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August 9, 2017

Key Findings from the Rating YoungStar Report

A very thorough research report examining Wisconsin’s YoungStar program was published in June 2017, completed by Wisconsin Policy Research Institute and written by Rob Grunewald, an economist with the Federal Reserve Bank of Minneapolis. Grunewald also co-authored the 2012 report just as YoungStar was getting launched, “The Economic Power of Early Childhood Education in Wisconsin”, concluding that “the investment in young children supports economic development by boosting the long-run productivity of the labor force and reducing public costs.” Five years later, Grunewald and his colleague Michael Jahr, have done a thorough analysis of YoungStar.

Here are some of their key findings and recommendations that resonated. The trends and findings are similar to what Kids Forward’s recent reports have focused on.
High- quality is the goal, but resources are needed
Several long-term studies demonstrate that the cost of providing a high-quality early childhood development program can be well worth the expense. But to achieve those benefits, programs must have an appropriate level of resources.
High participation in Wisconsin’s Quality Rating and Improvement System (QRIS)
Wisconsin has one of the highest participation levels in QRIS in the nation, largely due to the requirement for providers to participate in YoungStar in order to receive child care subsidy payments.
Decline of child care providers in YoungStar
Since 2012, the overall number of providers in YoungStar has decreased. Particularly for family child care providers, from 2012 to 2106, the number of rated certified family providers has decreased 56%, while the number of licensed family providers dropped 26%. Licensed group child care programs (larger centers) have declined by only 2 percent.
1,164 programs moved up the 5-Star rating scale
In the time frame of 2012 to 2016, the percentage of higher-quality programs (rated 3, 4 or 5-Stars) doubled, from 26% to 53%. At the same time, lower-quality programs (rated 1 or 2-Stars) dropped by 44%.
Scarcity of high-quality child care where it’s needed most
The research analysis found that the higher the poverty level in an area, the fewer high-quality providers or slots. The report used a mapping tool www.wpri.org/Daycare-Data.htm to see where gaps are across Wisconsin, comparing high-quality slots and areas with a high level of child poverty.
4- and 5-Star programs are in fiscal trouble
The analysis of the fiscal supports to high-quality programs found that incentives don’t provide enough resources for providers to operate at a higher level of quality. Wisconsin Shares base level of reimbursement rates, recommended by the federal government, has dropped from the 75th percentile of market rates to 25 th percentile. This means a 25 percent bonus for 5-star provider may only be enough to bring total reimbursement to market rate level, not enough to sustain high-quality. The report concludes that there may be justification for adjusting the tiered-reimbursement incentive levels or for increasing the base level of subsidy reimbursement.
Case studies find programs in debt
The report included two case studies, both 5-Star programs from Racine. One program serving 90 children closed with a net operating loss of $59,900, despite the combination of parent fees, subsidy payments and the YoungStar 25% bonus. The other smaller program collected parent fees, subsidy payments and the 25% YoungStar bonus, but was still showing a net loss of nearly $18,000. In this case, increasing the bonus to 30% would help them break even.

Dave Edie
Early Education Policy Analyst

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