Cost of Care Study
Cost of care studies, sometimes called cost estimation models, explore the actual costs child care businesses experience when caring for children. Understanding the true cost of providing child care is critical to developing a child care system that meets the needs of children, families, and providers.
First Children’s Finance has developed Cost of Care Study methodology informed by child care business owners and administrators, using key business data to inform child care subsidy rates. A growing number of states use true cost of quality models as an alternative methodology for subsidy rate setting. Let us help your state agency think comprehensively about policies and funding that impact the sustainability of child care businesses.
Our Work in Minnesota
In Fall 2023, the Minnesota Department of Human Services (DHS) released the 2023 Minnesota Child Care Cost Modeling Report, completed by First Children’s Finance. This report calculates how costs for providing care varied based on the age of children served, geographic location, license type, and quality of care. DHS will use the study to explore new approaches to setting Child Care Assistance Program (CCAP) payment rates. This study predates the 2023 legislative directives to develop potential plans to set CCAP rates using the cost model. This study serves as a foundation for future iterations of the cost model, which will be updated and adapted to meet this directive.
Minnesota Child Care Cost Modeling
FCF developed this cost model for the Minnesota Department of Human Services. The model estimates the average cost of care for children and how these costs vary based on the age, geographic location, license type and quality of care, of the children served.
What are Provider Briefs?
FCF has developed a provider brief to share back some of what we learned in the Cost of Care study. These briefs summarize some of the business data we analyzed throughout the study and outlines key findings and average costs for family child care providers.
Why It Matters
Most states use a Market Rate Survey to determine the price of child care services. Studies have shown that for many child care businesses, the price of tuition does not reflect the cost of providing care. Many providers set tuition rates based on what local families can afford and may balance their budgets by offering low wages, or by not paying themselves.
Setting subsidy rates based only on price, without understanding costs, can perpetuate the underfunding of child care, especially in low-income and historically disenfranchised communities.
The approach we take for our studies is rooted in the experience and expertise of those who live and work every day in child care. The entrepreneurs running their businesses know the cost of doing business and how these amounts change. Our approach prioritizes provider input in the following ways:
- An advisory group of child care business owners guide the study
- Providers will have opportunities to ask questions, give input, and share concerns through community conversations which will be hosted across the state
- Providers can to contribute to the study through a short survey or private, one-on-one conversations
- FCF understands the sensitivity of business information and maintains high data security standards and commitment to provider privacy and confidentiality.