Transcript Financing Strategies for Early Learning & Development
Financing Strategies for Early Learning & Development Programs and Practitioners
Finance Learning Table, Session 3 Louise Stoney and Anne Mitchell Alliance for Early Childhood Finance
National Center on Child Care Quality Improvement
ECE Revenue
Consumer tuition
is the largest source of revenue, roughly 57% of total industry receipts
Private sector
revenue has increased dramatically, but still less than 4% of total
Government funding
Private Sector
@ 39% of total, and is primarily portable
Gov't
$ (vouchers or tax benefits)
Families
The Iron Triangle of ECE Finance
• • • Ensure full enrollment – every day, in every classroom Collect tuition and fees – in full and on time Revenue covers per child cost (tuition, fees + 3 rd party funding) 3
The Recession Has Added New Challenges
•
With recession, ECE programs
– – – Lower enrollment Insufficient fee collection Pressure to lower prices
End result: Significant fiscal challenges for higher quality programs
The Cost-Quality Gap
• Higher quality ECE costs more than most families can afford • Market-based ECE encourages price competition – low tuition fees – and discourages investments in quality • Cost-quality gap is primary cause of inadequate compensation
Example Provider-Level Output Center: 106 children, infants, toddlers and preschoolers QUALITY
Regulated Star 2
$828,943 $847,626 $18,683
Expense Revenue Net Income Net Income as % of Expense
2% $846,319 $847,626 $1,307
Expense Revenue Net Income
0%
Star 3
$890,845 $855,825
Expense Revenue
($35,020)
Net Income
Star 4
$946,116 $873,394 ($72,722)
Expense Revenue Net Income
Star 5
$1,014,520 $882,765
Expense Revenue
($131,756)
Net Income
-4% -8% -13%
Annual Gap/Child
$176 $12 ($330) ($686) ($1,243)
Quantify the Gap in $
Annual Profit or Loss ($/Child)
$400 $200 $0 $200 $400 $600 $800 $1 000 $1 200 $1 400 $176 Star 1/Reg $12 Star 2 Star 3 $330 Star 4 $686 Star 5 $1 243
14% 12% 10% 8% 6% 4% 2% 0%
Quantify the Gap as %
Revenue Increase Needed to Close The Gap as Percentage of Current Revenue
13% 4% 8%
Star 3 Star 4 Star 5
Current Gap-Closing Strategies in Use
• • • • • • • • • Financial incentives commonly used in statewide QRIS programs: Child care subsidy payments at higher rates (tiered reimbursement) Child care subsidy payments only to programs that participate in QRIS or to those at higher levels Bonuses tied to quality levels Quality grants or merit awards for participating programs Practitioner wage initiatives Scholarships for practitioners or other professional development initiatives linked to QRIS participation Scholarships for families to use higher quality programs Loans linked to quality rating Tax credits linked to quality rating
Incentive Strategies
• • • • Incent participation: funds linked to participation, e.g., equipment grants Incent quality: quality bonuses, achievement awards, wage/retention awards, health insurance matching fund… Share the cost of quality: Pre-K, CACFP, Head Start partnerships… Promote program efficiency: policy changes, Shared Service Alliances…
Impact of Cost Sharing on ELD Program Bottom Line Revenue
CCDF + CACFP + Tuition
Regulated/ Star 1
$847,626
Expense Net Profit/Loss
$828,943 $18,683
Star 2
$847,626 $846,319 $1,307
Star 3
$855,825 $890,845 $35,020
Star 4
$873,394 $946,116 $72,722
Star 5
$882,765 $1,014,521 $131,756
Additional Revenue
Pre-K (1 classroom) Head Start QRIS Quality $
Net Profit/Loss
not eligible not eligible $18,683 not eligible $4,253 $5,560 not eligible $31,651 $3,369 $78,000 $79,524 $84,802 $78,000 $98,690 $44,934
Financing ELD Programs
Total Revenue = Portable + Direct Assistance
Total Program Revenue
linked to standards
Tuition/Fees + Portable Subsidy (e.g. CCDF vouchers, scholarships, tax credits, etc.) Direct, Institutional Support (e.g. HS, Pre-K, ECE quality grants, industry-wide investments)
Step
Start with Stars STAR 1 – Attained STAR 2 – Attained STAR 3 – Attained STAR 4 – Attained
Criteria
Apply for QRS & complete requirements (e.g. Health & Safety checklist) Meets STAR 1 Standards or in a points system has sufficient points for Star 1 Meets STAR 2 Standards or in points system has sufficient points for star 2 Meets STAR 3 Standards or in points system has sufficient points for star 3
Portable Incentives
Child care subsidy (CCDF/TANF) at basic rate State child care tax credit at basic rate Child care subsidy at Star 1 level (tiered bonus) State child care tax credit at basic + .25 Child care subsidy at Star 2 level (tiered bonus) Private scholarships/grants at Star 2 level State child care tax credit at basic + .50
refundable practitioner tax credit at base level (or Ed & Ret grants) Child care subsidy at Star 3 level (tiered bonus) Private scholarships/grants at Star 3 level State child care tax credit at basic + .75 refundable practitioner tax credit at 1.5 of base level (or Ed & Ret grants) Meets STAR 4 Standards/points or National Accreditation or Head Start (licensed integrated model) Child care subsidy at Star 4 level (tiered bonus) Private scholarships/grants at Star 4 level State child care tax credit x 2 (double benefit) refundable practitioner tax credit at 2x base level (or Ed & Ret grants)
Direct Incentives
Start with STARS grant - one time only TEACH and CADFP available Access to T/TA -- prioritized Links to family support and/or home visiting STARS Support Grant - available for 2 years TEACH, CACFP, T/TA, family support links same as Start with Stars Early Childhood MH Consultation available Health Consultation available STARS Support Grant - available for 3 years Ed & Retention Award (or practitioner tax credits ) Campus-based child care funds @ Star 2 level TEACH prioritized CACFP, T/TA, family support links same as Star One Early Childhood MH & Health consultation prioritized STARS Support Grant – ongoing Ed & Retention Award (or practitioner tax credits ) Campus-based child care funds @ Star 3 level TEACH & CACFP same as Star Two Training and TA available, as needed & appropriate Title IV-B - priority placement for protective/preventive Family support available & aligned with IV-B cases Early Childhood MH Consul aligned with IV-B Health Consultation prioritized & aligned with IV-B Priority placement for children with disabilities STARS Support Grant - ongoing Ed & Retention Award (or practitioner tax credit) Campus-based child care funds @ Star 4 level Eligible for Head Start and/or State Pre-K Funding TEACH,CACFP, T/TA, Title IV-B, Family Support, MH & Health Consultation same as Star Three Priority placement for children with disabilities
Department of Education
•Pre-K funding •Early Intervention •Professional Licensing •Early Childhood Food and Nutrition Programs
All linked to standards
Dept of Human Services
•Tiered Reimbursement Rates for child care • Training and quality grants
linked to standards
Department of Tax and Finance
•Higher Dependent Care Tax Credit •ECE Occupational Tax Credit Other business or individual tax benefits
All inked to standards
Department of Health
•Health & Safety training •Healthy Child Care America TA and supports
All linked to standards
Standards for Programs QRIS Standards Standards for Practitioners Learning Guidelines (Outcomes for Children) Head Start
Agreement with Federal Regional Office to create administrative/fiscal
links to common standards
Private Sector
Agreements with United Way, community foundations, etc. to
link
$
to common standards
Higher Education
•Campus-based child care programs •Practitioner education
All linked to standards
Judiciary/ Court Administration
Funds for child care centers at the courts or delinquency prevention
linked to standards
Quasi-Public Construction Authority
Funds for construction of ECE facilities
linked to standards
Innovative Financing Strategies
• Tax Credits – LA, OR, CO, PA • Land and Mineral Trust Funds • Social Investment Bonds • Strategic links to Child Welfare, Early Intervention, Home Visiting, EC Mental Health, etc.
Strategic Cost Sharing: Key Steps
• Leadership: Shared vision re standards (QRIS); Agreements for collaborative fiscal reporting/monitoring (cost modeling can demonstrate benefits) • Change Management within Government: How to get contract managers on board regarding re-alignment of fund management? • Change Management within ELDs: How to help ELDs focus more strategically on $ and relax focus on silos?
Change Management Within ELDs
• Sustainable quality requires strong leadership and sound financial footing • Poor fiscal management is the #1 reason ECE programs fail • Even programs with high QRIS/ERS scores may fail to see fiscal trouble until it is too late
Shared Services
• • • • • • • • Services provided by Hub: Administrative services Classroom supports Comprehensive services Fundraising Staff recruitment/screening Bulk purchasing Human resources Research and development 18
Strategic Partnerships with Private Sector
• Focus on QRIS as accountability measure & funding standard • Move away from ‘deficit financing’ toward leveraging change among funding partners and ELDs toward ‘cost-sharing’ support for quality • Examples: Cite examples from states attending, e.g. United Way, William Penn, Merage, Kellogg, etc.
Summary
• • • • •
Support financial stability (Iron Triangle) Quantify the ‘cost-quality gap’ Link every funding source to quality – create quality incentives Share the cost of quality among funders Support change management in programs to share services
Thank You
National Center on Child Care Quality Improvement
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