Question Period Note: ONTARIO’S COST-BASED APPROACH TO THE CANADA-WIDE EARLY LEARNING AND CHILD CARE SYSTEM

The Government of Ontario recently announced a new cost-based funding approach for child-care operators enrolled in the Canada-wide early learning and child care (ELCC) system

• Le gouvernement du Canada accueille favorablement l’annonce de la nouvelle approche de financement fondée sur les coûts de l’Ontario, et espère qu’elle répondra aux besoins des exploitants de services de garde et appuiera la création d’un nombre accru de places abordables en services de garde partout en Ontario.

• Le gouvernement du Canada et celui de l’Ontario continueront de travailler de concert et de collaborer avec les exploitants, les familles et les intervenants sur la meilleure façon de favoriser un accès accru à des services de garde abordables, de grande qualité, souples et inclusifs à l’échelle de la province.

On August 15, 2024, the Government of Ontario announced a new cost-based funding approach for child care operators enrolled in the Canada-wide ELCC system, which comes into effect in January 2025. The new approach aims to provide stability and predictability for operators, including to enable them to expand and create more affordable child care spaces across Ontario. The province also announced a new parent fee cap of $22 per day, effective January 2025. While these announcements were made together, they reflect two separate actions being taken by Ontario to support the implementation of the Canada-wide ELCC system.

Ontario is transitioning from a revenue replacement funding model to a cost-based funding model. Under the previous funding model, operators enrolled in the Canada-wide ELCC system in Ontario received funding to off-set reductions in parent fees. Ontario has indicated that while the revenue replacement approach 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.

Under the new cost-based funding approach, operators will be provided funding based on benchmark levels that reflect the typical costs to operate child care in the region in which they operate. Benchmark components include allocations for program staffing, supervisor staffing, accommodations, and operations. The new approach also includes growth top-ups for new spaces. For operators with costs that may exceed benchmark levels, a legacy top-up will be available to cover these legacy cost structures. The final funding amount is determined by applying a geographic adjustment factor to the licensee's operational plans, accounting for local variations in expenses like rent, labour, utilities, and food.

The new approach aims to provides stability and predictability for operators, ensuring that they can continue providing care without the risk of financial loss. To support this, the model includes a profit/surplus margin, estimated at an average eight per cent of eligible costs for 2025.

If pressed on the Government of Canada’s position on the new funding approach

• The Government of Canada welcomes the new funding approach and hopes it will meet the needs of operators.

• Any requirements a province may put in place regarding the provision of funding to operators is at their discretion, provided these requirements meet the terms and conditions outlined in the Canada-wide ELCC Agreements.

• The Governments of Canada and Ontario will continue to work together to support the successful implementation of the Canada-wide ELCC system.

If pressed on what is changing as part of the new funding approach

• Ontario is transitioning from a revenue replacement funding model to a cost-based funding model.

• The new approach aims to provide stability and predictability for operators, ensuring that they can continue providing care without the risk of operating at a deficit.

• Canada looks forward to engaging with Ontario as they implement the updated funding approach and seek feedback from the sector.

If pressed on funding approach and profits

• Focusing on growth in the not-for-profit and public sector supports the sound use of public funds, ensuring that surplus earnings are reinvested in ELCC programs and services.

• This approach allows continued growth of high-quality programs, rather than surplus earnings being distributed for the personal benefit of owners, members, investors or to enhance asset growth.

• The new funding approach contributes to supporting the ongoing implementation of the ELCC system in Ontario.

If pressed on whether the Government of Canada will lift current cap on for-profit providers in Ontario

• Ontario is committed to implementing accountability measures that ensure the reasonable use of public funds for all providers who opt-in to the Canada-wide ELCC system.

• The Government of Canada will continue to engage with Ontario on this subject and is seeking additional information to better understand the barriers faced by not-profit-providers in Ontario.

If pressed on the funding approach not supporting the workforce

• In November 2023, Ontario announced its Child Care Workforce Strategy, which included wage enhancements for Registered Early Childhood Educators working in centres participating in the Canada-wide ELCC system.

• The new funding approach seeks to support the wage enhancements that are part of the province’s Child Care Workforce Strategy.

• The Governments of Canada and Ontario will continue to work together to support the successful implementation of the Canada-wide ELCC system.

If Pressed (Subject)

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