Testimony of Tammie Miller, Chair of UFT Family Child Care Providers Chapter before the New York City Council Committee on Women and Gender Equity and the Committee on Education

My name is Tammie Miller and I serve as the Chair of the United Federation of Teachers (UFT) Family Child Care Providers Chapter. On behalf of the more than 10,000 UFT family child care providers, I would like to thank Chairpersons Helen Rosenthal and Mark Treyger and all the members of the New York City Council’s Committee on Women and Gender Equity and the Committee on Education for holding this important hearing on the impact the COVID-19 pandemic has had on child care in New York City.

I would like to share with you the challenges our families and providers face. First is the frustration families experience due to delays in the certification and recertification processes they use to access subsidized child care. Second is the increased cost that burdens providers due to an overall drop in child enrollment rates. I will conclude by sharing with you the many difficulties we at the UFT have experienced as a new provider network under contract with the Department of Education to support our group of providers.

Impact of COVID-19 on Children, Parents, and Families

Parents in need of child care are experiencing anxiety as they weigh whether to take their children to day care and thereby risk exposing their children and themselves to COVID-19 from other children and/or day care staff. Some have expressed interest in virtual opportunities while others prefer a hybrid learning model that includes remote learning. However, many of those interested in either hybrid or fully remote opportunities do not have electronic devices for their preschool children who are not yet enrolled in the public school system.

Parents who are willing to accept the risk and participate in traditional in-person child care are experiencing profound challenges with the certification and recertification processes they use to receive access to subsidized child care. Applications have been delayed for months. And recently, there were issues throughout the city when letters of denial were sent to the wrong families and to provider networks that were not matched with those families, sometimes networks in entirely different boroughs. These difficulties frustrate families and cause them to look for alternative child care options or to give up entirely.

Impact of COVID-19 on Providers

Due to the economic impact of the COVID-19 crisis, the child care system as a whole is at risk of collapsing. With record high unemployment, a substantial group of families are either no longer able to afford child care or no longer require child care as one or both parents are at home for the foreseeable future. Still other families have one or both parents working from home (or older children learning remotely), further depressing the demand for day care providers.

At the same time, the stress and cost of operating as a child care provider has exploded in the era of COVID-19. Essential supplies, including personal protective equipment, or PPE, have been both scarce and costly. Additionally, enrollment has decreased as providers have had to adjust for mandated social distancing requirements while child care rates have not increased, leaving providers without adequate funding for operating costs and staff salaries.

Unfortunately, providers cannot afford to provide stable, consistent employment at wages that would enable them to retain experienced workers. Even minimum wage is difficult for them, never mind living or competitive wages. They are also having trouble paying workers compensation and liability insurance, as well as meeting other daily expenses. In fact, according to a July survey by the National Association for the Education of Young Children (NAEYC), 86% of child care providers are serving fewer children now than they were before the pandemic, while 70% are incurring “substantial” new operating costs.

Meanwhile, interventions that were expected to come to the rescue have fallen woefully short. First, many providers applied for federal Coronavirus Aid, Relief, and Economic Security (CARES) Act grants and to date have not received the funding to enable them to remain open.

Systemically, there are issues with the way the New York City Department of Education (DOE) oversees its child care provider networks. These provider networks were established as a way to support individual providers. The UFT now serves as a new provider network with a five-year contract with the DOE. But unfortunately, our experience as a new network has been hamstrung by poor decisions and ineffective and impractical regulations. We’ve experienced too many issues as a new provider network to function to the full benefit of our group of providers.

Impact of COVID-19 on Networks that Support Providers

At a time when the pandemic has had such an impact on providers, networks need to support providers more than ever. However, networks are not able to operate optimally as a result of a combination of bureaucratic failures by the DOE and a flawed funding and reimbursement model.

Bureaucratic Failures:

1. Despite the DOE contract for network providers starting on July 1, 2020, access to the Web Enrollment System (WES) was not granted until late November 2020, nearly five months after the start of the program. As a result of this delay, children who were preliminarily enrolled were not able to complete their enrollment and were lost to other programs, or their frustrated families gave up on the system entirely. While this lack of access affected all 50 provider networks, it had a disproportionately negative impact on the 13 new networks that were starting from zero enrollment. Even with workarounds that were provided recently, the child enrollment process was substantially hampered. Unfortunately, the lack of access was only the first of a series of ongoing issues with WES. Full turnover of provider and family information in the system continues to slow the enrollment process, and also slows the process of notifying families about upcoming recertifications. Additionally, the data in WES is frequently inaccurate; for example, it often does not correctly reflect the true number of children in our programs, and students are miscategorized by age bracket. We recommend the DOE immediately resolve all technical issues and prioritize family outreach and enrollment.

2. New provider networks were not granted access to admissions and enrollment information for 3K School Day/School Year until late October 2020. Due to this lack of access, we lost children who wished to enroll with our providers because we were unable to get into the system and move them from the waiting list into a placement with one of our providers. The failure to provide access to this system also disproportionately affected new networks as the existing or renewed networks actually had access to this system not only during the admission cycle that closed in October 2020, but also during the cycle that closed in April 2020. New networks were unable to access the system due to a five-month delay in awarding the new contracts in response to the Request for Proposal (RFP) put out by the DOE. Contracts were announced in late February 2020 instead of September/October 2019 as originally planned.

3. Applications submitted to the EarlyLearn email address for the Extended Day/Extended Year program that we were directed to use receive no response. In the absence of enrollment status and updates, parents grow frustrated and find other options for child care – including giving up on the system as a whole. When bringing this issue to the attention of our Division of Early Childhood Education (DECE) liaisons at the DOE, we were told that the responsible parties were understaffed and overwhelmed and we were advised that “all we can do is wait.” In addition, recertification applications submitted by families from August through October still have not been reviewed or approved. It should be noted that this is the same agency that mailed letters of denial to the wrong families and networks.

4. The provider enrollment process has slowed to a crawl. After a provider completes the online survey, it can take weeks for that provider to appear in the online spreadsheet that guides the affiliation process. Moving to each successive step can also take multiple weeks. As a result, a process that should take one to two weeks is taking one to two months. This is depressing our current enrollment numbers, creating frustration with providers and families, and potentially causing us to lose children to other providers and networks or because families give up on the system.

Flawed Funding and Reimbursement Model

Despite having carefully negotiated a detailed budget with each network for Network Administration Costs, the DOE employs a dynamic reimbursement structure in which it only reimburses for actual expenses and at the percentage of complete child enrollment each network has in any given month. For example, if a network shows it is at 72% child enrollment in December but, in January, due to a major COVID-19 outbreak, for example, enrollment drops to 63%, then the network can only submit for reimbursement of actual expenses up to 72% for December and 63% for January. This model is deeply flawed for both programmatic and fiscal reasons, and the flaws are all the more evident during this pandemic.

The first issue is that this model is almost never seen anywhere else in the real world. It takes two distinctly different approaches to awarding contracts or grants and it combines the consequences of both while omitting the incentives of either.

In a “fee for services” style contract, a dynamic, enrollment-based reimbursement would be appropriate but not the limitation on actual expenses. In this approach, the service provider provides the quality of service desired by the contractor for a price that the contractor considers fair and the contractor does not look over the shoulder of the grantee to see how they are spending the money or how much they are spending. They receive the full amount to which they are entitled regardless of whether they spent more or less than that amount to provide the service.

The other approach does involve the contractor only reimbursing for actual expenses but without adjusting the maximum based on a performance indicator, such as enrollment. That is the trade-off. Our current model, however, combines the performance-based requirements of one model with the restrictive reimbursements of the other. It should be noted that in the prior RFP for networks, there was no dynamic, performance-based reimbursement structure for administrative costs. This “innovation” was added only with the current round of RFPs and has been a cause of consternation to many networks from the beginning.

This reimbursement model entirely fails to take into consideration the reality of fixed costs. If, for example, based on a five-year contract a new network signs with the DOE, the network signs a five-year (or even a one-year) lease, the rent costs do not fluctuate based on child enrollment changes. The same is true for the salaries of the mandatory “core” staff positions, such as Network Director and Education Director. These positions must exist according to prescribed ratios based on the number of providers the network supports, not the number of children the individual providers enroll. So, if a network is required to employ four Education Specialists to attend to 60 providers to adhere to the required ratio for this position, then the network must still pay those individuals at 100% of their salary and benefits as long as the network retains the same number of providers, regardless of what happens to their enrollments. It is nearly impossible to operate a program of this sort in a fiscally responsive manner given the failure to consider this reality.

More important is where the fiscal considerations cross over into the programmatic: A pay-for-enrollment model disincentivizes allocating adequate resources to operate the program successfully. When reimbursement of actual costs is tied to enrollment and enrollment is significantly hindered by external factors such as COVID-19, prudent stewardship of funding will call for less allocation of resources. This is an instance where the tail is wagging the dog. Lack of consistent and reliable funding makes it impossible to provide the high-quality support and services needed to properly run the program, especially given the importance of the population we’re serving and the severity of this moment.

To give you a sense of the fiscal and programmatic impact of this model, unless there are substantial changes in the on-the-ground reality in the coming weeks, we as a provider network will be reimbursed only 60% of our network administrative costs, at best. We have incurred expenses from July through November of approximately $750,000, and we will be reimbursed $450,000 at best, which is a loss of at least $300,000. Annualizing these costs and enrollment numbers would yield a loss of just more than $700,000.

We recommend that the networks’ hiring budgets be fully funded to ensure continuity of employment, salary stability and to avoid compromising quality for quantity.

In addition to the problematic reimbursement model, we would also like to point out that the DOE is using an incorrect calculation for funding indirect costs. According to the City of New York Health and Human Services Cost Policies and Procedures Manual, which resembles the federal uniform guidance on this matter (2 CFR § 200.68 - Modified Total Direct Cost), the first $25,000 of any subcontracted amount should be counted toward the Direct Cost Base against which the Indirect Cost is calculated. Unfortunately, despite bringing this to the DOE’s attention on several occasions, the DOE calculated the rate without the inclusion of the subcontracted funds.

Based on this calculation error, we alone have been deprived of up to approximately $317,000 on an annual basis that could otherwise support and sustain our vital operations in these trying times. The same is true for the 49 other networks whose programs would no doubt benefit from these additional funds as much as our program would.

We would also like to point out that despite having a five-year contract, the contract makes no allowances for cost-of-living adjustments, causing veteran staff to experience a decrease in their true compensation year-over-year. Finally, we would like to note that the daily reimbursement rate for providers per child enrolled in “3K School Day/School Year” is identical to that for children enrolled in “3K Extended Day/Extended Year” despite the “day” for the latter group being several hours longer than for the first group.

Conclusion

I know these are extraordinary times. And in such times, it’s important to be flexible and remain patient. Unfortunately, thus far, we at the UFT child care provider network believe the DOE has not extended the appropriate forbearance. Instead, the DOE has exacerbated an already delicate situation dictated by enrollment numbers that are out of our control. Despite all of our recommendations, we find it alarming that the DOE is unable to adapt and modify its operations to account for the unprecedented times we are facing. We hope the City Council can assist us in advocating for the DOE to make child care just a little bit easier for children, families, providers and networks.