In the January newsletter we discussed the likelihood of the reduction in subsidies to school-age programs starting September 1, 1996. As this goes to print Metro Council is considering several options. Only one option is certain; funding cuts will be made somewhere. You need to determine the impact of funding cuts on your school-age and other programs. In this issue we will make some very specific suggestions on how you can do this.

School-age subsidy reductions could adversely affect your operation in two ways.

1.        If subsidy is cancelled and your centre has a purchase of service agreement with Metro you can expect a significant drop in revenues as of September 1, 1996. You may already be experiencing lower enrolment because of the placement freeze effective January 1, 1996 resulting from a loss of the Jobs Ontario funding money. To counteract a drop in enrolment you may need to redesign your school-age program to operate within the financial capabilities of your parent group.

2.        Your centre could experience overall financial difficulties if your school-age program currently generates money to fund general administration and other programs at the centre (e.g. infant/toddler) and your school-age program is reduced or eliminated.

Redesigning Your School-Age Program

Changes to school-age funding will fall somewhere between leaving subsidy the way it is and total elimination of subsidy. Following is a look at how you would deal with total elimination of subsidy. We are not meaning to be alarmist but we believe you should plan for the worst and breathe a sigh of relief if cuts turn out to be not so drastic.

In last month's newsletter we emphasized the need to determine what your parents can afford to pay in the absence of subsidy. Let's assume you have determined that you could fill a program priced at between $6 and $7 a day.

What would the budget look like? Following is a possibility:

The example makes use of some significant assumptions:

• the most critical assumption is that you can hire good staff for 32 hours per day at $12/hour. We suspect that at these rates some caregivers will only stay until a full-time position comes along.

• this is not a stand-alone program! There is no provision for administrative costs, office supplies, etc. These costs must be borne almost entirely by fees paid by parents with children in other age groups.

• the example assumes 80% occupancy (12 children) throughout the year. Additional expenditures such as increased rates of pay and/or extra staff can be made if higher enrolment, to a maximum of 15 children per childcare worker, is achieved.

• in our experience program supplies of $1,100 per year are marginal for a school-age program of 15 children. Supplies may have to be supplemented with parent contributions.

• the example excludes care needed before school, at lunch, for PD days, March and Christmas breaks and summer holidays (see the next section). This is only an after-school program for regular school days.

In doing a projection for your programs try not to get bogged down with unnecessary detail. Focus on salaries, the major component. Other costs, excluding food and rent, can be estimated at 10% of total salary costs to simplify the process. Also, try to work on a room-by-room basis and exclude all general expenses such as administration and telephone.

It would be a real challenge to offer high quality school-age care at $6.30 per day. Increasing quality will probably require hiring staff for longer periods (i.e. offering something closer to a full-time job) and providing more funding for play supplies and other program costs. Fees will also have to increase if the program is to cover a portion of administration costs.

A PD Day/Holiday Program

Parents may want to have full day care for school-age children on PD days and holidays if they can afford it. Your centre could consider offering a PD day, Christmas and March break package. Again, we see the major difficulty in offering the program to be the hiring of high quality staff on such an infrequent basis. If staff can be found then a program could be offered as follows:

Again, this example assumes that:

• the program is not offered on its own and administrative and general costs are borne by other programs.

• no additional rent is incurred.

• a brown bag lunch is provided by the parents. The centre supplies 2 snacks per day.

• you are able to hire adequately trained staff on a casual basis.

• other salary costs include amounts for statutory payments such as CPP and UIC but not health benefits and casual staff for vacation and sick-leave replacements.

• March and Christmas breaks will probably require more than one staff member to cover a ten hour day.

The caliber of staff usually determines the quality of the program. We see the most significant challenge to running an affordable program to be the finding of good casual staff at modest salary rates.

The Effect of School-Age Subsidy Reductions on Other Programs

It is common for school-age programs that are part of a large operation to generate more revenue than is needed to cover direct costs. The excess is used to pay for administration of the centre and, if any is left over, to perhaps subsidize infant, toddler and pre-school programs. Redesigning your school-age program could eliminate this internal subsidy. You should determine how much, if any, of your administrative costs your school-age program covers and whether it also subsidizes other programs. This estimate is not difficult and be can done on a room-by-room basis as follows:

• calculate existing school-age fees for the room (number of children x fees);

• deduct salary costs of staff directly associated with the program (i.e. exclude administration) and exclude salary subsidies. Refer to page 8-B of your 1996 Metro budget;

• deduct an additional 20% of salary costs to cover casual staff, benefits and other staff related costs;

• deduct other direct costs. These can often be estimated at an additional 20% of salary costs.

A sample calculation is as follows:

Once again, keep the calculations as simple as possible. In doing the calculations focus on direct staff costs and roughly estimate other costs to avoid getting bogged down in detail. You should have completed this exercise by the end of March at the latest.

If your program generates an excess of revenue over costs and you expect this excess to disappear on redesigning your program then you should adjust your cash flow forecast and possibly adjust fees charged to other programs to make up the difference accordingly. If you have a deficit then you should revisit existing school-age fees being charged in light of the service being offered.

In summary, you should review your school-age program on a room-by-room basis as soon as possible to determine whether:

• your school-age care will survive the impending subsidy cuts.

• the program needs to be redesigned to continue to provide service to your community.

• you need to close the program at the end of the current school year.

You also need to determine whether redesigning the existing school-age program will have a negative financial impact on the overall cash flow of your childcare centre.