Illinois Fiscal Year 2022 Narrow Cost Analysis Report

Illinois Fiscal Year 2022 Narrow Cost Analysis Report (pdf)

Executive Summary

As a requirement of the Federal Child Care Development & Block Grant (CCDBG), the Illinois Department of Human Services (IDHS) Division of Early Childhood (DEC) currently utilizes a market rate survey1 to analyze whether child care subsidies adequately allow child care subsidy recipients equitable choice and access among child care providers.

Market Rate Survey: A market rate survey measures the prices charged by providers and paid by parents in a given child care market within specific geographies. As such, market rate surveys only capture data on the price of child care, not the cost of child care in a given market. The price of care is the fee per child paid by non-subsidized families for child care services or, when serving a family receiving assistance, the subsidy payment rate plus the family's co-payment.

Going forward, in addition to the market rate survey, states must complete a narrow cost analysis to estimate child care providers' cost of care, rather than price of care. The cost of child care is the current actual cost of the program (including personnel, facilities, equipment, supplies, etc.) for providing child care services when all contributions are considered.

Narrow Cost Analysis: Broadly, a narrow cost analysis measures the current cost for current providers to offer child care to families that meets current requirements. The purpose of a narrow cost analysis is to provide additional information for states to consider when setting payment rates, but states can determine how much weight to assign its outcomes in the rate-setting process. Per the Administration for Children and Families (ACF), "While Lead Agencies do not need to set rates based on the analysis, states are expected to evaluate the gap between costs and payment rates as part of their strategic, long-term approach to setting rates that support equal access."

Methodology: To assess child care providers' cost of care today through a narrow cost analysis, IDHS-DEC worked to develop a dynamic cost model engine that estimates the cost to provide care that meets today's child care licensing standards and the cost to meet requirements for the State's Quality Rating and Improvement System (QRIS), ExceleRate Illinois. Methodology and input assumptions were informed by federal requirements, review of other states' submissions, existing Illinois practice, the State's past cost modeling efforts, and the Illinois Salary & Staffing Survey of Licensed Child Care Facilities FY2021 report data2.

Outcomes: Outcomes of this narrow cost analysis provide estimated costs per classroom for Licensed Child Care Centers ("Centers") and by program for Licensed Family Child Care Homes ("FCC Homes") and Licensed Family Group Child Care Homes ("FCC Group Homes"). Today's center costs per classroom range from $145K to $247K, with differences therein across geographies, ages, and quality level. Today's FCC Home costs per program range from $69K to $95K, and today's FCC Group Home costs per program range from $105K to $128K with differences therein across geographies and quality level. The full report provides details of methodology and assumptions in this analysis as well as detailed outcomes of the analysis.


While IDHS-DEC believes this narrow cost analysis is an important step in its journey to better understand the cost of care and how to fund it, it is important to understand that the costs reflected in this analysis are not reflective of the State's vision for services that our children and families need.

The narrow cost analysis estimates the current costs that providers incur today to meet what is required through child care licensing standards and by ExceleRate Illinois Circle of Quality as it is implemented today - it is not an analysis of the cost of all services that providers may provide (or that children may need) above and beyond licensing standards or the costs associated with services in an adequate system. For example, the narrow cost analysis relies upon current

personnel costs for both programs meeting child care licensing standards and programs that have earned ExceleRate Illinois Circles of Quality. These personnel costs are accurate for current providers to offer current levels of child care in their communities; however, they may not be adequate to expand the workforce, support more advanced qualifications, or reduce turnover.

Over time, IDHS-DEC seeks a system that provides adequate, equitable, and quality services to children and families, and ensures additional funding is directed to improving educator and staff qualifications and compensation, along with other resources necessary to meet Illinois' vision of effective, high-quality early childhood education and care environments.

Future Recommendations: To that end, while IDHS-DEC is confident in its approach for the FY 2022 narrow cost analysis in this first study, there are ways in which this analysis, its assumptions, and its data sources can improve over time to become more accurate and representative of the cost to provide high-quality care at scale across the State. In future phases of cost analysis work, IDHS-DEC will explore the use of working groups to 1) refresh and update non-personnel cost assumptions that the State has used in past modeling efforts and 2) better understand provider models used for services for school aged children, which can look very different by provider and by type of care (summer care vs. before and after care). Additionally, IDHS-DEC will work to update state-administered surveys to inform narrow cost analysis inputs for future years.