Voices supports the proposed improvements to child care payment rates and the parent copayment requirements. These proposed changes will greatly impact the under resourced child care sector as well as help parents who are looking for care, so that they can continue to work. While it has been long recognized that child care programs need more resources to provide quality care, educators need higher wages and parents need lower costs to afford the care. Solutions have often been piecemeal and insignificant with regards to impact in all three areas of need. This proposal has the potential to transform how staff are paid, how parents choose quality, affordable care, and how quality improvement resources are provided.
Virginia is ranked 10th highest in the nation for child care costs. The average annual rate for an infant is $14,063 and $10,867 for a preschooler.
In 2021, Voices supported Senator Jennifer McClellan’s proposal to improve child care by funding the true cost of quality care (SB1316 Bill Explainer). The adoption of this legislation prompted the Virginia Department of Education (VDOE) to examine its payment practices and to seek approval from the federal government to use an alternative payment methodology to set rates based on program inputs. During the pandemic, VDOE has had the ability to waive parent co-payments which has provided relief when many families experienced economic hardship. New copayment rates will help to reduce the burden on parents participating in the subsidy program. Recent policy changes have also improved the ability for parents to participate by raising maximum income requirements, removing child support requirements, and ending a lifetime limit of 72 months for receiving assistance.
The new payment rates have been set to reflect the costs of program inputs by including wages, program standards, curriculum, and quality improvement activities. Payment rates have been posted online and can be compared to previous rates. Under the previous reimbursement rate process, the market, or what parents could pay in a specific community, drove the costs. The new model considers rates at a regional level and takes into account different types of licensures. In doing this, it recognizes the educators in the classroom as the critical inputs, not the physical location.
As payment rates are currently set by the age of the child, type of setting, and locality, the impact of the new payment rates in comparison to the old rates varies significantly across these three areas. Voices took a look at the new rates across jurisdictions to better understand impact. While there are a few localities who will not see rates increase for the preschool or school-aged age groups, every locality will see rate increases for providers. Each locality is now grouped into a region where the regional rate is equal across jurisdictions (unless the original market was higher).
Some providers and jurisdictions will see minimal increases of $5 per day, or slightly less. However, a $5/day increase for child served for 260 days throughout the year would equal a $1,300 increase for the program. Some localities and providers will see much larger increases in the magnitude of $20-35 per day. A $20/day increase (for example, in a center serving infants in James City County) would equal $5,200 additional resources per year and a $35/day increase (for example, in a center serving infants in Wythe County) would equal $9,100 per year.
As with any cost calculation, there will be some “winners” and “losers”. Providers in Northern Virginia will not see the same scale of increase as providers in more rural areas of the state. However, families looking for infant and toddler care will see significant rate increases as will home care providers serving school-age children. As we look to additional changes for payment practices and participation in the coming years, the state should consider the localities that do not receive significant increases in this proposal as a priority population. In particular, providers in Northern Virginia are not provided significant rate increases despite recent policy changes for Washington DC that increased rates and educator compensation. Failing to compete at the regional level could incentivize Virginia-based early educators to transition to nearby jurisdictions paying more.
The proposed changes will roll out in three phases:
While the rate increases could impact programs to a varying degree depending on subsidy enrollment, ages of children, and jurisdiction, those who are receiving the increase will be asked to participate in a voluntary wage scale allowing VDOE to collect information on the current wages and to offer a benchmark to ensure educators are paid higher wages as a result of the rate increase. This wage scale is a very exciting component to help increase the compensation for early childhood professionals and family home care providers. Compensation was modeled to factor in the wages that teachers in public preschool programs were paid to put their private counterparts on equal footing. The voluntary scale will allow Virginia an opportunity to measure progress towards increasing compensation, particularly when other neighboring localities to Virginia have made this a focus.
The child care subsidy program can be an extremely valuable benefit to working families, but only if it provides the continuous affordable coverage they need to work. Proposals to reduce the parent co-pays and collapse income levels will help reduce benefit cliffs where families receive diminishing returns for higher wages by reducing their access to public benefits. The impact of the proposed changes would save some families $600 per year while others could save thousands of dollars. Families earning less than the poverty level (who currently make up 43% of children enrolled) would pay no copays under the proposed changes. These families would go from paying about $50 per month to no monthly contribution. Families just over poverty (100-200% FPL) would pay $60 per month in comparison to $135-185/month under the current structure, and parents above that rate would pay $120-180/month. Providers are allowed to charge parents for any difference between tuition rates and what is covered by subsidy reimbursement and parent co-pays.
The reimbursement rate changes are program manual changes that do not require legislative approval, but will go through the public comment process and will be presented to the Board of Education.
Public comments on the proposed changes can be emailed to rr-earlychildhoodaccess@doe.virginia.gov by July 25, 2022. The current timeline has reimbursement rates taking effect October 2022 and copayment changes would take effect January 1, 2023.
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