Scale and Sustainability for the ECE Industry: An Overview of Shared Services

1. Scale and Sustainability for the ECE Industry: An Overview of Shared Services Louise Stoney, Alliance for Early Childhood Finance and Opportunities Exchange January, 2010

2. INVENTED THE NEXT NEW THING GOT A MUCH BETTER JOB AND PAID MORE TAXES DIDN’T START SELLING DRUGS DIDN’T DROP OUT OF HIGH SCHOOL DIDN’T HAVE TO REPEAT A GRADE DIDN’T BEAT UP A BOY Source: Paul Sheldon, Citicorp. Based on data from ECE model programs like Perry Preschool and Abecedarian High-Quality ECE is Essential COST BENEFIT Dollars Age 21

3. Higher Standards More accountability More complexity – in service delivery and reporting Increased costs Increased Focus on Quality, Accountability, Results Achieving good results for kids isn’t easy!

4. ECE is Market-Based:Most Revenue is Tuition & Fees Consumer tuitionis the largest source of revenue, roughly 57% of total industry receipts Private sectorrevenue has increased dramatically but still less than 4% of total Government funding @ 39% of total, and is primarily portable funding (vouchers or tax benefits)

5. Market Challenges Lack of effective demand from consumers for high quality services. Insufficient product differentiation makes it difficult for consumers to obtain information on the quality of early care and education services. Low profitability due to high labor costs, quality standards, and price-sensitive consumers. No economies of scale in an industry composed of very small businesses.

6. Bottom Line Issues for ECE Businesses Ensure Full Enrollment – every day, in every classroom Collect Tuition & Fees – in full and on-time Maintain High Quality Services (fees cover cost or have 3rd party revenue source) ….

7. The Many Roles of an ECE Director

8. The Answer Is Not Just Money: It’s a Paradigm Shift • Forge new alliances within the industry – to gain economies of scale but keep the benefits of small sites • Understand & respond to consumers • Build infrastructure to maximize public/private investments in ECE • Use private sector $ strategically (as venture capital to fuel change)

9. Forge Alliances to Share Costs & Services • Management/Administration (e.g. team of directors/supervisors) • Fiscal (Billing and Fee Collection • Marketing • Fundraising • Human Resources & Staffing • Purchasing goods & services • Food Services • Quality Support (QRIS, curriculum, child assessments, etc.) • Health/Mental Health/Family Support

10. A Potential ECE Network Administrative Services: payroll, billing, fee collection, marketing, tax/finance support, etc. Research & Development: Information Technology, data collection & analysis, etc. Happy Acres Day Care Green Hills Child Care Center Tender Tots Pre-School Human Resources including health & retirement benefits, Unemployment Insurance, etc. Bulk Purchase of Goods and Services Network Hub (Shared Staff) Comprehensive Services: health, mental health, social services, family support The Newberry After School Program Annie’s Nursery School Staff Recruitment & Screening, including substitutes Mary’s Family Child Care Home Classroom Supports: mentor teachers, classroom assessments, QRIS support, etc. Fundraising and Fund Development (from public and private sources)

11. A Potential ECE Network Happy Acres Day Care Payroll, billing, fee collection, etc. Tender Tots Pre-School Green Hills Child Care Center Shared Staff: health, MH, SS, family support, etc. Research & Development Network Hub Employee Benefits Wage Subsidies / Employment Tax Credits Staff Recruitment & Screening The Newberry After School Program Pre-K Class at Lakewood Elementary Mary’s Family Child Care Home Annie’s Nursery School Briarwood CCR&R QRIS Support

12. New Business Models: Administrative Structures • ECE Program Alliance – Independent ECE businesses contract with common administrative agency (Chattanooga, TN; Columbus, OH; Colorado ELAs) • ECE Consortium – Group of providers merge into single non-profit (Seattle, WA) • ECE Provider Trust – Group of providers form Trust, which contracts with administrative agency (Fairfax, VA) • ECE Cooperative – Jointly owned entity

13. Reinventing the Industry: New Approaches to Staffing & Budgeting A Shared Service approach offers the opportunity to re-think staffing and supervision, job descriptions, roles, responsibilities, etc. In ECE, staffing patterns have a profound impact on the budget.

14. Budget for Small Center: 20 Full-Time Children Expenses Revenues Revenues for this center increased by $20,000 in the first year, due to improved fiscal management and full enrollment. Cost reduction + new revenue = $62,000 now available to support shared administration and/or to invest in quality improvements in the center. Reduction in Site Expenses: $42,000

15. Staffing Changes in Small Center: 20 Full-Time Children *Director spends remaining 75% of time at central office, on administrative tasks supporting ALL sites in the Alliance, including this one.

16. Budget for Larger Alliance Center: 65 Full-Time Children Expenses Revenues Revenues for this center increased by $35,000 in the first year, due to improved fiscal management and full enrollment. Cost reduction + new revenue = $153,000 now available to support shared administration and/or to invest in quality improvements in the center. Reduction in Site Expenses: $118,000

17. Staffing Changes in Larger Center: 65 Full-Time Children

18. Home-Based AllianceRevenues: Provider Perspective • Enrollment – More likely to be full because Alliance central office recruits families • Fee Collection – Providers can count on a monthly check from the Alliance. The central office takes responsibility for collecting fees from parents and third party funders. • Quality – Alliance helps to improve quality (which helps increase access to new revenue sources.)

19. Benefits of Shared Services • Stronger Team of Professionals • Better Cash Flow and Fiscal Stability • Stronger Fundraising • Better Working Conditions • for Staff • Better Quality Services

20. Growing Philanthropic Engagement • Annie E. Casey FoundationDavid and Laura Merage FoundationWilliam Penn FoundationMiriam and Peter Haas FundGoizuetta FoundationUnited Way in CO, IA, NH, OH, TN, WA,Community Development Agencies • ….and many other local funders

21. Potential Support from Policy Makers • Alliances can be a win-win for State and City ECE Administrators. Some Alliances have tapped public funds, including: • Child Care & Development Block Grant • TANF • Head Start/Early Head Start • State Pre-Kindergarten • ….and other sources • The new Stimulus Funding is another opportunity

22. Getting Started Examples from new Alliances • Philadelphia • Atlanta • Colorado

23. Philadelphia Shared Services on the Web • Led by Delaware Valley AEYC • Web platform (ECE Shared Resources) from CCA Global • Goal is to reach scale in center participation Shared Services in Depth • Led by Philadelphia Health Management Corporation • Back-office fiscal management (automated system) • Additional management supports (automated staff scheduling, staff recruitment/screening, etc.) Strategic links to Keystone Stars (QRIS) Start-up Funding from the William Penn Foundation

25. Atlanta Shared Services on the Web • Led by Quality Care for Children (QCC) • Web platform (possibly customized version of ECE Resources site) • Goal is to reach scale with centers, working collaboratively with other CCR&Rs Shared Services in Atlanta Metro • Coordinated by QCC in partnership with others • Services to be determined but could include: mentor teachers, classroom assessments, TA visits, affinity groups, child assessment, centralized staff/sub recruitment, training and screening, food program sponsor for small centers Peer to Peer Shared Services in Atlanta Metro • QCC will help match needs/resources and foster shared strategies • Services to be determined but could include: fiscal management; bookkeeping and accounting, child and family comprehensive services, food preparation, transportation, marketing, family enrollment and referral management, janitorial and maintenance services Start-up Supported by the Annie E. Casey and Goizueta Foundations

26. Colorado Early Learning Ventures (ELV) is a private operating foundation – established by the David and Laura Merage Foundation that focuses on operational efficiencies in the early care and education industry.

27. ELV Alliance Benefits Legal Structure and Documents Business operations/Financial modeling templates Start-up technical assistance ELVA Marketing Templates and Brand Recognition ELV IT Platform-Services/Supports Centralized relationship with Child Care Licensing Policy & Finance Reform Quality Rating Improvement System Supports

29. Legal Structure and Agreement Templates

30. Shared Services in Build States • New York – Child Care Resources of Rockland and Steuben I-CAN • Washington – Sound Child Care Solutions in Seattle • Pennsylvania – New initiative in Philadelphia • Michigan – Nascent projects in Detroit and Kent County • Ohio – Action for Children (former ELI-funded project) • Minnesota – some nascent work withRCCM in St Paul; strong Alliances in other non-profits, with case studies from Humphrey School

31. For More Information www.opportunities-exchange.org www.earlylearningventures.org Check out the Videos and the Shared Services Toolkit New Shared Services “Starter Kit” coming soon! Join the Shared Service Alliances Group on Linked In