Response to the Proposed Funding Formula

The purpose of a child care funding formula is to provide guarantees of appropriate levels of funding to enable

• current programs to continue to operate effectively
• rapid growth in the not-for-profit and public sectors.

   

The issues raised in the proposed funding formula are more fundamental than whether “the ministry has considered all the appropriate parameters and which ones may be missing”.

Problems with the Proposed Funding Formula

Inputs vs Outputs

The funding formulas that work the best are based on outputs rather than on its inputs. The Ministry of Education’s own schools funding formula and the Early Learning and Child Care system in Quebec are examples of this type.  Both these systems base their funding models on per diems/per unit of service with adjustments for extra costs and unusual situations.  The Ontario proposed 2024 Child Care funding formula is based on inputs, accommodation costs, and operating costs.  This approach is excessively bureaucratic and does not give much discretion to operators.  

Because staff compensation costs are the largest component of the costs of the service, a funding formula based on a per diem/per unit of service cost requires that wage rates and other compensation are similar across all operators. Operators would be paying staff according to a wage grid to ensure consistency in costs.  With a wage grid compensation rates will need to be significantly higher than now. 

Averages vs Ranges

Canada and Manitoba announce $56.1 million for wage increases to support early learning and child-care workers across Manitoba

What are the Ministry’s “average base wage rates” based on? The wage rates being collected now for 2022 collect a “wage range”, but that doesn’t reflect what the average wage rate is – the average for any operator could be at the very top of that range. Does this “average base wage rate” cover only children aged 0-5 and not children from 0-12? How does it take into account the different hours worked by different staff?  The average wage should be calculated as a weighted average wage for RECE staff with the weights being the different number of hours worked by different staff.

Competition with other jurisdictions with wage grids

As we have indicated above, there are clearly very significant retention and recruitment issues at prevailing wage and benefit rates.  Even wage rates for ECEs in Newfoundland – where the cost of living is much lower than in Ontario – are now considerably higher than in Ontario. The funding formula should be based on a target wage grid at much higher wages and operators should be invited to calculate compensation costs based on this wage grid.

Time worked should be time funded

The staffing grant is not based on the expected number of hours worked but on the expected number of hours and days that the centre will be open.  

The formula seems to assume full-year attendance for kindergarten children, though many children of this age do not actually attend during summer hours and days.  The formula will give an advantage to centres where children attend less than full-time hours because the formula will pay for the number of staff required as if the child was present for all hours the centre is open.   

No annual increase in wage costs

An annual wage cost increase has been alluded to as part of the formula but has not been specified.  This should be inflation plus a generous percentage, so that centres will be in a position to pay their staff appropriate compensation to catch up to staff in unionized environments.   

Staffing at different levels

The program staffing grant formula is based on the percentage of program staff who are RECEs and the percent that are not RECEs, not on the hours worked by those staff. In the case where staff are given director’s approvals to work as an RECE does the Ministry have any knowledge as to whether these staff members are earning at the rate of an RECE, the rate of a non-qualified staff, or somewhere in between? 

Only one FTE supervisor is allowed (e.g., for 7.5 hours per day) and no assistant supervisor.  This does not account for all the hours a centre is open in a day, let alone the need for more supervisory staff in larger centres.

There is no allocation for pedagogues that are above required ratios.

The supervisor’s wage appears to be based on an outdated average from a previous survey, rather than the past wage or necessary future wage.  If there was a salary grid, supervisors could also be compensated according to their qualifications and years of experience. 

Training, Prep time, Professional Development

The program staffing grant does not include any allowance for training and professional development or covering absences for professional development.

The program staffing grant does not make any explicit allowance for planning time for RECEs and staff meeting time.

Accommodation grant issues

The accommodation grant formula is based on gross floor area.  Does this include playground space?   

How will this accommodation formula take into account capital renewal and capital maintenance?  Will the typical rental rate be based on new facilities or old facilities?

The accommodation formula should distinguish between for-profit and not-for-profit.  For-profits may own their own building or may have an interest in the value of the property. Government accommodation funding would increase the value of their private real estate.  Not-for-profits don’t keep these increases in value because their assets stay in public hands.  There should be very tight rules on accommodation grants for for-profits that have any financial interest in their premises. 

The proposed formula has no recognition of the considerably larger costs going forward that are due to administration and reporting requirements.  This should be an explicit part of the operating grant.

Child care subsidies

The funding formula is silent on what will happen to future funding for children whose families receive child care subsidies with no explicit commitment about child care subsidies directed at low-income families and families otherwise in need.  As the parent fee for licensed services is lowered, a growing percentage of available spaces will be taken by families whose incomes are above subsidy-eligible levels. 

Providing high quality care for subsidized children may take extra staff time and result in higher costs.  If the funding formula does not reward centres who take subsidized children with extra funding, subsidized children will tend to get squeezed out.  It may also be necessary to take other measures to ensure that children receiving subsidies and other prioritized children are at the front of the line for available spaces.

The role of CMSMs and DSSABs

The proposed funding formula makes CMSMs and DSSABs into flow-through agencies for the distribution of funds, rather than service system managers.  Previously, CMSMs and DSSABs have played a key role in defining and funding local child care priorities.  The new funding formula should restore some of this local funding discretion, allowing municipalities with long subsidy waiting lists to direct more funding to these families, allowing other municipalities to direct more funding to children with special needs, to centres serving Indigenous children, to centres increasing accessibility for rural families, etc.

Principles Upon Which the Funding Formula Should Be Based

The funding formula should:

• cover all the legitimate operating costs of a centre providing quality licensed child care services at or above regulatory minimums for children 0-5 across Ontario;

• cover compensation costs for Registered Early Childhood Educators, assistants, pedagogue, and supervisors at wage and benefit rates that are competitive with other occupations requiring similar education, training and practicum requirements such that early learning and child care in Ontario is not characterized by staff shortages;

• reward and encourage ongoing professional development and increased educational qualifications of both early childhood educators and assistants;

   

• provide for extra compensation for early childhood educators with special qualifications such as special needs qualifications and pedagogue qualifications;

• give operators discretion in decisions about the expenditure of allocated funds (ability to transfer funds across grant categories), but also require operators to report in detail at year-end about how funding has been spent, and adjust funding amounts as necessary;

• adopt a desired wage grid and a timeline over which to achieve it.  The funding formula should require operators to pay wages and benefits at or above the adopted wage and benefit rates;

• recognize sources of additional legitimate costs, such as providing care to a large number of children with special needs, even if not diagnosed, or caring for a large number of subsidized children living in disadvantaged circumstances or providing extended hours of care;

• recognize higher costs per child that come from operating a small centre in a rural or remote area;

• distinguish between legitimate and illegitimate reasons for having higher than normal occupancy costs;

• encourage expansion, especially within existing facilities.  So, for instance, the formula should be based on licensed capacity (or the expected number of enrolled spaces) in order to encourage operators to expand their programs. 

   

• Introduce a “reconciliation” process so that centres that have not used their funds in the current years will have their funds adjusted at year end or in the following year.