Previous Child Care Fee report from 27 April 2009 Meeting

Item 7.1 - Attachment 1

Previous Child Care Fee report from 27 April 2009 Meeting

COMMUNITY CARE

ITEM NUMBER 12.5

REFERENCE F2008/03695 - D01182491

REPORT OF Service Manager Children and Family Services

PURPOSE:

This report is provided in response to a request from Council for a further report on the childcare centre fee options following a Councillor workshop on the issue on 18 March 2009. The report and attachment outline various options for Council consideration.

RECOMMENDATION

(a) That Council receive and note the contents of the report and attachment;

(b) That Council consider the range of childcare fee options as presented in the attached Options Paper;

(d) Further, that Council consider a staged increase in the childcare fees that will assist their sustainability and work towards a cost neutral result for Council.

BACKGROUND

1. The childcare centres returned a deficit of $302,000 in the 2006/2007 financial year, and a deficit of $291,599 for the 2007/08 financial year. As the deficit result is neither a desirable nor sustainable position, a review of the service was commenced in October 2007 to determine what was driving the deficit result.

2. Increasing costs and reduced utilisation, particularly due to the preference of families not to enrol in services on Mondays and Fridays, were found to be contributing factors to the deficit.

3. The review noted that Council’s childcare centres all still have a waiting list for places, it is the number of days per week of care that the majority of families are seeking that has changed. Where once the majority of families were seeking full time care, the majority are now seeking 3 to 4 days per week, mainly on Tuesdays, Wednesdays and Thursdays.

4. The childcare centres also have a large waiting list for children aged under two years which, at the time of this report, totalled 357.

5. As a result of the review, a variety of fee options were put to the Council Fees and Charges Workshop in March 2008 and an average fee increase of $17.16 (29.53%) per child per day was placed on exhibition within the 2008/2009 Management Plan.

6. Council received many responses from centre users to this fee proposal and the fees were adopted at a much lower rate of $62.00 per day, resulting in a deficit budget of $473,655 for 2008/9.

7. Based on a 90% utilisation figure, a Child Care Fees Options Paper was presented to Councillors at a budget workshop on 18 March 2009. As a result of this workshop additional information was requested from Councillors regarding the childcare fee options.

ISSUES/OPTIONS/CONSEQUENCES

8. As detailed in the Childcare Fees Options Paper March 2009 (Attachment 1), four fee options have been proposed along with an analysis for the resulting cost to Council and the impact on families. These options can be considered in conjunction with the information below.

Fee Increase to Achieve a Cost Neutral Result

9. If it is decided to increase the fees in one step to achieve a cost neutral result, it would mean an increase of $12.00 per child per day which equates to19.3%.

10. This increase in fees if undertaken in one financial year would be seen as considerable and Council could anticipate that there could well be financial hardship for many families if such an increase was introduced at one time.

11. As a result of the feedback from this type of proposed fee increase in the 2008/2009 Management Plan, it can be anticipated that the reaction of the families will be negative and many families may have no other option but to either look for cheaper childcare elsewhere, or reconsider working arrangements and withdraw or reduce their days of attendance.

12. This is a very real consideration for Council and the childcare services, as increasing the fees to such an extent could drive utilisation a lot lower than the 90% rate, generating more challenges for the centres to return a cost neutral budget.

Staged Fee Increase to Achieve a Cost Neutral Result

13. Another option is to implement a staged fee increase that would achieve a reduced subsidy and eventually a cost neutral result for Council.

14. It is proposed that the fees could increase in July 2009 and then again in January 2010. The following table gives an indication of the impact of a staged fee structure on Council.

Proposed Fee/Day

Daily Fee Increase

Percentage Increase

Total Annual Cost to Council Across 5 LDC Centres

Option 1

$65.00 from July 2009

$3.00

4.8%

$384,994 p/a

Option 2

$65.00 from July 2009

$68.00 from January 2010

$3.00

4.8%

4.6%

$306,430 p/a

Option 3

$66.00 from July 2009

$70.00 from January 2010

$4.00

6.5%

6.1%

$211,468 p/a

15. Full cost neutrality and service sustainability could be achieved with further staged fee increases in the following financial year.

16. Taking into consideration future planning, there may need to be a further increase of $4.00 per day in January 2011 to incorporate the fact that the State Government is currently reviewing the Children’s Services Regulations and they will include a new staff to child ratio of 1:4 instead of 1:5 for children under two years of age. This will have a budget impact as each centre will require an extra staff member.

17. At this stage it is unknown if the new Regulations will come with a transition timeframe for the increased ratio or if they will come with additional funding, so this proposed figure is only an approximation until details are confirmed.

CONSULTATION & TIMING

18. After the decision is made for a proposed fee for 2009/10, a letter will be sent out to the families at the Long Day Care Centres notifying them of Council’s intent. Families will have an opportunity therefore, to respond as part of the public exhibition of the Draft 2009/10 Management Plan and Budget and Council could consider such responses prior to adopting the final Plan.

19. Consultation is also currently being undertaken with the Department of Community Services and the Federal Government in terms of a more sustainable service delivery model and funding options for the Occasional Care Centre. This service currently operates with a deficit and no fee increases have been proposed at this stage as utilisation remains low. Further information on the Occasional Care Centre will be made available once negotiations with the government agencies have been advanced.

Carolyn Isaac

Service Manager Child and Family Services

Attachments:

Childcare Fees Option Paper - March 2009

5 Pages

Item 7.1 - Attachment 1

Previous Child Care Fee report from 27 April 2009 Meeting

CHILD CARE FEES

(OPTIONS PAPER)

MARCH 2009

F2008/03695 – D01156779

TABLE OF CONTENTS

1. EXECUTIVE SUMMARY. 3

2. BACKGROUND.. 3

3. CHILDCARE FEE LEVELS – IMPACT ON COUNCIL BUDGET 2009/2010. 4

4. PROPOSED FEE INCREASE IMPACT ON FAMILIES.. 4

5. LOOKING AHEAD.. 5

1. EXECUTIVE SUMMARY

This discussion paper provides some background information on the fees currently applying to Council’s child care services and proposed for the Management Plan and Budget 2009/10. A modest fee increase has been included in the draft services budget which will result in a deficit result for Council, similar to 2009/10. Other options are outlined in this report including details of the potential impact on families and Council.

2. BACKGROUND

It has been the aim of Council to achieve cost neutrality with the childcare centres but due to increasing costs and reduced utilisation this has not occurred in recent years. The utilisation issue started to arise largely as a result of incentives in the way the Federal Government applied a fee subsidy which encouraged more families to switch to part time care and so the centres were faced with numerous odd days to fill, particularly on Mondays and Fridays.

As a result of this, a significant review of the childcare centres was carried out prior to the fees being set last year. Historically, the fees at the centres have increased by three dollars per day every Financial Year. In 2008/2009, the fees were standardised across the centres and increased by $1.00 to $6.00 per day, depending on the centre.

Over this Financial Year the childcare centres have maintained an average utilisation of 90%. The utilisation reached a high of 96% in September and a low of 86% in January. As a result of these figures it is proposed to continue to set the childcare fees based on 90% utilisation across the board.

Note: Utilisation rates at each centre vary which is why we aggregate the rate across all ages for all centres for budgetary purposes. For example, all centres are achieving 100% utilisation rates for the 0 to 2 year old groups but a varied rate for the 3 to 5 year old age group, ranging from 86% to 90% utilisation

The standardised utilisation method is based on a more realistic break even fee that anticipates some fluctuation in childcare operations, takes account of lower utilisation rates and fixed staff and operating costs.

To achieve full cost neutrality based on the current environment and utilisation rates the daily fee would need to increase markedly. The fees within the 2009/2010 draft budget have been set at $65.00 per day which has been based on the suggested CPI in the Fees and Charges document and will result in a Council deficit of approximately $385,000. The information below outlines the impact on families as well as options to reduce the Council subsidy.

3. CHILDCARE FEE LEVELS – IMPACT ON COUNCIL BUDGET 2009/2010

The following table provides an overview of the possible increases per day for the Long Day Care Centres as a quick snapshot of the increase and difference in fee when compared to current rates as well as the resulting cost to Council.

Proposed Fee/Day	Daily Increase on current fee	Total Cost To Council Across 5 LDC Centres
$65.00	$3.00	$384,994
$68.00	$6.00	$227,867
$70.00	$8.00	$162,089
$74.00	$12.00	$0

4. PROPOSED FEE INCREASE IMPACT ON FAMILIES

Families accessing the childcare centres are entitled to two Federal Government subsidies. Childcare Benefit (CCB) is a subsidy that is applied weekly at the centres to reduce the fee and is applied as a percentage through an income test. The second is the Childcare Tax Rebate (CCTR) which is a 50% rebate for the out of pocket childcare expenses for families, capped at $7,500, and this can be claimed by the families quarterly through the Family Assistance Office.

The attached tables illustrate the impact of the proposed fee increase options on the families after the subsidies have been applied.

(a) Table one displays the fee impact after CCB has been calculated and has been calculated on the percentage rates effective for the 08/09 Financial Year. These are usually CPI indexed each year, but the 09/10 percentages have not been released at this time.

(b) Table two shows the impact on families after the CCTR has been applied.

(c) Table three outlines examples of the total difference that families will have to pay for the varying proposed fee options.

The impact of fee increases on families will obviously vary depending on their income level and other personal circumstances. A breakdown of the income categories for families currently using Council’s childcare centres is:

i. 25% Families earn $34,310 or less

ii. 13% Families earn between $34,310 - $60,000

iii. 31% Families earn between $60,000 - $130,000

iv. 31% Families earn above $130,000, are not eligible for CCB or choose to take the Lump Sum CCB option and claim as part of their annual income tax return.

5. LOOKING AHEAD

Taking into account forward planning, it must be noted that there are also new Children’s Services Regulations that are due to be implemented in approximately July 2010, with a change to the staff to child ratio from 1:5 to 1:4 for children under two years of age. These changes will have a direct impact on the childcare centres as an extra staff member will need to be recruited per centre. This will need to be included in further fee structures.

The changes may also place significant pressure on Council to maintain or increase the number of under two year old children that we cater for in the future as there is anticipation that some of the private centres in the LGA may cease this service as a result.

This information does not relate to the Occasional Care Centre as it is being dealt with as a separate issue. A review of the service provision model is currently being undertaken and discussions with the State Government are in the process to look at approval for the possible improvement that will encourage viability as well as meet the needs of the Community.