RECAP: October EEC Board Meeting—Setting Subsidy Reimbursement Rates

At Neighborhood Villages, we prioritize keeping up with the policy landscape in the early education and care field, both across the country and in Massachusetts. That includes tuning-in to the monthly meetings of the Massachusetts Board of Early Education and Care (EEC) to stay apprised of updates and to identify opportunities for how we can work with government and other stakeholders to improve our early education and care system.  

This month’s EEC meeting focused on what the new child care subsidy reimbursement rate should be for providers participating in the subsidy system. This is a complex system, but at its core, the subsidy system provides eligible low-income families with subsidies from the government to cover some or all of the costs of child care. Subsidy reimbursement rates are the amounts of money that child care providers receive for providing education and care to eligible low-income families who pay reduced or no tuition. The way the system works is that providers cover the cost to care for the child and are then reimbursed by the state with an amount that accounts for program type, the child's age, the location of care, and the type of care.  

During the October Board meeting, EEC Acting Commissioner Amy Kershaw discussed the opportunities and constraints associated with the federal Child Care Development Block Grant program, which governs Massachusetts’ child care subsidy system. Under this program, the federal government requires the following:

●      Federal law mandates that EEC set provider subsidy payment rates based on either a “market rate survey” (MRS) or an “alternative cost methodology.” Market Rate Surveys detail tuition prices being charged to families by providers in the child care marketplace. They are intended to determine what the “going rate” is for child care in a given region. Because Massachusetts has not created an alternative cost methodology, EEC relies on a MRS to set state rates.  (Note: it’s well understood that the MRS is a flawed approach to capturing the true cost of care. But, it’s what we have for now, until Massachusetts transitions to an alternative cost methodology.)

●      States must then base their subsidy payment rates on the results of its most recent MRS. The federal government recommends that a state's subsidy reimbursement rate be at the 75th percentile of the market. In other words, the subsidy reimbursement rate should be greater than or equal to the tuition at or below which three-quarters of child care providers reported charging families.

●      Despite this recommendation, the current subsidy reimbursement rates in Massachusetts mostly fall below the 50th percentile, with many below the 25th percentile. Under federal law, rates cannot be set lower than the 25th percentile. (It’s expected that this floor may be raised soon, with the federal government enforcing a higher minimum rate level.)

What EEC is Now Recommending for Massachusetts

In the Fiscal Year 2023 (FY23) state budget, Massachusetts allocated an additional $60 million to be used for raising the base rate (set by the results of the last MRS) for providers participating in the state subsidy system. Of this $60 million, $20 million is specifically for a “rate increase” for child care programs in regions below the 30th percentile of market rate and $40 million is available to increase the base rate across the board.

 At the Board meeting, Commissioner Kershaw proposed that the Board approve allocating the $60 million such that all child care providers in the subsidy system would receive an approximately 9% increase over current rates. This increase is expected to elevate everyone to at least the 30th percentile of market rates, as well as achieve an across-the-board bump in rates.

 In addition, the state would allocate another approximately $22 million (from a separate EEC funding stream) to support rate increases specifically for Family Child Care programs and to increase the daily add-on rate for supportive, teen, and homeless contracts.

 This is good news: at Neighborhood Villages, we have long been advocating for updates to the state’s subsidy rate structure so that it accurately reflects the true cost of providing high-quality early education and care to lower-income and other at-risk children. While achieving reimbursement for the true cost of care requires developing an alternative cost methodology – and then appropriating sufficient state funds to cover that cost – this increase to the child care subsidy reimbursement rate is a step in the right direction.

 The Board will vote on its proposal at the next meeting in November. We will be tuning in of course, and will provide an update after that meeting. Stay tuned!