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The U.S. Department of Health and Human Services, Administration for Children and Families, Office of Child Care, requires states to use information about the provider cost of child care to inform the setting of payment rates under the Child Care Development Fund (CCDF) program. This requirement is consistent with the growing recognition that payment rates for early childhood care and education (ECCE) through CCDF are often too low to fully reimburse providers for their costs.

Drawing from a 2020 cost-of-care study for Oklahoma that was conducted by RAND researchers, this updated report will meet the CCDF requirement for Oklahoma to have a current narrow cost analysis to inform subsidy rate setting. This report also provides an opportunity to understand how ECCE provider costs may have changed since the onset of the coronavirus disease 2019 (COVID-19) pandemic, which took place just as the data collection for the 2020 study was completed.

The authors adopted a two-pronged approach for this study: (1) collecting program and expenditure data from a sample of licensed providers, purposively selected to capture variation in key provider features that affect program structure and, therefore, per-child cost, and (2) developing a cost model (or calculator) with parameters informed by the information gathered from the sampled providers. The results from this updated report, with cost of care estimates for 2023, can continue to help policymakers in Oklahoma improve the access to and quality of ECCE.

Key Findings

  • The per-child cost of care in center-based settings declines with child age.
  • There is considerable variation in how providers operate their ECCE programs, both within center- and home-based settings and across these two types.
  • There is relatively low compensation in cash earnings and benefits for center leaders and classroom staff and for home-based owner/operators.
  • There is differential take-up of state child care subsidies and federal subsidized child care meals across providers.
  • The child care subsidy reimbursement rates are too low to cover the cost of care, whether observed or estimated, especially for infants and young toddlers and in settings with lower quality ratings.
  • There is mixed capacity on the part of providers for tracking and reporting financial data.
  • Among the providers sampled, there was almost universal application for the state Child Care Stabilization Grant Program during the COVID-19 pandemic and a diverse deployment of those funds to meet short-term and long-term program needs.
  • Many of the providers sampled had reached their desired enrollment levels for infants, toddlers, and preschool-age children as of October 2023.
  • Since the COVID-19 pandemic, most providers sampled had experienced above-normal inflation for their food expenditures and other key inputs, including learning materials and classroom supplies.
  • The model-based estimates suggest that providers would be less likely to recover their costs unless the current $5-per-hour COVID-19 supplement to the Child Care Subsidy program reimbursement rate schedule remains in place or an updated reimbursement rate schedule is adopted.

Recommendations

  • Policymakers and other stakeholders should use cost information collected directly from providers and/or through cost modeling to reconsider the current Child Care Subsidy program reimbursement schedule.
  • Policymakers and other stakeholders should consider options for tying increases in subsidy reimbursement rates to increased spending on resources that matter for the provision of high-quality care.
  • Policymakers and other stakeholders should encourage participation in Child and Adult Care Food Program subsidies by ECCE providers in the state.
  • Policymakers and other stakeholders should ensure that providers have access to supports to improve their financial literacy and business practices.

This research was sponsored by the Oklahoma Partnership for School Readiness Foundation and conducted by RAND Education and Labor and the Social and Behavioral Policy Program within RAND Social and Economic Well-Being.

This report is part of the RAND research report series. RAND reports present research findings and objective analysis that address the challenges facing the public and private sectors. All RAND reports undergo rigorous peer review to ensure high standards for research quality and objectivity.

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