VT Blue Ribbon Commission
PCG Cost of Care Methodology: Prepared for the VT Blue
Ribbon Commission on Financing High-Quality Child Care
August 2016
Child Care Cost Methodology
August 2016
Contents
OVERARCHING METHODOLOGY ................................................................................................................... 4
COST METHODOLOGY ................................................................................................................................... 4
CENTER-BASED PROGRAM LINE ITEMS......................................................................................................... 6
PROGRAM OVERVIEW................................................................................................................................... 7
STAR Level & Quality ................................................................................................................................. 7
Total Children Served: Program Size: 34 Children .................................................................................... 7
Percent of Population Served Eligible for CCFAP/CACFP: 25% ................................................................. 7
Staff (Child Ratios)..................................................................................................................................... 8
EXPENSES .................................................................................................................................................. 8
Gross Salaries: $403,936 annual ........................................................................................................... 8
Taxes, Fees, and Employee Benefits: $173,596 .................................................................................... 8
Training and professional development: $3,800 ................................................................................. 8
Travel (field trips, vehicle maintenance) and Staff mileage reimbursement for work-related travel:
$2,520 ................................................................................................................................................... 9
Staff wellness activities: $1,800 ............................................................................................................ 9
Rent: $43,350 ........................................................................................................................................ 9
Telephone + Internet: $1,848 ............................................................................................................... 9
Utilities & Services: $12,600 ................................................................................................................. 9
Shared Services: Administration: $14,813 ............................................................................................ 9
Shared Services: Comprehensive Services: Placeholder ..................................................................... 10
Liability Insurance: $6,996 .................................................................................................................. 10
Debt Service: $6,000 ........................................................................................................................... 10
Food & Supplies: $54,330 ................................................................................................................... 10
Educational Supplies & Equipment: $10,200 ...................................................................................... 11
Repairs to Program-Owned Equipment: $3,600 ................................................................................. 11
Allowance for Bad Debt and Vacancy: $19,017 .................................................................................. 11
Contribution to Capital Expense Fund - 1% of AGR, Miscellaneous expenses: $6,557 ...................... 11
Miscellaneous Expenses: $3,000 ........................................................................................................ 11
HOME-BASED PROGRAM LINE ITEMS ......................................................................................................... 12
STAR Level & Quality ............................................................................................................................... 13
Total Children Served: Program Size: 9 Children .................................................................................... 13
CACFP: 25% ............................................................................................................................................. 13
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Child Care Cost Methodology
August 2016
Staff (Child Ratios)................................................................................................................................... 13
EXPENSES ................................................................................................................................................ 14
Gross Salaries: $6,108 + $45,760 (Owner’s draw) .............................................................................. 14
Taxes, Fees, and Employee Benefits: $5,612 ...................................................................................... 14
Training and Professional Development: $1,000 ................................................................................ 14
Travel (field trips, vehicle maintenance) and Staff Mileage Reimbursement for Work-Related Travel:
$1,992 ................................................................................................................................................. 14
Rent/Mortgage: $0 ............................................................................................................................. 14
Utilities: $3,600 ................................................................................................................................... 14
Shared Services: Administration: $680 ............................................................................................... 15
Shared Services: Comprehensive Services: Placeholder ..................................................................... 15
Liability Insurance: $864 ..................................................................................................................... 15
Debt Service: $5,400 ........................................................................................................................... 15
Food & Supplies: $12,228 ................................................................................................................... 16
Educational Supplies & Equipment: $1,800 ........................................................................................ 16
Repairs to Program-Owned Equipment: $600 .................................................................................... 16
Allowance for Bad Debt and Vacancy: $3,250 .................................................................................... 16
Miscellaneous Expenses: $600 ........................................................................................................... 16
Contribution to Capital Expense Fund - 3% of AGR, Miscellaneous Expenses: $3,250 ...................... 16
Owner's Draw (Provider's Salary): $45,760 ........................................................................................ 16
DEMAND ..................................................................................................................................................... 17
Infant/Toddler ..................................................................................................................................... 17
Preschool............................................................................................................................................. 17
TOTAL COST OF CARE CALCULATIONS ........................................................................................................ 18
Table 4. Cost by Program Type ............................................................................................................... 18
Table 5. Total Cost of High-Quality Care in Vermont .............................................................................. 18
OTHER CONSIDERATIONS: .......................................................................................................................... 19
VARIATIONS FROM “VT COST OF QUALITY CHILD CARE CALCULATOR” ..................................................... 19
Appendix A. BRC High-Quality Definition and Quality Cost Drivers............................................................ 21
Appendix B. Studies on Child Care Demand ............................................................................................... 23
3
Child Care Cost Methodology
August 2016
OVERARCHING METHODOLOGY
1. August: Calculate the cost of high quality care
a. Calculate the cost to fund the whole system based on perceived demand
2. September: Determine what is affordable i.e. what portion of the cost should parents pay for
(tuition)?
a. Calculate the amount that must be funded based on affordability cost i.e. total cost
minus parent tuition= total remaining to be funded
3. October: Determine which financing options to recommend
COST METHODOLOGY
The pricing model for high-quality child care centers and home-based providers is an adjusted version of
the Vermont Cost of Quality Child Care Calculator. The “calculator” is a product of the “Cost of Quality
Child Care Modeling Project” developed by a working group of Vermont-based early childhood
organizations: The Permanent Fund, Let’s Grow Kids, Vermont Birth to Five, and Vermont Community
Loan Fund. The intent of the “calculator” is to allow Vermont Birth to Five and the Vermont Community
Loan fund to “provide technical assistance to child care providers to support them in developing sound
business models while also improving quality.”
For the purposes of estimating the total cost of funding high quality care for all children and families in
Vermont, PCG used the BRC high-quality definitions, decisions on major cost drivers providing high
quality care, and national best practices research to adjust the model.
The model produces the total cost of care for a BRC-defined high quality center and home-based
provider. That cost is then proportionally divided into the age groups served to determine a cost per
child. The cost per child by age group multiplied by perceived demand by age group and type of care
results in the total cost of providing high-quality care to all children birth to five in Vermont.
Figure 1. Cost of High-Quality Care in Vermont Calculation
CENTER-BASED PROVIDER
infant
cost
per
child
x
# of
infants
+
toddler
cost per
child
x
# of
toddlers
+
preschool
cost per
child
x
# of
preschool
+
preschool
cost per
child
x
# of
preschool
+
HOME-BASED PROVIDER
infant
cost
per
child
# of
x
infants
+
toddler
cost per
child
# of
x
toddlers
= total cost
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Child Care Cost Methodology
August 2016
The cost methodology is rooted in the BRC Definition of High Quality Early Care and Education Program
(v. 01.27.2016): Framework synthesized from Federal Head Start Monitoring Protocol, NAEYC
Standards, STARS and NAFCC, which includes the following key cost drivers:
1. Child Health and Safety
2. Early Care, Education and Child Development
3. Family & Community Engagement
4. Leadership & Management Systems1
See Appendix A. for the full BRC definition of high quality care and the cross-walk of the definition and
program cost drivers.
Figure 2. Quality Standards
NAEYC and Head Start regulations are generally more
rigorous than the Vermont QRIS system. PCG took the
NAEYC1
most “conservative” approach by following the
regulations associated with the highest quality
Head Start, Early
standards when estimating cost (expense made by a
Head Start2
high quality program).
VT STARS level-53
2
88 Head Start and Early Head Start programs
3
223 5 Star licensed and registered programs
4
NAEYC: 50, (NAFCC: 11 *Includes 4 programs
“enrolled” and 1 in application)
1
BRC-cost drivers of quality and economies of scale 3.17.16
Count of Head Start programs from Early Childhood Learning & Knowledge Center
https://eclkc.ohs.acf.hhs.gov/hslc/HeadStartOffices?findState=VT&search=true&searchBy=state&language=0&lat=
44.5588028&lng=-72.57784149999998&findRadius=1&findType=1
3
VT 2014 Child Care Market Rate Study
4
NAEYC http://www.naeyc.org/academy/accreditation/search; NAFCC https://www.nafcc.org/AccreditedProvider-Search-Function
2
5
Child Care Cost Methodology
August 2016
CENTER-BASED PROGRAM LINE ITEMS
Below is a summary of the annual expenses for the BRC for a high-quality center-based program.
Table 1. Center-Based Program Expenses
EXPENSES
Gross Salaries
 Infant Staff
 Toddler Staff
 Preschool Staff
 Center Staff
Taxes, Fees, and Employee Benefits
 Federal Tax Liability
 Healthcare
NOTES
TOTAL
2.5 FTE
2.5 FTE
2.5 FTE
3 FTE
$
$
$
$
97,760.00
97,760.00
112,320.00
96,096.00
7.65% of gross salaries
$
$
30,901.10
87,281.86

1.45% of GAI for all positions spread
across 12 months
3% GAI for FT Employees
Assume 1 infant, 1 toddler, and 2
preschoolers
Quarterly
Quarterly field trips, vehicle
maintenance and Staff mileage
reimbursement for work-related travel
$
5,857.07
$
28,236.00
$
21,320.00
$
3,800.00
$
2,520.00
$
$
$
$
1,800.00
43,350.00
1,847.87
12,600.00
$
14,812.80
$
$
$
$
6,996.00
6,000.00
54,330.00
10,200.00
$
3,600.00
$
19,016.88
$
6,557.73
$
$
3,000.00
767,963.31
Workers Comp


Retirement Contribution
Reduced tuition for employee
children
Training & Professional Development
Travel
Staff wellness activities
Rent
Telephone + Internet
Utilities & Services
Shared Services: Administrative
Services
Shared Services: Comprehensive
Services
Liability Insurance
Debt Service
Food and Supplies
Educational supplies & equipment
Repairs to program-owned
equipment
Allowance for bad debt and vacancy
Contribution to Capital Expense Fund
- 1% of AGR
Miscellaneous expenses
TOTAL EXPENSES
Placeholder
Fluctuates monthly based on days open
Assume $25/child per month
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Child Care Cost Methodology
August 2016
PROGRAM OVERVIEW
STAR Level & Quality


Used NAEYC ratios
5 STAR level program (VT QRIS)
Total Children Served: Program Size: 34 Children

Used the average size of a center-based program in Vermont: 33-34 children
Table 2. Average Capacity by Program Type in Vermont
Average Total
Capacity
Licensed - Family Child Care
Licensed school-age
Licensed (Early childhood,
Non-R)
Avg. Infant
12
65
33
Avg.
Toddler
2
0
4
Avg.
Preschool
3
0
4
School-Age
5
0
21
Percent of Population Served Eligible for CCFAP/CACFP: 25%

Based on the VT Working Group’s model research and assumptions: “The models assume that
the program participates in the Child and Adult Care Food Program, which provides free or
reduced meals for eligible children. We assume that 25% of half the infant group (half of those
between the ages of 13 months and 23 months), 25% of toddlers, and 25% of preschoolers
would be eligible for CACFP reimbursement. The model also assumes that half of the CACFP
eligible children qualify for the CACFP free meal rate and half qualify for the reduced meal rate.
Based on 2015–2016 CACFP rules, the program would receive $5.57 per free meal rate eligible
child per day, $4.45 per reduced meal rate eligible child, and $0.65 per non-income qualifying
child for breakfast, lunch and one snack.”
CACFP daily participation FY15: 10,3535
National School Lunch program participation: 49,208
CACFP total participating child care centers (FY14): 1676
CACFP total participating family child care homes (FY14): 460
Total current participation rate in CACFP:
Total daily participation (10,353)/Total children 0-5 (73,214)=14%
Total current participation rate in National School Lunch:
NSLP total participation (49,208)/Total children 6-17 (86,9667)=56.6%
5
Participation data from: http://www.fns.usda.gov/pd/child-nutrition-tables
Center and FCC participation data from: http://frac.org/federal-foodnutrition-programs/child-and-adult-careprogram/
7
School age population data retrieved from:
http://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?src=CF
6
7
1
64
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Child Care Cost Methodology
August 2016
Staff (Child Ratios)

Used NAEYC ratios and age groupings and best practices.
EXPENSES
The following section provides a brief description of the assumptions and rationale used for each line
item expense for a high quality child care center in Vermont. Expenses are for an annual budget unless
otherwise indicated.
Gross Salaries: $403,936 annual

Includes:
o 1 preschool licensed teacher
o 3 teacher associates (1 per class room/age group)
o 3.5 FTE Teacher Assistants: 1.5 FTE Teacher Assistant for Infant and Toddler classrooms
and .5 FTE for Preschool classroom. The full time FTE’s are budgeted for 8 hours a day,
the half extra 1.5 FTE are available to cover the additional 2 hours/day for typical center
operating hours to ensure appropriate staffing ratios are consistently met 2 part-time
o Classroom aide/ Center assistant: 2 part-time to cover a 10 hour a day provider. It is
best practice that a “floater” is available to assist lead teachers and assistants rather
than relying on the director to cover breaks, including lunch. The staff member can
“float” between classrooms of different age groups to ensure appropriate staffing ratios
are consistently met and to provide extra classroom support when activities or
classroom routines are best supported with an additional set of hands. The “floater”
also allows the Program Director to be available to focus on administrative matters and
can help reduce the need for program substitutes.
o 1 substitute, 1 day a week: given the teacher assistant and floater roles, a substitute
should not be needed consistently. It is best practice for programs to have consistent
educators i.e. the teacher assistants and floaters versus a substitute for purposes of
promoting continuity of care.
o 1 program director
Taxes, Fees, and Employee Benefits: $173,596


Based on the VT Working Group’s model research and assumptions; “Workers compensation:
estimated at 1.45% of Gross Salaries. Retirement contribution: For center models, the models
assume employer matching contributions. Reduced tuition for employee children: All of the
models assume that the programs offer a 25% discount on tuition.”
Program pays 80% of monthly premium for FT and 60% of monthly premium for PT for Blue
Cross/Blue Shield HD Gold Plan - Assume 60% of staff participate
Training and professional development: $3,800

$850 quarterly; assumes the use of paid and complimentary professional development training
resources
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Child Care Cost Methodology
August 2016
Travel (field trips, vehicle maintenance) and Staff mileage reimbursement for work-related
travel: $2,520

$630 quarterly; includes travel for program field trips, vehicle maintenance and repair, and staff
mileage reimbursements for work-related travel including professional development workshops
or trainings
Staff wellness activities: $1,800

Based on the VT Working Group’s model research and assumptions ($150/month); “This line
item includes expenses to foster a healthy, collaborative workplace such as providing a meal at a
program’s monthly staff meeting, hosting a staff and family holiday party etc.”
Rent: $43,350

Based on the VT Working Group’s model research and assumptions ($3,612.50/month); “Rent
was estimated based on allowance of 75 square feet of space per child (combines individual
space – space immediately around a child – and shared spaces such as kitchen facilities,
bathrooms and hallways). The center-based models assume that most programs are able to rent
space at the rate of $17 per square foot. Models also assume that the property owner covers
repairs and general building upkeep (new roof, updating flooring on regular basis, etc.).”
Telephone + Internet: $1,848

Based on the VT Working Group’s model research and assumptions ($153.99/month); “The
monthly cost listed is based on Comcast’s small business telephone and internet bundle of
$139.99 plus applicable taxes and fees.”
Utilities & Services: $12,600

Based on the VT Working Group’s model research and assumptions ($1,050/month); “Costs
include utilities such as electricity and/or gas or other heating fuel, and services such as trash
removal, lawn care, and snow removal.”
Shared Services: Administration: $14,813

In the absence of a comprehensive study of a Vermont-based shared services model8, PCG used
an estimated cost for shared services for administrative services using the estimated cost saving
from models from other states.9 Shared services savings are projected between 20-26%, for this
model PCG used 20% cost savings or an expense of 80% of costs. The model calculates 80% of
the cost of administrative fees based on the VT Working Group’s model research and
8
Building Bright Futures is currently exploring a shared services model in Vermont.
(26%) Stoney, L. (2009) Shared Services: A New Business Model to Support Scale and Sustainability in Early Care
and Education. Greenwood Village, CO: David & Laura Merage Foundation
http://www.earlychildhoodfinance.org/downloads/2009/SharedServicesELVreport_2009.pdf
(~20%) Ruble, K., Gruendel, J., Waters, J., Lewis, D. (2009) Greenville County First Steps: South Carolina Shared
Services Model. Greenville, SC: Institute for Child Success.
http://greenvillefirststeps.org/wp-content/uploads/2015/12/Final-Shared-Services-ICS-Proposal-RFS.pdf
9
9
Child Care Cost Methodology
August 2016
assumptions for cleaning and maintenance fees, accounting & legal, advertising + hiring ads,
office supplies & equipment ($18,516 annually).
o Cleaning and maintenance fees (full cost $833/month, shared services cost
$666/month); “Cleaning and maintenance fees assume that the program contracts with
a cleaning service to clean the full facility”
o Accounting & legal (full cost $250/month, shared service cost $200/month); “These
expenses include payroll service, taxes, and any necessary legal consultation.”
o Advertising + hiring ads (full cost $210/month, shared service cost $168/month);
“Expenses include things such as hiring ads and advertising for the program. A budget
for hiring ads is important even in a high-quality center, despite the marginally higher
salaries in high-quality center-based programs, high turnover is a major issue in child
care field.10
o Office supplies & equipment (full cost $250/month, shared service cost $200/month);
“Includes items such as leasing a copier, toner, office paper, pens, etc.”
Shared Services: Comprehensive Services: Placeholder

The BRC’s definition of high-quality child care includes comprehensive services for children and
families receiving care from the program. The comprehensive services include those found in
Head Start and Early Head Start and include but are not limited to screening and referrals,
access to health and dental care, family community engagement activities such as family
stability and well-being, partnerships with families and communities. See Appendix A. for the full
BRC definition of high quality care and the cross-walk of the definition and program cost drivers.
Due to the complexity and range of comprehensive services, PCG has included a placeholder for
the costs that could be most efficiently delivered in VT through a shared services model.
Liability Insurance: $6,996

Based on the VT Working Group’s model research and assumptions ($583/month); “This line
item represents an average monthly cost for liability insurance based on budget models the
work group reviewed and based on past experience providing technical assistance to providers.”
Debt Service: $6,000
 Based on the VT Working Group’s model research and assumptions ($500/month); “Many
programs take out loans to make capital expense purchases. This line represents an average
monthly payment amount for a child care program based on the experience of the Vermont
Community Loan Fund.”
Food & Supplies: $54,330

Based on the VT Working Group’s model research and assumptions (varies by month); “This line
includes only the cost of food items and excludes labor costs associated with food preparation
(salary information for a cook is included in the salary line). Food expenses are estimated at $7
10
Early Childhood Research Quarterly. “Turnover Begets Turnover: An examination of job and occupational
instability among child care center staff.”
https://www.researchgate.net/publication/222623860_Turnover_begets_turnover_An_examination_of_job_and_
occupational_instability_among_child_care_center_staff
10
Child Care Cost Methodology
August 2016
per child per day and include breakfast, lunch and one snack. Food expenses are adjusted to
reflect days the program is closed” (and therefore costs fluctuate month-to-month).
Educational Supplies & Equipment: $10,200

Based on the VT Working Group’s model research and assumptions ($25 per child per month
=$850/month); “These expenses include classroom supplies such as paint, paper, markers,
crayons, etc. as well as resources such as Teaching Strategies GOLD materials, a progress
evaluation tool used by prequalified Pre-K providers, and other programming resources used by
higher STARS recognized programs such as Strengthening Families resources.”
Repairs to Program-Owned Equipment: $3,600
 Based on the VT Working Group’s model research and assumptions ($300/month); “This line
item includes repairs to non-facility equipment such as play equipment, furniture, painting
easels, etc.”
Allowance for Bad Debt and Vacancy: $19,017

Based on the VT Working Group’s model research and assumptions ($1,613/month); “An
industry best practice is to estimate a vacancy rate of 3% per month. This includes all classrooms
plus the adjusted Pre-K tuition payment from the state. Pre-K payment losses are included to
account for losing part of a payment if an eligible child transfers to another program or drops
out of the program.”
Contribution to Capital Expense Fund - 1% of AGR, Miscellaneous expenses: $6,557

Based on the VT Working Group’s model research and assumptions ($546/month); “A best
business practice is to set aside funds for future capital expenses such as new play equipment,
renovations, etc. In the level two and three models, some funding is set aside for this purpose.”
Miscellaneous Expenses: $3,000

Based on the VT Working Group’s model research and assumptions ($250/month); “This line
represents monthly budgeting for small-scale expenses not otherwise covered by the
aforementioned line items.”
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Child Care Cost Methodology
August 2016
HOME-BASED PROGRAM LINE ITEMS
Below is a summary of the annual expenses for the BRC for a high-quality home-based program.
Table 2. Registered Home-Based Program Expenses
EXPENSES
NOTES
TOTAL
Salaries (inclusive of any federal or state taxes)

4hrs/wk for
7wks/academic yr
1/2 day/wk year round
$
3,404.00
$
2,704.00
$
4,200.00
$
$
39.21
1,372.80
$
1,000.00
$
1,992.00
$
$
$
$
$
$
$
1,380.00
3,600.00
680.00
864.00
5,400.00
$
12,228.00
$
1,800.00
Repairs to program equipment
Allowance for bad debt and vacancy
Miscellaneous expenses
Capital Expense Fund Contribution - 3% of AGR
Owner's Draw (Provider's Salary)
$
$
$
$
$
600.00
3,250.08
600.00
3,250.08
45,760.00
TOTAL EXPENSES
$
94,124.17
Pre-K Consulting Teacher
 Regular sub
Employee Benefits
 Healthcare - Assume provider purchases
family plan through Vermont Health Connect
and receives a subsidy
 Workers Comp
 Retirement Contribution - 3% of GMI
Assume $1000/yr for
provider
Gas for field trips,
maintenance, etc.
Tax write-off
Training & Professional Development
Travel
Rent/Mortgage
Telephone + Internet
Utilities
Shared Services: Administration
Shared Services: Comprehensive Services
Liability Insurance
Debt Service
Provider cleans
Placeholder
Fluctuates monthly
based on days open
Assume $20/child per
month @ 7.5 children
Food and Supplies
Educational supplies & equipment
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Child Care Cost Methodology
August 2016
The following section provides a brief description of the assumptions and rationale used for each line
item expense for a high quality registered home-based provider in Vermont.
STAR Level & Quality


Used Vermont Registered-Home Licensing Regulation Ratios
5 STAR level program (VT QRIS)
Total Children Served: Program Size: 9 Children

Used the average size of a registered home-based provider in Vermont11: 9 children (1 infant, 2
toddlers, 3 preschool, 3 school-age children part time)
CACFP: 25%

Based on the VT Working Group’s model research and assumptions; “The models assume that
the program participates in the Child and Adult Care Food Program, which provides free or
reduced meals for eligible children. We assume that 25% of half the infant group (half of those
between the ages of 13 months and 23 months), 25% of toddlers, and 25% of preschoolers
would be eligible for CACFP reimbursement. The model also assumes that half of the CACFP
eligible children qualify for the CACFP free meal rate and half qualify for the reduced meal rate.
Based on 2015–2016 CACFP rules, the program would receive $5.57 per free meal rate eligible
child per day, $4.45 per reduced meal rate eligible child, and $0.65 per non-income qualifying
child for breakfast, lunch and one snack.”
CACFP daily participation FY15: 10,35312
National School Lunch program participation: 49,208
CACFP total participating child care centers (FY14): 16713
CACFP total participating family child care homes (FY14): 460
Total current participation rate in CACFP:
Total daily participation (10,353)/Total children 0-5 (73,214)=14%
Total current participation rate in National School Lunch:
NSLP total participation (49,208)/Total children 6-17 (86,96614)=56.6%
Staff (Child Ratios)
Licensed family child care ratios15
a. a second staff person is present and on duty when the number of children receiving child care
exceeds six (6); and
11
Based on VT Child Development Division Licensing Data
Participation data from: http://www.fns.usda.gov/pd/child-nutrition-tables
13
Center and FCC participation data from: http://frac.org/federal-foodnutrition-programs/child-and-adult-careprogram/
14
School age population data retrieved from:
http://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?src=CF
15
http://dcf.vermont.gov/sites/dcf/files/CDD/Docs/Licensing/Licensed_Family_Child_Care_Regulations.pdf
12
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Child Care Cost Methodology
August 2016
b. there are no more than two children under 24 months of age per staff person; or, when children only
under age 3 are enrolled:
c. there is at least one staff present and on duty when 3 or fewer children are in care; and
d. there are at least two staff persons present and on duty when 4-7 children are in care; and
e. there are at least three staff persons present and on duty when 8 or more children are in care.
EXPENSES
Gross Salaries: $6,108 + $45,760 (Owner’s draw)

Includes
o 1 licensed teacher working part-time for 4 hours/week
o 1 substitute teacher working a ½ day/week (4 hours/week)
o 1 provider/owner (salary included as the “owner’s draw line item expense)
Taxes, Fees, and Employee Benefits: $5,612


Based on the VT Working Group’s model research and assumptions; “Workers compensation:
estimated at 1.45% of Gross Salaries. Retirement contribution: For center models, the models
assume employer matching contributions. Reduced tuition for employee children: All of the
models assume that the programs offer a 25% discount on tuition.” Note: The model assumes
that the licensed (preschool) teacher is a consultant and therefore the worker compensation is
not included
Program pays 80% of monthly premium for FT and 60% of monthly premium for PT for BCBS HD
Gold Plan - Assume 60% of staff participate
Training and Professional Development: $1,000

Based on the VT Working Group’s model research and assumptions ($1,000/year) for the
provider
Travel (field trips, vehicle maintenance) and Staff Mileage Reimbursement for Work-Related
Travel: $1,992

Based on the VT Working Group’s model research and assumptions ($166/month); “includes
travel for program field trips, vehicle maintenance and repair, and staff mileage reimbursements
for work-related travel including professional development workshops or trainings.”
Rent/Mortgage: $0

Based on the VT Working Group’s model research and assumptions ($0); “Assume that the
provider takes a tax write-off for portion of home that is used for program. Therefore, expense
is not included in any of the home models.”
Utilities: $3,600

Based on the VT Working Group’s model research and assumptions ($300/month); “Costs
include utilities such as electricity and/or gas or other heating fuel, and services such as trash
removal, lawn care, and snow removal.”
14
Child Care Cost Methodology
August 2016
Shared Services: Administration: $680

In the absence of a comprehensive study of a Vermont-based shared services model16, PCG used
an estimated cost for shared services for administrative services using the estimated cost saving
from models from other states.17 Shared services savings are projected between 20-26%, for this
model PCG used 20% cost savings or an expense of 80% of costs. The model calculates 80% of
the cost of administrative fees based on the VT Working Group’s model research and
assumptions for cleaning and maintenance fees, accounting & legal, office supplies & equipment
($850 annually).
o Cleaning and maintenance fees (full cost $25/month, shared services cost $20/month);
“Cleaning and maintenance fees assume that the program contracts with a cleaning
service to clean the full facility”
o Accounting & legal (full cost $20.83/month, shared service cost $16.97/month); “These
expenses include payroll service, taxes, and any necessary legal consultation.”
o Office supplies & equipment (full cost $25/month, shared service cost $20/month);
“Includes items such as leasing a copier, toner, office paper, pens, etc.”
Shared Services: Comprehensive Services: Placeholder

The BRC’s definition of high-quality child care includes comprehensive services for children and
families receiving care from the program. The comprehensive services include those found in
Head Start and Early Head Start and include but are not limited to screening and referrals,
access to health and dental care, family community engagement activities such as family
stability and well-being, partnerships with families and communities. See Appendix A. for the full
BRC definition of high quality care and the cross-walk of the definition and program cost drivers.
Due to the complexity and range of comprehensive services, PCG has included a placeholder for
the costs that could be most efficiently delivered in VT through a shared services model.
Liability Insurance: $864

Based on the VT Working Group’s model research and assumptions ($72/month); “This line item
represents an average monthly cost for liability insurance based on budget models the work
group reviewed and based on past experience providing technical assistance to providers.”
Debt Service: $5,400
 Based on the VT Working Group’s model research and assumptions ($450/month); “Many
programs take out loans to make capital expense purchases. This line represents an average
monthly payment amount for a child care program based on the experience of the Vermont
Community Loan Fund.”
16
Building Bright Futures is currently exploring a shared services model in Vermont.
(26%) Stoney, L. (2009) Shared Services: A New Business Model to Support Scale and Sustainability in Early Care
and Education. Greenwood Village, CO: David & Laura Merage Foundation
http://www.earlychildhoodfinance.org/downloads/2009/SharedServicesELVreport_2009.pdf
(~20%) Institute for Child Success (2009) Greenville County First Steps: South Carolina Shared Services Model.
Greenville, SC: Institute for Child Success.
http://greenvillefirststeps.org/wp-content/uploads/2015/12/Final-Shared-Services-ICS-Proposal-RFS.pdf
17
15
Child Care Cost Methodology
August 2016
Food & Supplies: $12,228

Based on the VT Working Group’s model research and assumptions (varies by month); “This line
includes the cost of food items. For infants eating solid foods, toddlers, and preschoolers, food
expenses are estimated at $7 per child per day and include breakfast, lunch and one snack. For
part-time school-age children, food expenses are estimated at $1 per child per day for one
snack. It is also assumed that the provider is responsible for food preparation. Food expenses
are adjusted to reflect days the program is closed. Some programs spend more than this each
day, especially if the program provides organic and/or locally sourced food options.”
Educational Supplies & Equipment: $1,800

Based on the VT Working Group’s model research and assumptions ($20 per child per month
=$150/month); “These expenses include classroom supplies such as paint, paper, markers,
crayons, etc. as well as resources such as Teaching Strategies GOLD materials, a progress
evaluation tool used by prequalified Pre-K providers, and other programming resources used by
higher STARS recognized programs such as Strengthening Families resources.”
Repairs to Program-Owned Equipment: $600
 Based on the VT Working Group’s model research and assumptions ($50/month); “This line item
includes repairs to non-facility equipment such as play equipment, furniture, painting easels,
etc.”
Allowance for Bad Debt and Vacancy: $3,250

Based on the VT Working Group’s model research and assumptions ($248/month); An industry
best practice is to estimate a vacancy rate of 3% per month. This includes all classrooms plus the
adjusted Pre-K tuition payment from the state. Pre-K payment losses are included to account for
losing part of a payment if an eligible child transfers to another program or drops out of the
program.”
Miscellaneous Expenses: $600

Based on the VT Working Group’s model research and assumptions ($50/month); “This line
represents monthly budgeting for small-scale expenses not otherwise covered by the
aforementioned line items.”
Contribution to Capital Expense Fund - 3% of AGR, Miscellaneous Expenses: $3,250

Based on the VT Working Group’s model research and assumptions ($271/month); “A best
business practice is to set aside funds for future capital expenses such as new play equipment,
renovations, etc. In the level two and three models, some funding is set aside for this purpose.”
Owner's Draw (Provider's Salary): $45,760

Based on the VT Working Group’s model research and assumptions ($3,813/month); this is the
owner/program director’s salary
16
Child Care Cost Methodology
August 2016
DEMAND
Figure 3. Demand by Type of Care
Infant/Toddler


Used the total number of children in VT birth
to five from Kids Count Data Center18
For infant and toddler care, used the
National Study of Low Income Families to
estimate the demand by type of care: 24.7%
for center-based care and non-relative
home-based child care 25.7%. See figure 2.19
Preschool

Used the Census Bureau as the source of
demand of 32.9% for all non-relative care; 25.2% for center-based settings and 13% for
family/home-based programs. Historically, parents and families rely on preschool-aged child
care more than infant, toddler care. The National Study of Low Income Families focuses on
demand for child care for younger ages.
PCG conducted a review of national best practices for estimating demand using current parent and
family trend in choice of care. Please see Appendix B. for the summary of studies considered.
18
Kids Count Data Center. Child Population by Single Age. http://www.datacenter.aecf.org/data/tables/100-childpopulation-by-singleage?loc=47&loct=2#detailed/2/47/false/869,36,868,867,133/42,43,44,45,46,47,48,49,50,51,52,53,54,55,56,57,58,
59,60,61/418
19
Administration for Children and Families. Office of Planning, Research & Evaluation. “National Study of Child
Care of Low-Income Families 1997-2007. http://www.acf.hhs.gov/opre/research/project/national-study-of-childcare-of-low-income-families-1997-2007
17
Child Care Cost Methodology
August 2016
TOTAL COST OF CARE CALCULATIONS
Table 4. Cost by Program Type
CENTER-BASED MODEL
Cost of Operations
Enrollment
# of
Age Groups
children
Cost per age group
Cost per child
Infant
Toddler
Preschool
$
$
$
$
$
$
Age Groups
Infant = <1
Toddler = 1 & 2
Preschool = 3,4,5
8
8
18
Total
Children
6,023
12,224
18,360
$
255,987.77
255,987.77
255,987.77
Perceived Demand
For all Non-Relative
24.7%
24.7%
25.2%
767,963.31
34
31,998.47
31,998.47
14,221.54
REGISTERED-HOME MODEL
Cost of Operations
Enrollment
# of
Age Groups
Children
Infant
Toddler
Preschool
School-Age
Children (PT)*
1
2
3
$
Cost per age group
Cost per child
$
$
$
$
$
$
31,374.72
31,374.72
31,374.72
3
31,374.72
15,687.36
10,458.24
$
31,374.72
$
10,458.24
Total
Perceived Demand
Age groups
Children For all Non-Relative
Total # of Children
Infant = <1
6,023
19.8%
1,193
Toddler = 1 & 2
12,224
19.8%
2,420
Preschool = 3,4,5
18,360
13.0%
2,387
*The cost of school-age care is not included in the overall cost of care
calculation
Total # of Children
1,488
3,019
4,627
Table 5. Total Cost of High-Quality Care in Vermont
Cost of Infant, Toddler Licensed Center-Based Child Care
Center Infant
# of
Toddler Cost per
# of
+
Cost per Child
Infants
Child
toddlers
$
31,998.47
1,488
$
31,998.47
3,019
+
Cost of Infant, Toddler Licensed Family Child Care
Family Infant
# of
Toddler Cost per
+
Cost Per Child
Infants
Child
$
31,494.72
1,193
$
15,687.36
+
# of
toddlers
2,420
94,484.17
9
PreK Cost per
Child
$
14,221.54
# of Prek
4,627
PreK Cost per
Child
$
10,458.24
# of
Toddlers
2,387
=
=
=
18
Total Center Cost
$210,016,494.31
Total Family Cost
$100,346,718.88
GRAND TOTAL
$310,363,213.19
Child Care Cost Methodology
August 2016
OTHER CONSIDERATIONS:


The center-based model is based on a full-time enrollment model
We know center-based programs serve school-aged and vacation (summer and winter) care but
this is not included in the model. There are many variations of school-aged services provided by
center-based programs. Not the VT Working Group also did not include before and after-school
time care in the center-based model.
VARIATIONS FROM “VT COST OF QUALITY CHILD CARE CALCULATOR”



Program Size: Based on Vermont CCD’s data on the average size of programs
Staffing:
o For center-based, included a floater (assistant) to ensure appropriate ratios at all times
and to have a floater for the additional hours outside of the 8-hour program time (most
program opens for about 10 hours/day)
o For registered home, reduce the time of a substitute
Staff Ratios (center only): Adjusted ratios based on NAEYC
Table 6. Staff Ratios
Age Group
Infant
Toddler
Preschoolers
VT Working Group Model
NAEYC20
1:3
2:7
1:9
1:4
1:4
1:9

Shared Services: consolidated administrative services
into an estimated shared service cost
 Training & Professional Development (center only):
Adjusted from monthly expenditure of $850 to
quarterly. Although monthly training could be
beneficial to staff, PCG believes that realistically staff
will not be able to attend monthly, rather, quarterly is
more likely. Additionally, there are a number of free
professional development resources provided
 Travel (field trips, vehicle maintenance) and Staff
mileage reimbursement for work-related travel:
Adjusted from monthly expenditure of $630 to quarterly
 Loss on CCFAP co-pays: Removed this loss completely as an expense. A high quality child care
center or family home with a sustainable business model should not account for a loss; the
program should operate under full enrolment, full fee collection and revenues should cover perchild cost; the balance - the “iron triangle”21
20
National Association for the Education of Young Children. Teacher Child Ratio Chart.
http://www.naeyc.org/academy/files/academy/file/Teacher_Child_Ratio_Chart.pdf
21
Alliance for Early Childhood Finance. “The Iron Triangle: A Simple Formula for Financial Poicy in ECE Programs.
http://www.paeyc.org/files/pages/attachments/IronTriangle%20handout.pdf
19
Child Care Cost Methodology

August 2016
Workers compensation (home-based only): Removed workers’ compensation for the pre-school
teacher which is assumed to be a contractor (working 4 hours/week)
20
Child Care Cost Methodology
August 2016
Appendix A. BRC High-Quality Definition and Quality Cost Drivers
Blue Ribbon Commission on Financing High-Quality Affordable Child Care. Definition of High Quality
Early Care and Education Program (v. 01.27.2016). Framework synthesized from Federal Head Start
Monitoring Protocol, NAEYC Standards, STARS and NAFCC
High quality early childhood programs in Vermont strive to realize the promise of each child. These
programs focus on: Child Health and Safety; Early Care, Education and Child Development; Family and
Community Engagement; and Leadership and Management Systems. These programs seek to move up
the quality continuum in STARS and to achieve high quality standards as indicated by 5 STARS,
Accreditation or Federal Head Start Monitoring.
1. Child Health & Safety
a. Screening and Referrals: health, developmental and behavioral
b. Environmental health & safety
c. Food & nutrition
d. Assuring child and family access to Health and Dental Care
e. Healthy Practices and Routines
f. Appropriate Group Sizes, Ratios and Supervision
g. Safe Transportation
2. Early Care, Education and Child Development
a. Relationships and Teaching Practices
i. CLASS / teacher-child interactions
ii. Pyramid model / EMTSS / MTSS
b. Curriculum and assessment
c. Individualization
d. Services for children with special needs
e. Cultural and linguistic responsiveness
f. Transitions and school readiness
3. Family and Community Engagement
a. Family stability and well-being
b. Partnerships with Families
c. Parent-Child Relationships
d. Parents as Their Child’s Educators
e. Community Partnerships
4. Leadership and management systems
a. Governance
b. Fiscal stability and integrity
c. Human resources
i. Credentials, training, professional development
ii. Compensation and benefits
iii. Practice-based coaching
d. Facilities, materials and equipment
e. Enrollment practices
21
Child Care Cost Methodology
August 2016
Table 6. BRC High-Quality Child Care Definition Cost Drivers
Cost Drivers in ECE
Programs
Wages & Benefits
Classroom Staff
Child Health & Safety
Appropriate Group Sizes,
Ratios and Supervision
(staffing patterns)
Early Care, Education and
Child Development
Relationships and Teaching
Practices
Individualization
Cultural and linguistic
responsiveness
Family & Community
Engagement
Partnerships with Families
Wages & Benefits
Management Staff
Wages & Benefits
Other Support Staff
Occupancy
including cleaning
services
Food & Supplies
Program Materials
Administration Costs
Professional
Development
Other Operating Costs
Leadership & Management
Systems
Compensation and benefits
Governance, mission and
vision
Fiscal stability and integrity
Supervision, evaluation and
leadership development
Enrollment systems and
practices
Screening and Referrals:
health, sensory,
developmental and
behavioral
Assuring access to health &
dental care
Environmental Health &
Safety
Services for children with
special needs
Transitions and school
readiness
Food & nutrition
Family stability and wellbeing
Parent-Child Relationships
Parents as Their Child’s
Educators
Community Partnerships
Practice-based coaching
Equity, access and
inclusionary practices
Facilities
Food & nutrition
Curriculum and assessment
Materials & Equipment
Credentials, training,
professional development
Safe and reliable
Transportation
22
Child Care Cost Methodology
August 2016
Appendix B. Studies on Child Care Demand
PCG conducted a review of national best practices for estimating demand using current parent and
family trend in choice of care. Please see Appendix B. for the summary of studies considered.
Table 7. Best Practice Research Demand for Child Care Figures
Source & Time
Period
Population(s)
NonRelative
Family
Child
Care
Homes
NonRelative
Child
Care
Center
Relative
(NonParental)
Care, either
in Relative or
Child’s Home
No
Demand
(Au Pair,
Nanny,
Parental)
or
Unknown
Total
Used in the BRC Cost of Care Model
National Study
of Low Income
Families22
(2007)
Children Ages
1 – 12, under
200% of FPL
24.7%
19.8%
49.6%
5.9%
100%
U.S. Census
Bureau23 (2011)
All Children
Under 5 (in
regular
arrangements)
25.2%
13%
26.6%
35.2%
100%
Other Research
National Study
of Low Income
Families (2007)
National Study
of Low Income
Families (2007)
National Study
of Low Income
Families (2007)
National
Household
Education
Survey (2001)24
Children Ages
3 – 4, under
200% of FPL
Children Ages
1 – 2, under
200% of FPL
Children
Under 1,
under 200% of
FPL
Children
Under 6
38.7%
20.1%
38.9%
2.3%
100%
27.6%
20.6%
47.5%
4.4%
100%
18.9%
21.0%
50.7%
9.4%
100%
49%
23%
22
28% (includes all relative
home-based care)
100%
Burstein, N., Layzer, J. (2007) National Study of Child Care for Low-Income Families: Patterns of Child Care Use
Among Low-Income Families. Cambridge, MA: Abt Associates Inc.
23
Laughlin, L. (2013) Who’s Minding the Kids? Child Care Arrangements: Spring 2011. Washington, DC: U.S. Census
Bureau
24
Kinukawa, A., Guzman, L., & Lippman, L. (2004). National estimates of child care subsidy receipt for children ages
0-6: What can we learn from the National Household Education Survey? Washington, DC: Child Trends.
23
Child Care Cost Methodology
Source & Time
Period
August 2016
Population(s)
NonRelative
Child
Care
Center
NonRelative
Family
Child
Care
Homes
Relative
(NonParental)
Care, either
in Relative or
Child’s Home
No
Demand
(Au Pair,
Nanny,
Parental)
or
Unknown
Total
50%
100%
50%
(remainder)
100%
29.6%
(remainder)
100%
National
Household
Education
Survey (2001)25
Children
Under 2
N/A
N/A
~50%
(estimate for
Family,
Friend, and
Neighbor
Care)
ECLS-B26 (2004)
Children Birth
– 9 months
9%
15%
26%
Stalled at the
Start –
Children under
Vermont’s Child
6
Care Challenge27
(2016)
Indicated that 70.4% of VT children
under six have all parents or
caregivers in the workforce; does not
differentiate between Center-based
and Family Home Child Care.
25
Brandon, R. N. (2005). Enhancing family, friend, and neighbor caregiving quality: The research case for public
engagement. Seattle: University of Washington, Human Services Policy Center.
26
Flanagan, K., & West, J. (2004). Children born in 2001 first results from the base year of the Early Childhood
Longitudinal Study, Birth Cohort (ECLS-B). Washington, DC: U.S. Department of Education Institute of Education
Sciences.
27
Let’s Grow Kids (2016). STALLED at the START Vermont’s Child Care Challenge: An Analysis of the Supply of and
Demand for Regulated Infant and Toddler Care in Vermont. Burlington, VT: Let’s Grow Kids
24