House Bill 30 (Chapter 2) of the 2022 Special Session I directs the Virginia Department of Education (VDOE) to develop a methodology to estimate the actual cost of providing high-quality early childhood services in community settings. The language is as follows:

129.O. The Department of Education shall develop a methodology to estimate the actual cost of providing high-quality early childhood care and education services in community-based settings. Such methodology shall meet the requirements set forth by the Administration for Children and Families, U.S. Department of Health and Human Services, for alternative methodologies to market rate surveys. The Department shall summarize the methodology in a report to the Governor and the Chairs of the House Appropriations and Senate Finance and Appropriations Committees by December 31, 2022.

The VDOE has since developed and implemented such a methodology, as is described in the following report as Virginia’s Alternate Methodology for estimating Virginia’s cost of care. House Bill 30 of the 2022 Special Session I then further directs the VDOE to apply the alternative methodology to develop recommendations for the Virginia Preschool Initiative (VPI) Community Provider Add On, which is described in the following language:

137 C.14. g. 2) In the first year, the amount of these add-on grants for community-based or private providers shall vary by region and provide a grant of: (i) $3,500 per child for divisions in Planning District Eight, (ii) $2,500 per child for divisions in Planning District 15, Planning District 23, and for the counties of Stafford, Fauquier, Spotsylvania, Clarke, Warren, Frederick, and Culpeper and the Cities of Fredericksburg and Winchester, and (iii) $1,500 per child in any other division. In the second year, these add-on grants shall be informed by the Department of Education's methodology to estimate the actual cost of providing high-quality early childhood education services in community-based settings. In the Department's report on this methodology to the Governor and Chairs of the House Appropriations and Senate Finance and Appropriations Committees, required by Item 129.O, the Department shall include recommendations for the amount of these add-on grants in the second year. This reporting requirement is not intended as a mandate to increase the individual amounts of these add-on grants or to increase the state appropriation supporting these add-on grants. The Department of Education is authorized to prorate payments for these add-on grants so as not to exceed the available appropriation.

3) The Department of Education shall develop a plan to determine the magnitude of the gap between regional prevailing child care market rates and the Virginia Preschool Initiative per pupil amount. The Department shall establish a schedule designating the amount of the add-on grants for each school division for fiscal year 2023. The amount of the add-on grant plus the Virginia Preschool Initiative per pupil amount shall not exceed prevailing child care market rates in a particular region.

The following report contains two key sections of information. The first describes Virginia’s process for developing an alternative methodology to determine the cost of providing high quality early childhood care and education services, which has since been used to revise the reimbursement rates used for the Virginia Child Care Subsidy Program. The federal Administration for Children and Families issued pre-approval for Virginia’s proposed plan in May 2022. VDOE further refined and finalized the methodology between June and August of 2022. With federal approval of the approach, VDOE will no longer complete a market rate survey. The results of the cost estimation model will be the best available data for market analyses.

The second section of the report provides additional information related to the VPI Program, and specifically, the current use of add-on funds to support the offering of VPI in private settings. This includes the discussion of a potential approach and recommendation for applying Virginia’s alternative methodology for determining the cost of high quality care to the add-on rates used to support these public-private partnerships.