Financing Strategies for Early Learning & Development Programs and Practitioners

1. Financing Strategies for Early Learning & Development Programs and Practitioners Finance Learning Table, Session 3 Louise Stoney and Anne Mitchell Alliance for Early Childhood Finance

2. 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 @ 39% of total, and is primarily portable $ (vouchers or tax benefits)

3. 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 + 3rd party funding)

4. 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

5. 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

6. Example Provider-Level Output Center: 106 children, infants, toddlers and preschoolers

7. Quantify the Gap in $

8. Quantify the Gap as %

9. 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

10. 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…

12. 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) Financing ELD ProgramsTotal Revenue = Portable + Direct Assistance

13. Hypothetical QRIS Supports -- Finance and TA

14. Higher Dependent Care Tax Credit • ECE Occupational Tax Credit • Other business or individual tax • benefits • All inked to standards Department of Tax and Finance • Tiered Reimbursement Rates for child care • Training and quality grants • linked to standards Dept of Human Services • Pre-K funding • Early Intervention • Professional Licensing • Early Childhood Food and • Nutrition Programs • All linked to standards Department of Education QRIS Standards Funds for child care centers at the courts or delinquency prevention linked to standards Judiciary/ Court Administration Standards for Programs Standards for Practitioners • Health & Safety training • Healthy Child Care America TA and supports • All linked to standards Department of Health Learning Guidelines (Outcomes for Children) Agreement with Federal Regional Office to create administrative/fiscal links to common standards Head Start Funds for construction of ECE facilities linked to standards Quasi-Public Construction Authority • Campus-based child • care programs • Practitioner education • All linked to standards Higher Education Agreements with United Way, community foundations, etc. to link $ to common standards Private Sector

15. 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.

16. 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?

17. 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

18. Shared Services Services provided by Hub: Administrative services Classroom supports Comprehensive services Fundraising Staff recruitment/screening Bulk purchasing Human resources Research and development

19. 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.

20. 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

21. Thank You National Center on Child Care Quality Improvement NCCCQI does not endorse any non-Federal organization, publication, or resource. • Follow-up Contacts: • anne.walsh.mitchell@gmail.com • louise.stoney@gmail.com • Dmathias@buildinitiative.org • OCCQualityCenter@icfi.com • www.qrisnetwork.org