Introduction
Child Care and Development Fund (CCDF) Lead Agencies are required to consider cost information when setting payment rates. Many agencies meet this requirement by doing a narrow cost analysis. This series aims to help CCDF Lead Agencies by:
- defining narrow cost analysis
- offering examples and expert advice on how to do a good narrow cost analysis
- describing how to use cost data when setting payment rates.
The series includes the following:
1. Defining Narrow Cost Analysis (PDF). This brief has three goals:
- define narrow cost analysis
- define and discuss child care costs and prices
- explain how narrow cost analysis helps inform payment rates
2. Approaches to Narrow Cost Analysis (PDF). This report describes three widely used approaches:
- building a cost model
- conducting a limited cost survey
- using a cost model informed by a limited cost survey
3. Using a Narrow Cost Analysis to Inform Payment Rates (PDF). This brief covers two main topics:
- analyzing gaps between costs and payment rates
- exploring strategies to close gaps
Methods
This series was informed by expert meetings that included:
- Child Care and Development Fund (CCDF) Lead Administrators
- child care researchers
- experts from the Office of Child Care (OCC)
- an expert from the National Center on Subsidy Innovation and Accountability
We reviewed OCC guidance, prior literature, and materials from webinars on cost analysis. We also reviewed narrow cost analyses conducted by states. We also held interviews with six CCDF Lead Administrators in early 2022. A small group of experts within and outside OCC reviewed outlines and drafts.
Citation
Isaacs, Julia B., Lynn A. Karoly, Pia Caronongan, Katie Gonzalez, Peter Willenborg, and Sarah Prendergast. 2022. Defining Narrow Cost Analysis: A Brief for CCDF Lead Agencies. OPRE Report #2022-172. Washington, DC: Urban Institute.
Gonzalez, Katie, Julia B. Isaacs, Pia Caronongan, Peter Willenborg, and Lynn A. Karoly. 2022. Approaches to Narrow Cost Analysis: A Report for CCDF Lead Agencies. OPRE Report #2022-XXX. Washington, DC: Urban Institute.
Caronongan, Pia, Katie Gonzalez, Lynn A. Karoly, Julia B. Isaacs, and Peter Willenborg. 2022. Using a Narrow Cost Analysis to Inform Payment Rates. OPRE Report #2022-XXX. Washington, DC: Urban Institute.
Glossary
- Cost:
- the value of the resources needed to provide child care services. These include, but are not limited to, salaries, rent, and supplies.
- Cost model:
- a method that estimates how much it costs to provide child care services. To use this method, you must make decisions about some aspects of the child care programs you are modelling. These are the modeling assumptions. Some assumptions may be the total number of children served by age group, the staff-child ratios, and teacher qualifications. You will also need the cost or price of each resource required to provide child care services. Some examples are the salaries and benefits for staff, the rent, and so on. We use the term cost models. Other common terms are cost calculators or cost-estimation models. The Provider Cost of Quality Calculator (PCQC) is an example of a cost model (OCC, n.d.). Cost models work best when you use state-specific data.
- Cost survey:
- a study that collects data from a group of child care providers to calculate the costs required to provide child care services. This data can be analyzed in different ways to show the cost per program, per child per month, or per hour of care.
- Narrow cost analysis:
- a study of what it costs providers to deliver child care in your state or territory at two or more levels of quality: - a base level of quality that meets health, safety, staffing, and quality requirements, and - one or more higher levels of quality as defined by CCDF Lead Agencies CCDF Lead Agencies can choose how to approach narrow cost analysis. Common methods include: - cost models - limited cost surveys - a cost model informed by a cost survey Whatever methods you use, you will need to: - estimate costs by level of quality - include relevant variation by, at a minimum, provider type, child age, or location - analyze the gaps between estimated costs and payment rates, so the cost information can inform payment rate setting
- Payment rates:
- the amount CCDF Lead Agencies pay child care providers for subsidized child care services. Also called reimbursement rates.
- Price:
- the tuition or fees that child care providers charge families.