Shrinking the Number of Child Care Providers Down to a Level that May Be Supported by Inefficient CCDF Funding: It’s Economics!

Shrinking the Number of Child Care Providers Down to a Level that May Be Supported by Inefficient CCDF Funding:

It’s Economics!

HHS Market Correction and Government Failure

In economics, market failure is a situation in which the only way for my small business to be better off is for someone else’s business to become worse off.  (Click here.)

The existence of a market failure is often the reason governments may intervene to correct a particular market. ‘Economists are often concerned with the causes of market failure and possible means of correction. Analysis of market failure should play an important role in many types of public policy decisions and studies.

‘However, government policy interventions, such as taxes, subsidies, bailouts, wage and price controls, and regulations (including poorly implemented attempts to correct market failure), may also lead to an inefficient allocation of resources, sometimes called government failure.’

“Government failure occurs when the government intervention causes a more inefficient allocation of goods and resources than would occur without that intervention and when an agency performs inadequately, including when it fails to intervene or does not sufficiently intervene.” (Click here.)

Twice now, I have personally heard State Actors in Mississippi share their thoughts that there are too many licensed child care programs serving low-income children to support the CCDF assisted enrollment needed for each small business to be successful and included in the development of universal Pre-K.

One floated the merger of community-based private businesses while another suggested the Mississippi State Department of Health should just not issue any new child care licenses.

Of course, as was recently pointed out by one representing self-employed child care providers, that is nothing short of economic policy perspective favoring government intervention in the market process to correct the market or as he said, “fascism”.

“Fascism operated from a Social Darwinist view of human relations. The aim was to promote superior individuals and weed out the weak.” (Click here.)

The Propaganda Ministers of Systematic Underinvestment (Government Failure)

Almost two decades ago, the Child Care Development Fund was created as a work force support system to low-income parents transitioning from Welfare to Work.

Many well established, quality child care programs with long waiting lists that received full payment in advance did not have to discount fees or wait to be reimbursed in order to fill vacancies or provide the diversity of mixed socio-economic incomes.

Programs that were willing to participate could only do so in a very limited way due to the losses that would occur as a result of accepting below market rate child care assistance as well as the additional administrative burden of reporting to states for payment.

HHS researched a formula for setting rates that middle income providers would accept – 75% of Current Market Rates.

Even still, there were not enough slots available to absorb the large number of low-income children in sudden need of care.

With the full force of HHS and federal resources, MDHS went out seeking those who would operate child care facilities and be willing to serve low-income children and children of color.

Grants for facilities were made available and SBA loans were granted.

Licensing was assisted and the largely segregated low-income child-care-market was born!

Now, HHS has decided the government-child-care-market it created through the Child Care Development Fund over a period of two decades is no longer solely a work support system. It must be redesigned to demonstrate, and qualify (with degrees), and compare (equal) to Head Start and Title I Preschool programs without sufficient HHS monitoring for leveraged or equal per child stipends (parity) and without sufficient CCDF funding.

HHS has initiated a “market correction” for the redistribution of wealth (the CCDF)…no matter the consequence or social injustice (for the public interest and safety of the children).

HHS has allowed Mississippi to reimburse even Tier I low-income providers at 75% or less of 2004 market rates for over a decade and in spite of three increases in the minimum wage.

In fact, for many years, HHS has accepted many Plans from many states throughout the nation demonstrating inadequate reimbursement fees (falling far below HHS’s “scientifically proven” and recommended rates for providing low-income children access to “high quality” programs).

And when HHS finally did intervene, it diminished the possibility of ever providing “high quality” for child care programs serving large numbers of low-income children (which are so prominent in segregated Mississippi) by requiring states to increase per child reimbursement fees only up to a percentage of 2014 Market Rates as payment to providers in FY 2017-2019 (government failure).

In the recent “Pre-K Collaborative-early-learning -model–only” lobbying-campaign carried out by The Hechinger Report (through the absolute comedy of all white reporters interviewing all white policy makers on “the race issue”), Louise Davis, chair of the Early Years Network, who manages all of Mississippi’s CCDF quality funding, stated that the MOST CRITICAL problem with crippling reimbursements that obstruct quality in low-income child care settings is, “Most of these directors are in it for their heart. They don’t have a business background. These directors … don’t know how to do a budget.”  (Click here.)

The Public Interest

In their paper, “Is Market Failure a Sufficient Condition for Government Intervention?”, economists Art Carden and Steve Horwitz write, “…even when the market provides less than ideal outcomes, government actors will put in place policies that won’t necessarily produce a better market outcome, but may reflect their own priorities.” (Click here.)

Economist Robert Schenk writes, “…those who are involved in government have the same motivations that those in the private sector have; that is, they are motivated by a narrow concept of self-interest: wealth, fame, and power.”

“There is no guarantee that policies made by representatives pursuing their own interests will be in the interests of the society.”  (Click here.)

The U.S. Department of Health and Human Services “positioned a study” demonstrating the effects of a child’s physical environment on intellectual and social development.

This developed into a multi-million dollar “quality” industry that includes marketing of programs designed to rate child care centers according to the physical environment, the number of staff with college degrees, and reduced child/staff ratios. These programs are called Quality Rating and Improvement Systems.

In all this time of HHS endorsed “QRIS”, this is what we have learned:

In 1999, a comprehensive, longitudinal study by the RAND Corporation of Colorado’s QRIS program, one of the longest-running in the country, found Q.R.I.S. programs are expensive and complicated to administer, that state funding to sustain QRIS in the future may not be available, and worse, QRIS programs do not raise learning or social development outcomes for students. (Click here.)

Fourteen years later, QRIS proved no better!

In 2013, Education Week Reported “Child-Care Rating Systems Earn Few Stars” and said the tool falls short in predicting quality. Researchers, “who were from several universities, found that children attending highly rated pre-K programs did not have significantly better results in math, pre-reading, language, and social skills when they finished the programs, compared with the children attending lower-rated programs.” (Click here.)

Gail L. Zellman, the principal investigator on the Qualistar study for RAND, said:

 “The field has not sufficiently determined how to evaluate quality and how to assess it in a valid way.”

So, why the continued and heavy push for QRIS?

Perhaps government market correction in spite of government failure and an inefficient CCDF – without stimulus – requires the “excludability policy” QRIS provides.

Excludability

“Excludability deals with the ability of agents to control who uses their commodity, and for how long – and the related costs associated with doing so.” (Click here.)

“A public good is excludable if you can prevent somebody from using it.” (Click here.)

QRIS allows states to draft a tool that will be used to exclude child care programs in the “public interest” market correction for “improved” school readiness and social development.

In Mississippi’s Early Learning Collaborative Act of 2013, QRIS is the tool used for child care excludability.

In the RFP for stabilizing MDHS Slots Contracts, QRIS was the tool of excludability.

In the only opportunity to receive anything above a percentage of 2004 Market Rates in Mississippi in more than a decade, QRIS was/is the tool of excludability.

Re-write Mississippi Quality Stars if you want, but QRIS will still be the tool of excludability!

Add a “State Approved” curriculum if you like; QRIS will still be the tool of excludability!

QRIS, by design, redistributes the wealth to those programs more financially able to participate in costly (so-called) improvements in the first place, deepening class disparity and inequality.  (According to the MLICCI Step-Up  QRIS research, the average amount of “up-front” funding that it takes a center to move from a 1-star to a 2-star rating is approximately $40,000 per center.) See SECAC QRIS Executive Summary by clicking here.

It does not necessarily result in a socially desirable distribution of resources or the overall well-being of society.

For instance, MDHS is required, in the State Plan to raise reimbursement fees from 2004 Market Rates to 2014 Market Rates, increase quality funding, begin to monitor 1,200 hundred in-home providers who are not licensed, serve the same number of children (HHS doesn’t specify whether or not MDHS must maintain children in full-time care and part-time care), set re-determination for a true calendar year regardless of ongoing parental employment, and all is to be done with little or no new funding.

Such demand by HHS can only be met if child care programs are weeded out, and the wealth is redistributed, in some cases, in a way counterproductive to quality.

HHS “washes its’ hands” of the actual market correction applicability, the populations that are helped and harmed by its policies and potential disparate impact culpability through a little thing called “states’ flexibility” or the “State Plan”.

HHS stops just short of requiring QRIS as such, but it does require states to report how they will move more children into “high quality” care as defined by the state.

Class Disparity and Inequality

Nowhere is the class disparity and inequality brought on by HHS intervention (and often, the failure to intervene) better demonstrated than in The Hechinger Report’s article, “The Race Issue”:

“In visits to 30 child care centers in central Mississippi, reporters saw centers split along lines of race and class.”

“There is a direct link between how much parents can pay and how much a child care center can charge that, in turn, dictates the size of daycare budgets for salaries and supplies. Many centers serving low-income black children can’t offer the same resources as those that cater to middle- and upper-middle class white children, such as expensive playgrounds, highly educated teachers or lower-than-required staff-to-child ratios.”

“The reimbursement a family receives for child care tuition varies depending on a child’s age and family income, but assistance only covers a percentage of a center’s tuition. That means centers that serve low-income children often receive reimbursements that cover only a fraction of what it actually costs to run a daycare.” (Click here.)

Disparate Impact

There are other laws to be considered by HHS and government actors when adopting CCDF policy including the Small Business Administration Act, the Unfunded Mandates Act, Administrative Procedures Law, The Takings Clause, and the Title VII Civil Rights Act – all which may have been ignored at times. It is either that, or there has been too little uniform reporting gathered by HHS for it to truly determine if its policies governing low-income child care have resulted in socially desirable distribution of resources or if they have resulted in further class disparity and inequality.

Many argue HHS Policies are deepening the cycle of poverty for low-income working parents and the low-income child care industry that HHS seeks to correct – often which are minority owned and disadvantaged small businesses.

Under Title VII Civil Rights Act, disparate impact theory involves a claim that a facially neutral practice is being applied in a manner as to disadvantage members of a protected class.

December 1, 2015, (six months ago) the Mississippi Advisory Committee to the U.S. Commission on Civil Rights issued an Advisory Memorandum to the U.S. Commission on Civil Rights regarding the Committee’s months long investigation of the federal Child Care and Development Fund (CCDF) and related programs, and the potential for disparate impact on the basis of race or color as a result of the State’s discretionary administration of these funds. The investigation and subsequent Memorandum found that many eligible children, predominantly within the African-American community, were not serviced by the subsidy program and that funding that should have gone to support eligible children was redirected. (Click here.)

The investigation also found that the program rating system used in Mississippi to promote higher quality childcare limited the participation of African-American owned and operated childcare facilities.

The Mississippi Committee recommended the HHS Office of Child Care should conduct or commission a thorough study of the validity of the QRIS evaluation criteria as a predictive measure of improved developmental outcomes for children. This study should include a review of evaluation outcomes in diverse communities to ensure criteria are culturally relevant to diverse populations, and that they do not unduly disadvantage any particular protected class. (Click here.)

I know of no such HHS investigation that is now in the works – my point exactly!

In fact, the HHS Office of Child Care declined to participate in the Mississippi Committee’s panel discussions in the first place.

March 14, 2016, by majority vote, the United States Commission on Civil Rights (“Commission”), issued a letter recommending program changes to the Child Care Subsidies Distribution Program in the state of Mississippi within the purview of the Administration for Children and Families (ACF) and Health and Human Service (HHS). (Click here.)

Commission Chairman Martin R. Castro on behalf of a majority of the Commission stated, “When the most vulnerable and needy children are prevented from accessing urgently needed resources because of their race, color or other improper reasons, it is the role of this Commission and our State Advisory Committees to demand action and changes. To fail to heed these recommendations by our Mississippi State Advisory Committee will continue to doom a generation of children to living in the cycle of poverty—and that must not be allowed.”

The Commission stated:

“The Quality Rating and Improvement Systems (QRIS) program which is purported to promote higher quality child care appears to instead penalize and costs so much that it excludes the participation of African-American owned and operated child care facilities.”

During Mississippi Committee hearings, CLASP reported that Mississippi saw a decline of 53 percent in the number of low-income children served between 2006 and 2013.

Since 2013, the number of licensed child care programs overall has shrunk from 1,800 to 1,500 while the number of less costly, unlicensed in-home providers has increased (redistribution of wealth/child care on the cheap). Where is the “highly qualified teacher” in unlicensed, in-home care?

HHS mandates do not necessarily result in a socially desirable distribution of resources or the overall well-being of society.

Mississippi Quality Stars

In just over the decade that the Mississippi Early Childhood Institute has received millions and millions of dollars to serve as administrator of Mississippi’s Quality Stars, and many millions more have been awarded to provide technical assistance to improve “quality” in child care, Mississippi, at its’ most recent assessment reported (61%) were rated as 1 Star – the lowest level.

After ten years, less than 20% or 74 of only 383 programs participating (including those enrolled in CLASS.) were rated at the 3, 4- or 5-Star levels required to participate in Pre-K or be deemed “high quality”.

“Monica May, director of the QRIS program, said the program trains evaluators to be consistent. ” (Click here.)

“May said some complaints of racial bias in QRIS may stem from the way the quality rating system started out in the state.”

“In 2011, the state adopted a more comprehensive quality rating program, which also included efforts to help centers improve.”

Yet, in 2015, External Evaluation of QRIS Conducted by the Frank Porter-Graham Group revealed the following truths:

• In a block structure, fewer than 20% of programs earned a Level 3 or 4; in the point and hybrid structures, more than 70% of programs achieved a Level 3 or 4. Block structures generally provide greater challenges to improvement in ratings. Mississippi continues with the block scoring system in spite of the known and growing popularity of the less stringent hybrid scoring system.
• Nationally, the most common classroom observation reassessment period is every 3 years. Mississippi requires reassessment annually unless a program wants to maintain its current rating in which case it is every 2 years.
• Mississippi’s Quality Stars system is the only system in the nation that requires providers to finance and maintain a parent resource center.
• There is no due process for appealing a score.

Click here to review the evaluation and see pages 22-23 for low provider participation rates.

Seventy-five percent of Mississippi providers have rejected QRIS as a measure of quality.

MDHS has planned to continue with Quality Stars anyway without conducting a statewide quality needs assessment as required by HHS.

Rather, MDHS manipulated a survey presented only to parents of children enrolled in the few child care programs participating in QRIS.

In June, 2015, Mississippi appointed a Mississippi Quality Stars Re-write Committee.

I do not know who the members of that committee are. I am told it’s a secret.

Notice of their meetings is not posted on the web site or the Mississippi Public Meeting Transparency Website as required by Mississippi Code Section A 025-0041-0013. (Click here.)

I have also not been able to locate the committee’s minutes online.

Minutes must be recorded within 30 days and are a public record and must reflect the members present and absent; any votes taken; etc. (Click here.)

I have suggested that all the information be posted to the agency’s appropriate web page in order to practice transparency and inform stakeholders.

For now, it is either top secret and classified or requires that I travel to inspect the record and minutes at MDHS State Office.

Economics

The correct and effective use of available resources and economics is the study of how people deal with scarcity.

The State Early Childhood Advisory Council has been charged with the implementation of the 2017 – 2019 CCDF State Plan.

SECAC has appointed many committees and work groups to carry out this work.

Notice of some committee meetings has been posted on the SECAC Upcoming Meetings Page. (Click here.)

All SECAC Committee meetings and sub-committee meetings are also governed by the Mississippi Open Meetings Act and Mississippi Code Section A 025-0041-0013.

Therefore, self-employed child care providers and all who are personally vested (with commercial loans) or interested parties and stakeholders may be informed and attend as many meetings as they wish.

There are choices other than QRIS that may really improve quality.

They do not have to be embedded into QRIS to be successful.

If government actors insist only on embedding other quality initiatives into QRIS, then they are, in fact, insisting on retaining the “power of excludability” that may forever “evolve” to suit their funding priorities.

(If most severe exclusion has been done to us once, it can be done again.)

SECAC is looking now to develop a successful low-income child care early learning model.

Mississippi Building Blocks is such a model.

MBB improves the lives of children and it does not require QRIS.

We should not support or participate in ongoing, most stringent excludability policy and potential disparate impact.

Economics is a science of choice making and making the best choice among alternatives given inefficient CCDF funding and government failure.

If that cannot be accomplished without all/greatest harm to just one sector of Mississippi’s early learning system, then HHS and all government actors should be held to account.