Ministry of Education
Early Years and Child Care Division
315 Front Street West, 11th Floor
Toronto ON M5V 3A4
MEMORANDUM
2024: EYCC04
TO: Consolidated Municipal Service Managers and District Social Services Administration Boards
FROM: Holly Moran, Assistant Deputy Minister, Early Years and Child Care Division
DATE: August 1, 2024
SUBJECT: New Child Care Funding Approach
The ministry is grateful for your continued collaboration and values your ongoing feedback as we work together toward our shared goals of providing Ontario families with high-quality and affordable child care.
I am pleased to share the following to support early CMSM/DSSAB planning to implement a new cost-based approach to Canada-wide Early Learning and Child Care (CWELCC) funding, starting in 2025:
- A new CWELCC Cost-Based Funding Guideline, effective January 1, 2025;
- Preliminary 2025 child care funding allocations (excluding other funding not listed below, such as EarlyON allocations, which will be communicated later in 2024);
- Incremental 2024 CWELCC administrative funding allocations to support set-up costs associated with implementing the new cost-based approach; and
- Questions & Answers regarding the new child care funding approach.
As requested, to support smooth, effective, and consistent implementation, the ministry is providing CMSMs/DSSABs with these materials in advance of releasing the new guideline and related supports to licensees – and well in advance of the effective date. Note that the new CWELCC Cost-Based Funding Guideline includes placeholder references to sections of the remaining funding guidelines, which will come later in 2024, as well as a release date of the new Cost-Based Funding Guideline to licensees, all of which will be updated at appropriate times.
Investments for 2025
Investments from the Government of Ontario and the Government of Canada in the child care and early years system will total more than $5.6B for 2025 (excluding EarlyON):
- $4.61B in Cost-based funding to support operating costs for licensees participating in CWELCC for the delivery of child care to children aged 0-5;
- $0.15B in Start-up Grant funding to support capital costs for the achievement of creating affordable child care spaces for children aged 0-5;
- $0.76B in Local Priorities funding to support operating costs largely outside of the CWELCC system, including fee subsidies and Special Needs Resourcing; and
- $0.08B in administrative funding to support CMSMs/DSSABs with their administrative capacity to support the early years and child care sector.
The investments listed above have been allocated taking into account your current directed growth targets and may be adjusted through a potential recalibration of CWELCC space targets for 2025 and 2026. More information on space recalibration will follow later, including a request for data on progress towards space creation targets that will be used to inform the process.
Please refer to Appendix A for the Preliminary 2025 Child Care Funding Allocations.
Key Updates
a) Incremental 2024 CWELCC Administrative Funding
The Province recognizes that cost-based funding and the related accountability framework will transform sector funding and implementation. As a result, changes to existing policies and procedures, IT systems, service agreements with licensees, and the development of comprehensive training and communication materials may be required.
To support such set-up costs, the ministry will be releasing $27.5M in one-time-only, incremental CWELCC administrative funding to CMSMs/DSSABs for 2024. CMSMs/DSSABs can refer to Section 3 of the most recent 2024 CWELCC Guideline for more details on administrative spending guidance.
Please refer to Appendix B of this memo for one-time, incremental 2024 CWELCC funding allocations. 2024 transfer payment agreements and cashflow payments will be amended to reflect this increase in CWELCC administrative funding allocations as soon as possible.
b) Cost-based Funding (2025 onwards)
Starting January 1, 2025, the new funding approach described in the new Cost-Based Funding Guideline will take effect. Cost-based funding provides support for operating costs for licensees participating in CWELCC for the delivery of child care to children aged 0-5 years.
As described in the new guideline, cost-based funding is guided by the following principles:
- Transparent: Clear and consistent approach, both locally and across CMSMs/DSSABs so that licensees know what to expect from CMSMs/DSSABs.
- Representative: Funding is responsive to how child care is delivered in Ontario and based on the true costs of providing child care to eligible children.
- Simple: Easy to understand with minimal administrative burden.
- Accountable: Cost control structures and safeguards ensure accountability for and equitable distribution of public funding.
To achieve balance towards realizing these principles, cost-based funding allocations to licensees will include benchmark-based allocations with adjustment factors to account for geographic variances, growth top-ups for new spaces or top-ups for existing licensees whose cost structures exceed their benchmark allocations, and amounts in lieu of profit and surplus.
To ensure cost containment and the proper use of public funds, CMSMs/DSSABs will be required to reconcile funding allocated to licensees with their actual eligible costs at the end of the year, select licensees subject to Direct Engagements to Report on Compliance, and perform cost reviews of the most disproportionately high top-up allocations, among other measures.
Like previous years, the ministry is withholding a portion of child care funding – specifically cost-based funding for 2025 – to minimize recoveries at the end of the year. Like 2024, these amounts are based on ministry assumptions, such as operating capacity.
Please note that cost-based funding does not change the direct relationship between CMSMs/DSSABs and licensees, including dispute resolution.
For more information on the cost-based funding approach, please refer to the new Cost-Based Funding Guideline. The ministry also expects to share a technical paper with CMSMs/DSSABs later in 2024, which will provide further details on how the cost-based funding approach was designed.
c) Local Priorities
As part of the new child care funding approach, starting 2025, CMSMs/DSSABs will receive local priorities allocations to support child care programs as follows:
- General operating grants (for ages 6-12);
- Wage Enhancement Grant (WEG)/Home Child Care Enhancement Grant (HCCEG) and CWELCC wage enhancements, including those under the Workforce Strategy (for ages 6-12);
- Workforce Strategy – Professional Learning (for ages 0-12);
- Fee subsidies (for ages 0-12);
- Special needs resourcing (for ages 0-12);
- Capacity building (for ages 0-12); and
- Claims-based funding: Small Water Works and Territory without Municipal Organization (for ages 0-12).
While CMSMs/DSSABs will have flexibility in how to spend local priorities allocations, the remaining funding guidelines will include certain limitations on how such funding may be spent (for example, a minimum percentage spent on special needs resourcing; municipal cost share requirements). However, no significant changes for the above-listed child care programs are expected for 2025.
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.
While not part of the Province’s plan, service managers will not be required to recover related funding that has already been flowed to licensees in such cases. Wage increases for affected employees can be held constant until affected employees become eligible for additional increases.
For greater certainty and to ensure consistency across CMSMs/DSSABs going forward, the ministry is clarifying that “base wages” – for the purposes of wage enhancement allocations (such as WEG/HCCEG or wage enhancements as part of the Child Care Workforce Strategy) – must include any general operating funding provided to licensees for the purposes of improving wages.
d) Non-CWELCC-Enrolled Licensees
Under the new cost-based funding approach, licensees not participating in CWELCC may continue to run their operations under the existing provincial licensing and regulatory framework.
Some of these non-participating licensees may currently be recipients of child care routine funding (that is, general operating, fee subsidy, or wage enhancement grants). Starting in 2025, as the age 0¬5 portion of the routine funding is being integrated into cost-based funding under CWELCC to ensure the success of that system, routine funding must not be used to support such licensees, unless it relates to fee subsidies.
Existing fee subsidy agreements may continue to be funded until the benefitting child ages out of the program or leaves the licensee.
c) Next Parent Fee Reduction
Along with implementation of the new funding approach, to support the transition to $10 per day average fees by the end of 2025-26, families with children in programs enrolled in the CWELCC system would see child care base fees capped at $22 per day effective January 1, 2025. Regulatory amendments to Ontario Regulation 137/15 under the Child Care and Early Years Act, 2014 (CCEYA) will be required to operationalize this change to base fees, pending consultation and approval. When proposing changes to the regulations under the CCEYA, the ministry is required to consult with the sector for at least 45 days. Details related to this consultation will be communicated with the sector shortly and more information on the next parent fee reduction will be shared later in 2024.
e) Home Child Care Agencies with Active Homes in Multiple CMSM/DSSAB Jurisdictions
Starting in 2025, when an eligible agency has active homes in multiple CMSM/DSSAB jurisdictions, the overseeing CMSM/DSSAB will receive an allocation to cover all the agency’s active homes, other than new active homes within other (“secondary”) CMSM/DSSAB jurisdictions after a “specified date” (for 2025, this specified date is December 31, 2022).
Thank you for your ongoing support and valuable feedback. We look forward to continuing to work together to support Ontario’s early years and child care sector and the children and families it serves.
Sincerely,
Original signed by:
Holly Moran
Assistant Deputy Minister
Early Years and Child Care Division
cc: Matthew DesRosiers, Director, Funding Branch
Katie Williams, Director, Early Years Branch
Karen Puhlmann, Director, Child Care Branch
cc: Matthew DesRosiers, Director, Funding Branch
Katie Williams, Director, Early Years Branch
Karen Puhlmann, Director, Child Care Branch