Overview of a Child Care Market Rate Survey and Narrow Cost Analysis

Every three years, the Massachusetts Department of Early Education and Care (EEC) is federally mandated by the Child Care Development Block Grant (CCDBG) Act to conduct a valid and reliable child care market rate survey (MRS) and narrow cost analysis (NCA). The survey and narrow cost information are used as inputs when setting state-level child care subsidy reimbursement rates. It is important to recognize that the prices child care providers charge are not fully inclusive of the cost of child care and therefore should be one of multiple inputs into the rate-setting process.

For the purposes of the 2022 MRS and NCA, EEC contracted with the Center for Early Learning Funding Equity (CELFE) at Northern Illinois University to conduct a statistically valid and reliable market rate analysis using EEC’s administrative datasets that meets federal requirements. CELFE worked in partnership with Afton Partners for the Market Rate Survey and followed guidance issued by the Federal Administration for Children and Families (ACF) in using licensed capacity data to generate weighted 75th percentile rates. In partnership with the Children’s Funding Project, CELFE updated the Narrow Cost Analysis completed in 2020, the design of which was adapted from the Child Care Technical Assistance Network’s Provider Cost of Quality Calculator.

What is New in this Analysis?

The 2022 MRS used administrative data sources on rates and hours from EEC’s Licensing Education Analytic Database (LEAD), as well as a survey required from Commonwealth Cares for Children (C3) grant recipients, to perform the analysis. Previous MRSs in Massachusetts relied on a specific provider survey instrument to collect rate data. However, all EEC providers are now able to post their rates and hours publicly via LEAD, and providers that receive C3 stabilization grants are required to do so. This new administrative data on rates and hours provided a more comprehensive dataset to be utilized for this analysis. More than half of providers across the Commonwealth2 (4,237 or 56%) submitted complete and recently updated data that were included in the analytic sample for the 2022 MRS.

In addition to the MRS, all states are required to consider the cost of providing child care when setting subsidy rates. Guidance from ACF indicates that states must conduct a narrow cost analysis (NCA) that measures whether base subsidy payment rates adequately cover the cost of higher quality child care services. Massachusetts collected data in 2020 and engaged stakeholders in a process to inform a preliminary NCA. CELFE updated this analysis for 2022.