
35.5%
$2,195
$721,382 Expense
$888,706 Revenue
$167,325 Profit/(Loss) Rev less Exp
23.2%
$1,579
$836,796 Expense
$985,502 Revenue
$148,706 Profit/(Loss) Rev less Exp
17.8%
$1,403
$913,559 Expense
$1,076,136 Revenue
$162,577 Profit/(Loss) Rev less Exp
17.8%
$1,534

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