Child Care funding – policy proposals for discussion

Suddenly there is interest in child care. A couple of proposals have surfaced from the back bench; one is to increase general family payments so parents ostensibly have more choice; the other is a vaguer set of claims from backbenchers that something must be done. There has been some general huffing and puffing from various female politicians, and a string of articles on poor standards in child care centres has put the issue in the media spotlight. All agree on one thing – that there are problems with the current system.

Yet there is still confusion about the legitimacy of child care funding. After more than thirty years of federally funded child care and literally hundreds of thousands of children who have experienced child care, there are still many who question whether the funding of services for the very young is legitimate. This indicates confusion between ideology and actuality, because no study seems to have been undertaken that shows any evidence of significant harm or benefit for those in subsidised day care.

There is a strong push underway by the supporters of early intervention. Often using a medical model combined with economic arguments, supporters point to evidence of the economic and psychological benefits of early intervention in situations of disadvantage. They are making some headway, as is shown by the promise of the NSW Opposition and the new Federal Education Minister Julie Bishop to ensure greater preschool attendance. While important, these initiatives seem somewhat disconnected from the wider policy issues of providing affordable and accessible services for those children whose needs are for more than short bursts of developmental interventions.

Thanks to Scratch.

As there is no consistent evidence that good quality child care creates harm for the children receiving this care, we need to move away from the assumption that children are best cared for in the home. The studies most frequently quoted showing problems for children in care are often not based on quality care. They are also not long term or focused on the full range of social as well as cognitive and gross motor skills. They tend to be overly focused on brain chemistry and individual development and therefore may be missing the advantages of time spent in groups that possibly reproduce the older family community informal models that smaller isolated families can’t reproduce. I want to propose a funding system that will encourage the provision of care services that deal with the social and emotional needs of parents and children without prejudging their competencies or making assumptions about the need for community care services.

Despite much evidence of the vulnerability of these age groups, child care centres have not been given the same types of universal public funding and controls that are offered for older children in school. Instead of funding centres, subsidies primarily go to parents, leaving centres to respond to the vagaries of market costs, supply and quality. These responses may then exclude or disadvantage those likely to benefit from access. The increasing proportion of commercial and corporate providers raises questions about service limits. Should children’s centres be integrated into wider community service networks with an ethos that encourages co-operative rather than competitive functioning, capacity and trust?

Funding formulae for most child care centres are primarily based on fee relief for parents up to a specified maximum, based on hours used and (joint) parental income. Official assumptions that parental ‘choice’ will create value fail as supply shortfalls in many areas undermine cost/quality controls. Funding must solve the following problems:

1. The child care rebate bears no relationship to actual child care costs in particular centres or particular mixes of services, so once fees exceed the maximum subsidy, the ‘gap’ fee must be met by the parent.

2. This one size fits all formula makes no allowance for the differences in the costs of providing care for babies and children, or developmental needs that require more experienced/trained staff to assist children who need professional interventions.

3. Centres, particularly in low income areas, may cut costs as much as possible to limit the gap fees by using less experienced, less qualified people which may disadvantage those children who often have needs for a higher level of expertise.

4. The prevalence of chain commercial centres, which need to make a profit, leads to cost contained models that may not allow time for the development of social and community links.

5. While there are some conditions placed on eligibility for fee relief, standards remain at state based minimal not optimum standards, except for a Federal accreditation system which has no effective monitoring and some flaws.

6. Additional payments to parents such as the tax rebate or other possible tax measures and subsidies will again go to parents and allow centres to raise their fees.

7. Demand in this area does not seem to stimulate supply as land costs etc are used as a base for investment by commercial operators rather than local needs.

8. Staff wage rises are badly needed to contain turnover and ensure quality but are not taken into account in the funding, setting up tensions between parents and providers.

9. State funded centres in NSW are under-funded and chaotic and need urgent reviews on both funding and needs for support and supervision.

Solutions need to address these issues, as well as the absurd splits of funding and control between Federal and state governments. The focus should be on accessible, affordable quality care, not the different auspices for the centres. Policy can specify conditions for centres which receive public money, covering appropriate costs of quality care and an adequate return on private capital but not uncapped profits. Conditions in contracts should prioritise user input and ensure a focus on child/parent needs.

Policy proposals

The following proposals outline possible directions for new Federal policies. They differ from most of the current floated proposals because they focus on funding centres so that both quality and fees can be controlled. This involves making subsidies to centres subject to approved budgets and fee schedules for each centre. These could only be varied if circumstances changed. Centres could be created outside the system without subsidies.

Directly funding centres, as well as providing fee relief for parents, would establish relationships between government and centres, primarily through contracts between centres and the funding bodies. These should allow both for flexibility to meet specific centre based needs and fee control. Funding would be contingent on the centres being accredited and in areas where there is demand for centres.

  • Each centre should be required to submit a budget and fee schedule. If approved, it should be then funded to a certain proportion of the costs, say 30%, as a basic subsidy to allow for the fee levels below.

  • A top up income-tested additional subsidy will be offered to lower income parents to reduce their costs.

  • Funding submissions by the centre should articulate what staffing levels they require to meet children’s needs for experience and qualifications in care settings.

  • The formula to be developed should set a maximum gap fee for parents eg at 8% of the minimum wage (about $38 per day), and additional subsidies on the basis of parental income can be claimed either by parent or centre with a minimum fee of $5 per day.

  • Centres should generally be expected to stick to their budgets for the agreed services. Where parents raise additional money for additional services, these must not be raised by compulsory levies or pressured additional payments.

  • Centres should submit their budget on a break even level, with a margin of 5% profit on capital investment to cover development of services or profit. Centres which are privately funded will get reasonable ‘rent’ on capital resources used.

  • Centres should acquit their budgets annually, show what has been collected and spent and adjustments made for underspending or legitimate overspending.

  • Capital grants must be made available through a joint federal/state agreement for new community centres and upgrading old ones, possibly 50/50 for buildings with the state offering land parcels (see1980s model).

  • All centres would be required to have a parental/community committee to make decisions on staffing, activities and programs.

  • All centres should be required to make links with local communities and related services as a condition of funding.

  • State governments should fund qualified preschool teachers for all services with 3 and 4 year olds for 15 hours per week to offer preschool programs.

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