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Empire Justice Comments on Proposed Market Rate Regulations for Child Care Providers

March 24, 2004


Public Information Office
Office of Children and Family Services
52 Washington St.
Rensselaer, NY 12144

Re: Comments on proposed market rate regulations: 18 NYCRR 415.6 and 415.7

To Whom It May Concern:

Thank you for this opportunity to comment on the proposed changes to 18 NYCRR 415.6 and 415.7. The Greater Upstate Law Project is a support center for legal aid and legal services offices across the state. Many of the clients served by the offices that we support utilize child care subsidies or are low income child care providers. Additionally, I serve as the legislative Chair of the New York State Child Care Coordinating Council, and from that perspective hear from many providers who serve subsidized children. We are particularly concerned with two provisions of the proposed regulations, the first of which affects child care providers who exclusively care for subsidized children.

18 NYCRR 415.6(e)(1)(ii) 

This proposed regulation, already adopted as an emergency measure, provides that for those only serving subsidized children, the "actual cost of care" is the amount that the provider "currently is receiving from the social services district." This is a change from the past policy which defined "cost of care" as the "usual rate charged by the provider for non-subsidized care." 96 ADM-3, p. 3. Until this regulatory change, providers who only served subsidized children would present the local social services district with a fee schedule showing the fee they would charge if they had private pay parents. Under the proposed regulations, in order to receive a rate increase, these providers are, for the first time, required to "demonstrate to the social services district that the actual cost of providing care to such children is higher than" the amount they currently receive. We strongly urge the Office of Children and Family Services not to adopt this regulation.  

Providers who care for both subsidized and private paying children will still receive market rate payment if the amount they charge private pay parents is at or above the market rate. The proposed regulation is therefore discriminatory because it only applies to one group of child care providers even though other providers care for subsidized children. The regulation puts those providers who are exclusively serving low income families at a disadvantage: such providers are less likely to have access to accountants or sophisticated accounting methods, and without these they are less likely to convince the state that their costs have risen with the market rate. The previous practice, requiring providers to present their fee schedule for private pay parents if the children of such parents were to enroll, was clear and equitable. The proposed practice is burdensome, and unless guidelines are clearly and carefully articulated, it will deprive providers who do indeed have an increased cost of care from receiving an increase.

As is discussed in more detail below, providers have fluid enrollments - at sometimes they may have some private pay children enrolled and at other times they may be caring for only subsidized children. How will these providers be treated? Will the methodology for determining cost of care vary depending upon the month in which they apply for a market rate increase?

It Is a Violation of Federal Child Care Regulations to Determine Cost of Care for Providers Who Only Serve Subsidized Children in a Different Way than for Providers Who Care for Both Subsidized and Unsubsidized Children 

The federal child care block grant regulations specifically state: "A Lead Agency may not establish different payment rates based on a family's eligibility status or circumstances." 45 CFR 98.43(c)(emphasis added). A payment scheme that sets a different standard for establishing the cost of care for providers who serve only subsidized children, based only on that fact, establishes a different payment rate based on the family's eligibility status; in other words, if the eligibility status of all the children in care is subsidized, the provider is given a rate based on an entirely different methodology that those providers who serve both subsidized and unsubsidized children.

If Adopted, the Regulation Must Be Amended to Provide Due Process Protections

If the regulation is adopted, the regulation should be amended to provide uniform guidelines for both local social services districts and child care providers so that they are able to determine whether the providers are due the market rate increase. The regulations should also require the state to provide training for child care providers so they know how to determine their actual cost. Guidelines will prevent arbitrary decision-making by social services districts and provide uniformity across the state.

If the regulation is adopted, it is important that counties have guidelines to follow when determining "actual cost." Already we have been advised that a child care provider who cares exclusively for subsidized children was denied a market rate increase because the local district did not know what kind of documentation she needed to provide to establish her "cost of care." She was told by the local district that it was waiting for the state to provide more information.

The Office of Children and Family Services must also include a requirement that providers be advised in writing the reasons that they were denied a rate increase and be provided the opportunity for a hearing if they are denied an increase after documenting their cost of care. Even with guidelines and training, due process and fundamental fairness require that the state provide notice and an appeal mechanism to ensure that providers’ eligibility for market rate increases are being determined fairly and uniformly.

The Regulation Is Administratively Burdensome to Both Counties and Providers 

Another example illustrates the bureaucratic tangles that this new methodology can create. Some providers have a fair amount of turnover in the children they care for, which can mean that they have mixed private pay and subsidized children one month but all subsidized the next. A provider requested a market rate increase, indicating that she serves both subsidized and unsubsidized children. She sent the local district her rate sheet, and the county followed up with a telephone interview. At the time of the interview, she only had 4 subsidized children in her care, and the county denied her the rate increase. Three weeks later, a private pay child enrolled, paying the rate on the rate sheet. The local child care counsel assisted this Spanish Speaking provider in asking that the denial be reconsidered and was told by the head of the local district accounting department that nothing could be done until guidelines were issued by the state.

The Office of Children and Family Services raised the market rate retroactively, effective October 2003. However, if counties are refusing to consider rate increases without guidelines, providers who only serve subsidized children are effectively denied even the opportunity to apply for the increase. The Office of Children and Family Services must establish uniform guidelines for local districts to use in determining whether a provider is due a market rate increase under the proposed regulation.

The regulations also need to clarify how the rule applies to second party child care providers. Second party providers contract with a non-profit agency which pays them for the children in their care. The non-profit may overall care for both private pay and subsidized children, but some of the agencies with which they sub-contract only care for subsidized children. The regulation should clarify that second party providers do not fall under the new requirement because social services districts pay the contracting non-profit which serves both subsidized and non subsidized children.

18 NYCRR 415.6(1)(i). 

This regulation provides that where a provider has a contract with a social services district, "the actual cost of care" is "the payment rate set forth in the contract." The regulation should go further and require local social services districts to fairly negotiate contracts with child care providers. Child care providers who are paid pursuant to a contract with the local social services district often believe that when the local district presents them with a rate, accepting that rate is a condition of receiving payment under the Child Care Block Grant. In sub-regulatory materials, OCFS has made clear that a local social services district may not require a contract as a condition of receiving payment under the Child Care Block Grant. 00 OCFS ADM-1, page 4, 02 OCFS LCM-16, p.3. This language should be repeated in the regulations.

The State has dropped language regarding the fairness of contract negotiations from its Administrative Directives. Previous directives have provided that "a fairly negotiated rate" could benefit both the local district and the providers. 00 OCFS ADM-1, p.4, 96 ADM-3, p. 3. By August 2002, however, OCFS made no mention of fair negotiations when discussing contracts. 02 OCFS LCM-16, p.3. Child care providers must be given the opportunity to engage in arms-length contract negotiations with their local social services districts.

Thank you for the opportunity to comment.


cc:  Assemblymember Roger Green

      Assemblymember Amy Paulin

      Senator Mary Lou Rath

      Mark Kissinger

For more information, please contact:

Susan C. Antos

Empire Justice Center
119 Washington Avenue
Albany, NY  12210 

(518) 462-6831
(518) 935-2852