Ontario is taking the next step in lowering child care fees for families as part of the national Canada-wide Early Learning and Child Care system with a new fee cap to reduce costs for families and a new, cost-based funding approach to provide more stability and predictability for operators.
Ontario's Participation in the National Child Care Plan
In March 2022, Ontario signed a five-year Canada-wide Early Learning and Child Care (CWELCC) Agreement with the federal government as part of their national child care plan.
Funding from the federal government is limited over the length of the CWELCC agreement, with a total of over $10.2 billion committed over five years and an additional commitment for over $2.9 billion in year six. Over the same six-year period, the province is investing an estimated $21.6 billion in full-day kindergarten and an estimated $11.8 billion in early years and child care, an estimated total provincial investment of $33.4 billion.
Ontario is the only jurisdiction in Canada to have a mid-term review included in the agreement to discuss the impacts of the CWELCC design on the delivery of the program. The review highlighted the need for additional flexibility from the federal government to achieve space creation targets, and the need for additional funding to make $10-a-day child care sustainable over the long-term.
Next Parent Fee Reduction
Starting in January 2025, parent fees will be capped at $22 per day for children under the age of six in CWELCC programs, resulting in additional savings of nearly $300 million in 2025 for families. Once this new fee cap is implemented, Ontario will have reduced parent fees in CWELCC spaces by an average of 59 per cent compared to 2020 levels.
Amendments to O. Reg 137/15 of the Child Care and Early Years Act, 2014 are required to implement this fee reduction and the Ministry of Education is launching consultations on these amendments this summer.
New Child Care Funding Formula
The Ontario government is also introducing a new, cost-based funding approach for child care operators in the CWELCC program, effective January 1, 2025.
This replaces the "revenue replacement approach" the government used in 2022, 2023 and 2024 where operators are eligible for the amounts required to buy down the parent fees (plus cost escalation). While this approach has worked for many it has also posed challenges, including that it was based on a point in time when some operators had kept fees low to support families during the COVID-19 pandemic.
The new funding approach prioritizes a simple and easy-to-administer system that is consistent across the province and is representative of the true costs of operating child care.
Benchmark Allocations
Under the new funding approach, all operators will receive benchmark funding based on the typical costs to operate child care in their region of the province. In order to simplify the process for operators, funding will be based on core metrics including:
the number of operating spaces/active homes
licensed spaces by age group
operator setting
operating days
cost escalation
To ensure funding reflects the true cost of operating child care, the benchmarks are based on data from Ontario child care operators through multiple sources (mini-survey, operator survey, child care licensing system) and school board capital data.
By design, about half of operators will have their costs fully covered by benchmark funding. To ensure existing (“legacy”) operators can continue to provide services, they will have their legacy cost structures covered by a “legacy top-up”.
To recognize that costs vary across the province, benchmark allocations are multiplied by a geographic adjustment factor, depending on the location of the operator.
In order to support the creation of new child care spaces, newly enrolled operators (or expanding legacy operators) will be able to spend up to benchmarks plus a “growth top up”, recognizing the additional costs associated with operating new spaces in certain communities.
The new approach provides stability and predictability for operators with a reasonable amount in lieu of profit/surplus to ensure child care operators have no risk of loss for the care of eligible children. The average profit/surplus margin will be an estimated eight per cent of eligible costs for 2025.
Child Care Workforce Strategy
In November 2023 Ontario announced its Child Care Workforce Strategy (CCWS) which is delivering wage increases to Registered Early Childhood Educators (RECEs) and helping to recruit and retain qualified educators.
Through the CCWS, Ontario has increased the starting wage in 2024 for RECEs employed by CWELCC operators to $23.86/hour, supported by subsequent annual wage increases of $1/hour.
The ministry has been informed that employees in 25 of 47 regions may have received part or all of their CWELCC wage increase up front, rather than gradually, based on an interpretation of ministry guidelines for the program.
In such cases, service system managers (SSMs) will not be required to recover related funding that has already been flowed to operators. Increases for affected employees can be held constant until affected employees become eligible for additional increases.
For greater certainty and to ensure consistency across SSMs going forward, the ministry is clarifying that “base wages” — for the purposes of wage enhancement allocations (such as the wage enhancement grant or wage enhancements as part of the Child Care Workforce Strategy) — must include any general operating funding provided to operators for the purposes of improving wages.
The ministry will continue to closely monitor to ensure all eligible RECEs continue to benefit from the government’s planned increases to wages.
Auspice Ratio Change
Ontario recognizes the important role that not-for-profit operators play in the child care system; however, these operators cannot alone create all of the child care spaces needed in Ontario.
The province, based on new data from municipalities, identified the need for the federal government to lift the cap on for-profit spaces in order to create more affordable child care spaces and reduce waitlists for children and families.
On July 5, 2024, the Minister of Education and the Association of Municipalities of Ontario (AMO) sent a joint letter to the federal government asking to remove the cap on for-profit child care to enable the creation of more spaces. The CWELCC agreement requires the province to have a maximum of 30 per cent of CWELCC spaces operated by for-profit operators.
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