As we have written about in the past, the rates at which Delaware funds child care remain too low for providers to support quality—let alone to cover basic costs required to operate, like paying staff, rising wages and costs, driven by minimum wage increases and inflation.

Delaware has long relied on a “market rate” study to set those rates. That study process has come under fire since it reflects what parents are able to pay in tuition. As a result, the state is moving toward utilizing a cost of care methodology—a study that examines what it actually costs to provide quality care.

What’s Underway and What Can We Expect

The Delaware Department of Health and Social Services is currently conducting both studies—and there are opportunities for child care programs to provide input in the coming weeks on “what it truly costs to provide quality child care—not just what families can afford.” Both studies are due later this spring.

Typically, the state has conducted a market rate study each year, and rates typically go up two to three percent per year or about nine to 10 percent every three years.

We anticipate the cost estimation to rise based on increases, including in:

• Minimum wage, which will have gone up 50 percent in January since 2020 (from $9.725 to $15/hour), causing other wages to increase. In an ideal system, child care workers would be paid on a target compensation scale on par with K-12 public educators).
• Hiring needs, because new hires don’t always show up when expected and turnover is significant.
• Behavioral challenges from children and increased developmental delays identified.
• Requirements to meet quality standards of the state, which are important for child development and still not yet high enough. One example is greater family service coordination to support wraparound care for families as well as qualification requirements for educators.

What’s Next

Based on the results of the studies, the policy- and budget-making process requires rate changes. For example, the budget epilogue last year indicated that Purchase of Care rates should be set at 100 percent of the 75^th percentile of the 2021 market rate—which would necessitate change to 2024 rates. And the Department of Education determined that state funded pre-K (ECAP) would be based on the 2021 cost of care rates for FY24, but FY25 remains to be determined.

1. Early care and education programs, participate in cost of care info sessions.
   1. Prenatal to Five Fiscal Strategies (P5FS) is seeking input on the cost of child care from early care and education providers, including child care centers and family child care homes, to help inform Delaware’s child care subsidy payment rates. Make your voice heard by participating in a Virtual Input Session.
2. Stay tuned for the release of the 2024 Market Rate Study and Cost of Care Estimation Model (both anticipated March/April). Sign up for the Delaware Early Childhood Council newsletter for updates and related events.
3. Advocate for Increased Rates during the FY25 Budget Development.
   1. Reach out to legislators through this platform or directly to tell them to increase investments.
      1. The Joint Finance Committee, which builds on the Governor’s Recommended Budget, meets again starting May 28.
   2. Save the date: Early Childhood Advocacy Day will be May 16 in Dover.

The Delaware Business Roundtable recently released its Delaware Investment Agenda, a series of priorities and recommendations focused on investing long-term to build Delaware’s economy—with a particular focus on collaboration across siloes and sectors. The 2016 Growth Agenda informed the creation of the Delaware Prosperity Partnership when Governor John Carney took office, and the aspiration is that the 2024 Investment Agenda informs the state’s priorities beyond a single four-year election cycle.

A major strategic recommendation found in the Investment Agenda is to “Support equitable investment in early childhood education to increase access.” It’s the only recommendation related to education before higher education and workforce development. The Agenda mentions two primary reasons to invest early:

1. Removing child care as barrier to employment. The report sees increasing availability and affordability of early childhood education as a key strategy to supporting workforce participation, noting its impact on retention and post-pandemic labor force participation.

2. Improving education outcomes by supporting children’s development during their most formative years. Looking long-term, the Agenda recommends investments for the future workforce of the state. Such investments would generate “substantial benefits for all, including better educational outcomes for historically disadvantaged students in the state….[which] is crucial to Delaware’s economic future.”

The report notes “a compelling need to invest in this space,” as six out of seven young children in Delaware are unable to access early childhood education, adding, “Delaware must implement strategies to stabilize and expand access to and affordability of early childhood education.” 

The recommendations are solid strategies for improving access and affordability for Delaware’s parents in the workforce. Those include:

• Expand Eligibility for State Funded Child Care: “Ensure wider access to early childhood education by expanding support to families earning over 200 percent of the federal poverty level (FPL). Currently Delaware provides support to families earning between 185 and 200 percent of FPL.”
  • Rodel and a coalition of partners have recommend going to at least 250 percent of the Federal Poverty Level. All of Delaware’s neighboring states set easier benchmarks for access.
• “Invest in the early childhood education workforce through apprenticeship models, professional development, support for obtaining professional credentials, and equitable compensation and benefits.”

The state has made investments in workforce development, including recent investments in the Early Childhood Innovation Center at Delaware State University. Delaware has a long way to go to invest in programs sufficiently so they can provide equitable compensation and benefits (as recommended in the state target compensation scale).

• Invest in high-quality programs. “Continue to support evidence-based curricula, screening, and assessments (STAR Quality rating) to ensure program quality across early childhood education programs. The Kingswood Early Learning Academy is an example of an early childhood education program that has improved outcomes with this approach.”
  • Although STARs is no longer underway, the state is funding quality through its pre-K Early Childhood Assistance Program (ECAP), which aligns with Head Start quality standards, and through quality improvement awards.

The report also recommends a public-private partnership like the Michigan Tri-Share Child Care program that splits the cost of childcare equally between an employer, the employee, and the state. (Another model to consider is the Wisconsin Partner Up model, which focuses on the true cost of child care.) The model is growing slowly and presents challenges associated with employer-sponsored care, which offers child care to those who are fortunate enough to be employed by a specific employer.

Rodel and partners have long advocated that Delaware should treat early childhood care and education like a public good, investing as a state—and country—as we do for children when they turn five in public schools, like most developed countries do. National experts and research highlight that these selective approaches can reinforce inequities and rather propose a focus on the more systemic approaches laid out in the above recommendations.

The Investment Agenda reinforces Delaware business support of greater investment, including the Delaware Business Roundtable Education Committee prioritizing the issue for over a decade. In 2022, The Federal Reserve of Philadelphia and the Delaware State Chamber of Commerce released “Child Care is Everyone’s Business,” expressing support for greater investment. Additional business support for early childhood has come from the Kent Sussex Leadership Alliance, New Castle County Chamber, and Bethany Fenwick Chamber.

While we have made progress, investing at a higher rate and stabilizing a fragile system, the next governor has an opportunity to make transformational change through transformational investments that truly provide a strong foundation for Delaware’s children—serving the majority in high-quality, publicly funded environments.

UPDATED: March 20, 2024. Click here for an official announcement from Gov. John Carney and the Delaware Department of Health and Social Services.

When it comes to funding Purchase of Care, the state subsidy that helps families cover child care tuition, about 30 percent comes from federal dollars funneled through the U.S. Department of Health and Human Services, Administration for Children and Families, Office of Child Care.

As with most federal dollars, there are rules and regulations attached to how they are spent. Earlier this month, the office released its new set of rules to govern the Child Care Development Fund (CCDF).

The new rules go into effect on April 30, 2024.* Delaware and other states must submit plans later this summer for how they will retool funding and policies for Federal Fiscal Year 2025-27, which begins October 1, 2024. (These summaries outline what states must do and what they may do with federal funds, including several policies underway in Delaware.)

The new rules are designed to improve child care access, affordability, and stability. What do they require and what will they mean for Delaware families?

Required Policy Changes—and Additional Opportunities for Delaware

1. Improve family affordability by limiting co-payments. This rule requires states to establish co-payment policies that ensure families receiving CCDF subsidy pay no more than seven percent of their family income for child care regardless of family size.

Eliminate co-payments for the families in greatest need. The rule allows states increased flexibility to waive co-payments for additional families—families with income at or below 150 percent of the federal poverty line, families with a child with a disability, children who are in foster care/kinship care, families experiencing homelessness, and families with children enrolled in Head Start or Early Head Start.

Currently, Delaware’s co-pay schedule goes up to nine percent and exempts only those below 70 percent of the poverty line.

UPDATE: At the Delaware Early Childhood Council meeting March 19, the Department of Health and Social Services committed to implementing both the required and allowable policies as of June 2024. These changes impact about 75 percent (8,000 of the 12,000) children and families served by Purchase of Care; most families served are below 150 percent of the Federal Poverty Level and will have no copayment.

Additional Opportunity: Delaware could get permission from U.S. Department of Health and Human Services and use state dollars to eliminate copayments altogether. For example, families in Delaware earning up to 200 percent of the Federal Poverty Level (FPL) are eligible for food benefits (SNAP), however the state requires them to pay for child care.

2. Provide stability to child care programs, so they can plan their budgets and hire staff based on enrollment.
   • A. Grants and Contracts. This rule requires states to use some grants and contracts for slots for children in underserved geographic areas, infants and toddlers, and children with disabilities. This is similar to how state-funded pre-K (the Early Childhood Assistance Program, or ECAP) works, with an annual contract to cover a slot for a child—similar to the approach used in public K-12 education.

Additional Opportunity: This rule encourages states to consider other populations that may benefit from grants or contracts, including care for children during nontraditional hours.

• B. Prospective Payments. This rule requires states to pay child care providers serving CCDF families prior to the delivery of services or at the beginning of the delivery of services to align with private-pay practices. This helps providers cover costs for the month, including staff.
• C. Payments Based on Enrollment. This rule requires states to pay subsidy based on authorized enrollment, not attendance. This helps providers cover fixed costs including staff, whether children attend or not—and it helps stabilize their finances when children are sick or families are away. Thirty-six states already pay based on enrollment.

UPDATE: Waivers and plans to adopt these policies in the next two years will be submitted as part of Delaware’s federal plan by July 1, 2024. As of June 2024, the state committed to paying for 10 absent days per month per child. The current limit of five per month has created instability for families and providers, especially when children are sick and staff are hired to full-time commitments.

Many of the updated rules are underway in Delaware, such as consumer education, payment of subsidy above the private pay rate, presumptive eligibility, and eligibility simplification.

Do these rules address the needs of Delaware’s families? Yes—in part. What else do families and providers need?

1. Expanded eligibility. Delaware’s subsidy eligibility will be raised to 200 percent FPL if the Governor’s Recommended Budget is passed; however, all our neighboring states and most other states set their eligibility limits above 250 percent, with some much higher. After minimum wage and other increases, many families are no longer eligible but cannot afford care.

Delaware is currently serving about 30 percent fewer children on Purchase of Care than in years past—likely in part because some families now “make too much” when eligibility has not kept up with families’ realities.

2. Increased rates. The state rate per child must be raised to cover not just basic costs to operate a licensed child care facility in the state but also increased costs of staff and increased needs of children.

The state bases its rates on the “market rate,” a seriously flawed mechanism based on a broken market. The General Assembly directed DHSS to support Purchase of Care based on 100 percent of the 75^th percentile of the 2021 market rate—and we will have a new rate available in April 2024.

The study, which is conducted every three years, regularly notes a nine- to 10-percent increase in providers’ operating costs. Recent increases to minimum wage and inflation continue to drive costs higher.

UPDATE: DHSS also committed at the March meeting to “fully fund” the updated rates in the 2024 market rate study (meeting 100 percent of the 75^th percentile when new rates are released). We anticipate rates increasing up to 10 percent, likely beginning in July with the new fiscal year. No rate increase had been discussed until the announcement this week.

The General Assembly also directed DHSS to move toward a cost of care methodology—this study showed the state was paying far below the cost of basic licensed care in Delaware and far below the cost of quality. An updated study is anticipated in May.

3. Workforce benefits. The child care workforce generally makes minimum wage, with no benefits. Many of them are on public assistance, but for those who are not, some states have provided subsidized child care or health benefits to child care workers earning up to 400 percent FPL. As soon as many educators get their degrees, they leave child care for school district jobs that pay twice as much for a school year with benefits. In order to attract and retain workers, child care has to be able to offer greater compensation and benefits.

UDPATE: DHSS committed to a “one time workforce enhancement,” likely similar to bonuses awarded in previous years to early care and education employees who have served for a minimum amount of time in the field. The move provides short-term compensation support.

These new investments are being funded by existing resources; DHSS released a report in March that noted over $40 million of the $122 million Purchase of Care budget was anticipated to go unspent in FY24. The hope is that some of the FY24 funds can be spent this year, and commitments were made that the ongoing policies would continue going into FY25 and beyond.

Reactions from the Field

Child care program leaders and advocates at the DECC meeting responded to this news with enthusiasm, thanking the Carney Administration and looking forward to even more progress in the future.

At the same meeting, providers were excited to hear that the Department of Education would award quality funding (formerly tiered reimbursement connected to a STARs quality rating) at a level of at least as much as programs received in the past, based on the number POC children served, and provided annually through a streamlined process. The initial plan is for awards to be as high as $180,000 depending on the size of program and percentage of POC children served.

The strong sense from members of the Delaware Early Childhood Council and participants was that the Carney Administration was listening and investing funds in ways that will support programs and families.

What’s next and what can I do? 

1. To provide input on Delaware’s next steps, attend public CCDF feedback meetings, including Delaware Early Childhood Council meetings March 19 and May 21 (sign up for the newsletter here).
2. Reach out to your legislators to tell them to invest more in early care and education bit.ly/FY25ChildCareAsk.
3. Tell candidates for office this issue is a priority for you and ask what they will do to expand access and affordability.

* States that are not in compliance with the provisions of the final rule by April 30, 2024 may request a temporary waiver for an extension of up to two years to ensure there is enough time to execute the steps to comply with regulations.

Delaware has a strong, multifaceted strategy in place when it comes to strengthening its educator pipeline. Like other states, Delaware continues to face educator shortages—prompting  the Delaware Workforce Development Board to name teaching “a priority, in-demand occupation.” The state has in place some short-term strategies, including a nine-percent salary increase for teachers in next year’s budget, and longer-term pipeline development and retention approaches as well. Now, we’re adding another approach with teacher apprenticeships.

Delaware’s Approach

Districts now begin recruiting their own middle school students into the profession through career exploration models. In high school, almost 3,000 students are enrolled in teacher pathway courses—and their demographics more closely reflect the diversity of our student population, unlike our current breakdown of teacher demographics.

As we’ve written about previously, our state’s year-long teacher residency program has grown from just a few to over 100 residents annually in just a few years, and the General Assembly has codified it and devoted ongoing resources to support residents. Delaware schools are seeing success in their retention because these graduates become fully immersed into the full school year and culture, whereas most student teacher opportunities only last a few months. Last year, the General Assembly codified funding to support “Grow Your Own” initiatives to attract candidates within the school community through improved recruitment, retention, and diversity of educators.

Teacher apprenticeships are another component to Delaware’s Grow Your Own approach. A recently introduced bill, HB 138, will codify registered apprenticeships in teaching. The bill is led by all Senate and House Education and Labor committee chairs and members of the Delaware Workforce Development Board.

Why Apprenticeships?

Apprenticeships are a model used in many industries and have proven to be an effective earn-and-learn model for career development that provides on-the-job training and mentoring—as well as “related training and instruction,” the professional training required to support career development.

Aspiring educators will find themselves in high-quality, industry-driven pathways that pay them and provide them hands-on work experience. Increased wages as the candidate progress are a foundational agreement in the apprenticeship. Candidates will be required to meet the student teaching and coursework requirements of teacher preparation in Delaware.

In recent years, two states registered teacher apprenticeship programs with the U.S. Department of Labor (Tennessee and West Virginia), and fourteen others developed and registered their state-level apprenticeship programs, which is the approach Delaware is taking.

The Delaware Departments of Education (DDOE) and Labor (DDOL) and the National Grow Your Own Center have been part of planning this work in Delaware and informing the legislation, which was based on other states’ models.

Apprenticeship is a great pathway to certification for candidates, including paraprofessionals—and it complements the other strategies we have in place in Delaware.

What’s Next?

Rodel is a proud partner in these efforts, supporting districts and charter schools, educator preparation programs, the Delaware Department of Education, and legislators to advance these important initiatives. We look forward to supporting a pilot in the fall in Appoquinimink School District and to working with the DDOE and DDOL to explore how to leverage federal funding to support these initiatives.