North Carolina Alternative Market Rate Study and Cost Model Development
In North Carolina, like many states, child care subsidies are based on the “market rate,” which is the amount that child care programs charge parents for child care services. Market rates represent what families in the area can afford to pay, not necessarily what child care services actually cost to provide. North Carolina is exploring alternative ways to set the child care subsidy rate to better cover providers' costs, meet federal guidelines, and sustain the needs of the state’s child care landscape.
Under contract with the North Carolina Department of Health and Human Services' Division of Child Development and Early Education, AIR’s Early Childhood and Child Development researchers and researchers from AIR's Center for Economic Evaluation supported the state’s efforts by developing three alternative models to set child care subsidy rates. AIR described the potential benefits and drawbacks of each model, recommended a single model with the highest likelihood of increasing child care access and stabilizing the field of child care, and made other recommendations to enhance the state’s existing child care system.
Throughout the study, the AIR team engaged partners including child care providers, the state’s Subsidy Advisory Committee, and an advisory group of local leaders and national experts from fields of child care, banking, health care, military operations, and business supports. AIR also developed a cost estimation tool for state staff to inform state decisions about child care policies, including setting the subsidy rate.
