RD424 - Cost Study of Private Day Special Education Programs Final Report – October 1, 2019
The Virginia General Assembly directed the Office of Children’s Services (OCS), the state administrative agency for the Children’s Services Act, to conduct a rate setting study for private day special education programs. OCS through a Request for Proposals, contracted with Public Consulting Group, Inc. (PCG) for this effort.
Since October 2018, PCG has been engaged with OCS and individual private day special education service providers to collect, analyze, and compile cost data to inform a rate methodology. This report incorporates the results of that work and includes:
• a national environmental scan of funding mechanisms for private day special education programs;
• the cost and personnel data collected to inform this study, as well as data quality assurance processes, and results from the cost study;
• stakeholder engagement activities and feedback collected during those sessions; and
• a proposed rate methodology along with study limitations and future considerations, including the impact of recommendations on local school districts, local governments, and public and private educational services providers.
In collaboration with OCS and service providers, PCG developed cost and personnel data collection tools. PCG provided training for providers (schools) on how to complete the tools and ongoing technical assistance throughout the data collection period.
• Approximately 40% of individual schools provided data.
Operating costs include expenditure data related to the day-to-day costs of operating the school. These costs are inclusive of 22 components including depreciation, mileage, and property damage but exclusive of staff salaries and benefits as well as subcontractor costs. To make meaningful comparisons between schools, each school’s operational costs were divided by the number of student days they reported. This provided a method to normalize the data and compare how costs might increase or decrease based on the total student days.
For each operating cost component, a base rate was developed (defined as the cost of operating the school with minimum attendance) and the adjustment per 1,000 student days (the slope) was also calculated. To develop an operating rate methodology for a given school, the base rates for all of the operating components are added together for an overall starting rate of $67.15. Adjustments for students were found to be $0.51 per 1,000 student days. The equation below shows the proposed formula to calculate the operating cost component rate for each school.
Operating Costs = $67.15 + ($0.00051 * Number of Students * Number of School Days)
The personnel component of the daily rate is composed of salary costs and benefits including healthcare, personnel taxes, retirement, worker’s compensation, and other fringe benefits. These costs were collected using a personnel survey sent to each school. The survey allowed schools to report the salary and benefits for each person employed by the school as well as their profession. These professions were reported at a granular level and were grouped into 11 unique categories.
Average salaries were calculated by dividing the reported yearly salary paid to an employee by the number of hours the school reported the employee worked. The average ratio of salary to benefits reported was 23 percent, therefore, each profession’s salary was multiplied by 23 percent to determine the estimated benefits to be paid to that profession.
For the proposed rate methodology, the hourly salary and benefits rates for each profession would be multiplied by the number of staff in that category at the school, and then multiplied by eight to find the daily personnel cost. Eight hours was chosen as the number of hours in a day to account for additional time employees spend beyond the typical 6.5 hours for a student school day. Finally, the total personnel amount is divided by the number of students to determine the personnel cost per day per student. The methodology is shown in the formula below.
∑Profession[(Salary per Hour + Benefits per Hour) * Number of Staff * 8 hours per day]
This methodology allows for different schools to have different staffing ratios, based on the needs of the students they serve. However, the current methodology assumes all staff are full time equivalents, which will need to be addressed in future rate development.
Major Findings and Recommendations
1. Funding for private day special education programs is managed uniquely from state to state. Rates often vary considerably within and between states with states deploying various methods for developing rates.
2. To develop school and/or program specific rates for Virginia’s private day special education schools, PCG recommends a secondary round of data collection to be mandated by the State. While the data collected during this engagement was sufficient to inform the development of a proposed rate methodology, a full set of expenditure and personnel reports is necessary to calculate specific rates. Full participation is critical to accurately reflect provider costs associated with delivering services. Non-participation could result in skewed base rate calculations and trend line adjustments, and, ultimately, rates that over or under fund programs
3. We recommend that future data collection efforts provide a detailed breakout of indirect costs (from Parent Organization). These costs are usually bundled costs such as accounting, information technology, or legal services if these services are not directly administered or contracted out by the school. In typical rate studies, these services generally account for around 10 percent of operating costs. However, in this circumstance, they represented a much larger proportion and should be detailed.
4. Along with the recommendations listed in the Future Data Collection section, PCG recommends adding a logic-check to each component to ensure only those costs incurred by each school will be built into that school’s rate. As one example, during stakeholder sessions it was noted that some providers receive a reduced or free building space through a non-profit organization. This represents significant cost savings to the school. A logic-check could easily be implemented to only include expenditures incurred by the school in each provider’s unique rate-build up.
5. It is recommended that a geographic approach to rates be developed, where each state defined region would have a unique set of base rates derived from the costs of providers specific to that area. Few nationally or state recommended geographic indices are available to adjust rates, and the data collected in this study were not sufficient to analyze geographic differences due to the low response rate.