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QRIS Resource Guide

Cost Projections and Financing

Costs Projections and Financing pictureBecause financing for the QRIS and its various elements is critical for long-term success, initial projections and sustainability review are important parts of planning. This section addresses the issues of projecting costs based on a proposed or revised QRIS model, identifying existing resources that can be realigned to support the QRIS, and securing additional sources of funding.

Funding is a significant factor in the successful implementation of quality rating and improvement systems (QRIS) and often drives the approach taken to piloting, scaling up, and crafting program and practitioner supports. Costs of QRIS vary widely, depending on the scope and scale of the programs included, the measures and frequency of rating and monitoring, and the types of program and practitioner resources utilized to support improvement.

A strategic approach to the financing and sustainability of QRIS will ensure that resources are sufficient to meet goals, and that public and private funds are maximized and leveraged effectively to support the improvement of quality over time. Clearly defining the goals of the QRIS and determining its scope, both in the short and long term, is a fundamental first step in determining costs and identifying and securing needed resources. By thinking broadly and creatively about how to effectively utilize available funding, including maximizing and leveraging varied funding sources, States will go a long way toward ensuring the sustainability of their QRIS and the programs that participate.

The information in this section is organized into six steps for developing a strategic financing plan.

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Step One: Deciding What Needs to Be Financed

Considering the phases of QRIS development and implementation is helpful in thinking through funding. Some phases are time-limited while others are on-going.  The following QRIS elements should be considered for funding:


  • Planning and Design: Strategic planning and data collection to establish the initial system
  • Standards: Research and development initially and revision at later points in time
  • Approaches to Implementation: Pilot or phased-in approaches
  • Accountability and Monitoring: Assessments, rating assignments, and on-going monitoring
  • Provider Support and Sustainability:  Short- and long-term program and practitioner supports, including one-time costs for attaining standards as well as on-going support for sustaining quality levels.
  • Data Collection and Evaluation: Information technologysystem design, and data collection,  analyses, and dissemination
  • Public Awareness: Parent, provider, and stakeholder awareness, communication, and outreach

Step Two: Projecting the Costs

Projecting the cost of QRIS can be challenging. Projections should include estimates for planning, launching, and maintaining the initiative, as well as anticipating its growth. Projecting participation levels and utilization of support services can be particularly challenging. Data from States with longer experience operating a QRIS can be useful.

To help estimate the costs of the QRIS, the Web-based Cost Estimation Model (CEM) is a tool that addresses the essential elements of a QRIS:

  1. Provider support, including professional development and technical assistance for program improvement
  2. Financial incentives for programs, early and school-age care and education practitioners and consumers
  3. Quality assurance, administration of the system with monitoring onsite assessments and document reviews
  4. Communication and outreach
  5. Data systems
  6. Evaluation

The CEM can be customized to address the components of each State or locale’s QRIS and can be used in several ways. The user can project the cost of a fully implemented QRIS with high participation rates, or they can change specific elements to see how different elements impact overall cost. The tool can also be used to estimate the cost of a QRIS pilot or field test by including only those elements that will be piloted and adjusting the participation rate variables to a specific number of programs. By costing out the separate elements of a QRIS, States can adjust future spending based on the effectiveness of each element. Information about how to access the CEM tool is available at

The tool requires the user to establish certain assumptions, e.g., projected participation rates. Documenting these basic assumptions will help when revisiting cost projections and tracking actual expenditures. Developing simple logic models that show the basis for the key assumptions that have major cost implications may be helpful. States may want to consider the level of resources needed to ensure that the program can successfully meet expectations. In Child-Care Quality Rating and Improvement Systems in Five Pioneer States Implementation Issues and Lessons Learned,Zellman and Perlman (2008) note:

It is important to design the QRIS so that available funds are used in the most effective way. This requires analysis of the costs of the various components, such as ratings and coaching. If, for example, the cost of ratings is so high that it compromises other QRIS activities, it may be necessary to rethink what is being measured or find other sources of support to fund them. It is critical that sufficient incentives are available to improve quality. While early rating system ideas in some states relied on the motivation of programs to improve, it has become increasingly apparent that improvement cannot occur without incentives and support. Providers accept risks in participating in rating systems. Those risks must be attached to real benefits. An underfunded system risks failure. (p. 55)

The States that have been the most successful in projecting accurate costs are those with existing data systems and information resources. These can be used to project key factors such as participation rates and initial levels of quality. Systems that may provide useful data for projecting costs and participation levels include licensing databases that capture the level of compliance with regulations and professional development registries that collect staff qualifications and annual training attendance. (Information about mapping the early care and education workforce is available in the “Initial Design Process” section.) The wide range of participation levels across States is reflected in the The Child Care Quality Rating System (QRS) Assessment: Compendium of Quality Rating Systems and Evaluation on page 17 (Child Trends & Mathematica Policy Research, 2010).

A related approach is to project the cost to the provider of meeting criteria at each QRIS level. Doing so can illuminate the cost of improving quality – the one-time cost of moving to the next level – as well as the ongoing cost to maintain quality at a specific quality level. The Provider Cost of Quality Calculator (PCQC) is a Web-based tool that calculates the cost of quality—based on site-level provider data and estimates—to help state policymakers understand the costs associated with delivering high-quality early care and education. The tool can demonstrate whether there is a gap between the cost of providing quality services and the revenue sources available to support a program.  Knowing the size of the gap at different quality levels for various provider types can inform the design of financial support and incentive packages.  This analysis provides additional information to calculate needed funding for incentives such as tiered reimbursement, bonuses, quality achievement awards or quality improvement grants.  To access the PCQC, contact the National Center on Child Care Quality Improvement at

Once cost projections are made and decisions are reached on the most important elements for which funding is available, States should develop a budget. In general, States do not maintain a separate budget for QRIS because expenditures are often embedded in the overall early  care and education system, such as the child care licensing or subsidy program, professional development and technical assistance systems, child care resource and referral (CCR&R) agencies, and other services and supports. Although a review of expenditure levels in other States’ QRIS provides a good starting point, each State’s QRIS has different criteria and incentives. Comparisons may also lead to incorrect assumptions due to varying availability of existing resources, such as licensing and access to training or technical assistance. Therefore, using the CEM to capture the State’s unique QRIS structure and existing resources, along with the PCQC to estimate provider costs, may be a better approach to cost projections.


Oregon Uses Provider Cost of Quality Calculator (PCQC) in Design of QRIS

Oregon was one of three states selected to pilot the PCQC.  They used the calculator to create scenarios and review them with various stakeholders.  The process provided several key points of learning including a focus on “the few and the powerful” in terms of standards and other specific standards because of the projected fiscal impact.  As a result, Oregon decided not to include Caring for our Children group size and ratio standards because of the fiscal impact. Oregon also realized the significant cost to programs to provide staff benefits as well as the fiscal value of programs participating in the Child and Adult Care Food Programs (CACFP).  Oregon now plans to include the PCQC as a tool in child care administration classes.


A primary goal of the QRIS is to improve the quality of child care and other early learning and school-age programs.  Assuming that higher quality has higher cost,  concern has been raised that a QRIS would increase the overall cost of providing services and thus the prices charged to families. Because most child care revenues come from parent fees, child care markets are extremely price sensitive. A program’s financial viability and sustainability is determined by three factors, sometimes called the ‘iron triangle’: revenue sufficient to cover expenses, enrollment as close to 100% as possible, and effective collection of all tuition and fees. If participation in a QRIS significantly increases costs, many providers may be unable to cover those costs soley by raising their prices.

States typically try to minimize the impact of a QRIS on the fees charged to consumers through subsidizing the increased cost of quality in two ways. They may support or offset costs of improvement tied to specific QRIS criteria, e.g., scholarships for staff to get the education required for higher standards. A second way is to cover ongoing costs of maintaining quality through financial awards such as tiered reimbursement bonuses for providers that participate in a QRIS, e.g., higher State reimbursement rates based on QRIS levels. Tiered reimbursement strategies are designed to help increase access to higher quality child care for low-income families. However, unless tiered reimbursement is structured as a “bonus” and not linked to market price, it can have the unintended consequence of driving up the price charged to nonsubsidized families and limiting participation in the QRIS, especially among providers that serve children of all income levels. This could potentially limit choices for low-income families if tiered reimbursement is the only financial incentive for a QRIS. Tiered reimbursement is likely to be more effective if it is one of several financial incentives available to providers. It is possible to structure financial incentives so that they are available to providers that serve families at all income levels but also offer special incentives for providers that serve subsidized children. (See the “Provider Incentives and Support” section for additional information and examples of financial incentives that States have developed.)

To date, research data on the relationship between QRIS and the price charged by participating providers are not available. Many factors make it difficult to correlate QRIS participation and price data, including external factors such as minimum wage increases, the supply of providers in a rate area, and local employment conditions. Nonetheless, it may be helpful for States to track price and rate changes over time, recognizing that the cost of care, market prices, and subsidy reimbursement rates are three related but distinct issues.


Georgia Uses Provider Cost of Quality Calculator (PCQC) to Inform Their Plan for Tiered Reimbursement

The PCQC is an online tool used to determine the financial impact to child care programs when they increase their quality as measured in a QRIS.   Georgia used the calculator with a large selection of child care programs, including the large multi-site programs, who furnished financial data and participated in a large state level meeting to review the results of the PCOQ work.  They recommended that the state implement modest tiered reimbursement percentages that could be sustained over time and would not dramatically reduce the number of children who could receive subsidies.  Their recommendations were implemented on July 1, 2013 for Quality Rated programs, with programs receiving up to a 10% bonus for the highest level, three stars. The programs reported that they felt included, informed, and instrumental in the decision-making process which led to a smooth implementation of tiered reimbursement and fostered trusting relationships between the programs and the state.  Georgia plans to use the PCQC in the future as a part of the 40 hour director’s training and for owners prior to them becoming licensed. Directors of three-star programs will be trained on the tool so that they can use it to mentor directors in one-star programs. 

Step Three: Identifying Funding and Resources That May Already Be Available or Aligned With the QRIS

Many States that have implemented a QRIS have been able to align their existing quality improvement strategies with the QRIS and build on the professional development, technical assistance, quality improvement, and monitoring systems that were already in place. QRIS can become an organizing framework for focusing multiple strategies toward an accountability structure that could include all early care and education services.

Using the QRIS as a tool for alignment and system reform requires careful planning. (See the “Initial Design Process” section for additional information.) Reaching the long-term goal of system reform is likely to occur over time as opportunities arise to restructure program administration and funding. Also, aligning resources and programs, such as licensing and CCR&R, may require changes in regulations or contracts, actions that cannot be immediately implemented.

The first step is to identify all existing resources and activities, such as professional development, technical assistance, monitoring, data collection/tracking, communication, etc., that currently support functions or activities included in the QRIS. This review should include resources for infant/toddler, school-age, and special needs care that may indirectly support the overall system and may also help identify gaps in resources. Resources may exist in several different state agencies. Many States have been intentional in making the changes needed to link these existing resources and activities to QRIS. While this step can sometimes be implemented via Memoranda of Understanding or other agreements, in some cases this step may require revised job descriptions or administrative structures, legislation, new regulations, amendments to rate or contract policy, new or revised responsibilities with contractors, etc.

In addition, there are efficiencies that can be realized by linking with other resources.  Creating online applications and importing data from a professional development registry and from a licensing database reduces the time it takes staff to collect information and assess the provider’s compliance with criteria. (See the Accountability and Monitoring section for additional information.) Some States accept monitoring and/or onsite assessments completed by other systems, e.g., using CLASS scores from Head Start classrooms, etc.  This has implications for financing in that efficiencies can reduce the scope of what needs to be financed.

As part of an analysis of resources, there may be existing programs and activities that can be eliminated or that may become redundant once the QRIS is in place. Funding for eliminated items can then be redirected to support the QRIS, although this action may necessitate significant involvement of key stakeholders and administrators to garner needed support and commitment to use funding in new ways.

QRIS offers States the opportunity to ensure that funding currently allocated to early and school-age care and education quality improvement is spent wisely. If used as a systematic framework for financing and measuring quality, QRIS offers many opportunities to maximize existing resources and promote accountability for results.


QUALITYstarsNY: Opportunities for Alignment of Current Resources

In 2010, the NYS Early Childhood Advisory Council commissioned a short-term project to identify current resources (state and federal) to support early care and education, through outreach to parents, technical assistance to programs and professional development for staff.  The intent was to paint a picture at a point in time of resources that might be aligned with NY’s QRIS, QUALITYstarsNY.  Appropriate websites for state agencies and programs were reviewed, and interviews were conducted with 30 individuals.  In addition to providing information about resources, the interviews were an opportunity to increase visibility of the QRIS among a key constituency, state agency leaders and their contractors, and a chance to further engage them in the larger initiative of the Early Childhood Advisory Council (ECAC) and specifically its quality improvement work.  Additional information on this project, including a copy of the survey and results, can be found at

North Carolina Business Redesign and Funding Realignment

The absence of a designated allocation for a QRIS forced the North Carolina Division of Child Development to redesign existing functions in order to implement its QRIS as a Star Rated License, an expansion of its existing licensing system. Existing systems and processes—licensing monitoring, staff qualification checks, automation, and the Web site—were reviewed to determine how to expand or revise them to include the onsite evaluation of child care programs. Automation helped licensing staff to manage monitoring of the expanded regulations for ratings. Agency staff who were managing the voluntary credentialing process and trainer approval were redirected to the new streamlined staff qualifications assessments. North Carolina found that it was more effective to integrate the QRIS into the existing licensing process than create new positions or units that worked on the rating system only. Using redirected quality funds, the State contracted with a university to complete the environment rating scale (ERS) assessments to ensure their objectivity. Cost savings were realized by performing complete rating assessments, including the ERS, once every 3 years, unless a program fails its annual monitoring of rating maintenance. Additional cost savings were achieved by putting some limitations on the ERS assessments—only one-third of classrooms and programs that could meet the other three Star standards were assessed. Additional information is available at

Step Four: Exploring Potential Sources of Funding to Fill the Gaps

Once funding needs are identified, States should seek new or unobligated funding sources that could be tapped to support the QRIS. American Recovery and Reinvestment Act of 2009 (ARRA) funds were used in several States to move their QRIS effort forward. The 4-year design phase of New York’s QRIS was accomplished with private foundation support and the volunteer efforts of hundreds of individuals. The field test of QUALITYstarsNY, which began in July 2009, was supported by funds from the ARRA and several private foundations. Implementation is being funded with federal funds via the State Early Childhood Advisory Council and Race to the Top (K-12). The most common source of funding for QRIS is the Federal Child Care and Development Fund (CCDF), with all but one State relying on this revenue source. Other possible sources include Federal funds from:

  • Temporary Assistance for Needy Families
  • Social Security Block Grant
  • Head Start
  • Title IVB Child and Family Services
  • Part B and Part C of the Individuals with Disabilities Education Act
  • U.S. Department of Education grants such as Early Learning Challenge
  • State general funds and dedicated State funding from tobacco settlement funds, so-called ‘sin’ taxes or lotteries
  • Local government revenues
  • Private sources, including business and philanthropic contributions

States may also be able to tap workforce development dollars or funds designed for special populations and initiatives (e.g., Native Americans, rural providers) to fund specific outreach to underserved communities or to expand the scope of programs included.  Federal education funding is becoming more inclusive of early care and education and systems building initiatives such as a QRIS; examples may be found on the U.S. Department of Education’s Early Learning Website ( and U.S. Department of Health and Human Services’ Early Childhood Development Website (

Before exploring charitable and business support, the State may need to identify a partner that can solicit and receive private funding for this purpose. State governments often do not have mechanisms in place to receive private funding. Also, funders have their own applicant guidelines to, in part, allow them to address tax issues related to charitable giving.


Funding Support for New York's Field Test

The field test was largely supported by funds made available through the American Recovery and Reinvestment Act. In 2010, the State Education Department (SED) committed the use of $4 million of its Race to the Top funding to support QUALITYstarsNY. SED prioritized implementation in high-needs school districts containing Persistently Lowest Achieving Schools. The Early Childhood Advisory Council provides funding support towards the implementation of QUALITYstarsNY and provides implementation oversight. The State Office of Children and Family Services awards up to $500,000 annually to support the professional development activities of QUALITYstarsNY participants. Each site creates a Quality Improvement Plan that outlines improvement activities. All funding requests are approved and monitored by the participating site’s Quality Improvement Specialist.

Minnesota Leverages Public and Private Funding

In addition to public funding from Minnesota’s Race to the Top—Early Learning Challenge Grant and federal Child Care Development Funds, the evaluation for Parent Aware, Minnesota’s QRIS, is funded by Parent Aware for School Readiness, a business-leader-led private nonprofit and the Greater Twin Cities United Way. In addition to funding the evaluation, both entities fund other significant Parent Aware efforts. Parent Aware for School Readiness markets ratings to parents and providers statewide. Greater Twin Cities United Way also supports the Accreditation Facilitation Project which is supporting 350 child care centers in the nine-county metro area in becoming both accredited and Parent Aware rated.

Step Five: Preparing a Strategy for Securing the Needed Funding

Key ingredients to this planning process include a long-range goal, a plan for incremental steps toward reaching the goal, and a lot of flexibility. Obtaining funding is often about seizing opportunities and does not always follow a logical plan. It may be possible, for example, to make great strides in linking the QRIS to one particular funding stream, such as child care subsidy. But it may take much longer to access dollars from another source, such as the State-funded prekindergarten or Head Start program in which many decisions are locally controlled. Or, it may be possible to secure financial incentives for a particular group of providers early on, and then work to extend these supports to all participants. (See the “Approaches to Implementation” section for information on the use of a phased-in approach when full funding is not available.)  Regardless of the timeline, it is helpful to have a roadmap of potential resources and a strategy for securing them, so that opportunities are identified as they arise. (Also see the “Public Awareness” section for information about building support among other stakeholders.)

The Finance Project has developed a series of tools and resources to assist States in both identifying and sustaining funding. In the resource Thinking Broadly: Financing Strategies for Comprehensive Child and Family  Initiatives (Hayes 2002), the author identifies five strategies that can help State or local leaders think broadly and strategically when developing financing strategies for long-term QRIS funding:

  1. Make Better Use of Existing Resources – Coordinate existing resources that support quality improvement for early and school-age care and education programs. This helps build an efficient service delivery strategy that reduces administrative costs.
  2. Maximize Federal and State Revenue – Track and draw down the full range of available funds that can support a QRIS. This includes using a mix of Federal, State, local, and private dollars to fully leverage available funding.
  3. Create More Flexibility in Existing Categorical Funding Streams – Consider strategies to pool or align uses of categorical funding streams. Develop memorandums of understanding or other mechanisms to facilitate blending and braiding of funding streams while ensuring fiscal integrity (and audit requirements) of each funding stream.
  4. Build Public-Private Partnerships – Partner with a range of stakeholders in the governance and funding of a QRIS. Engage private funders in leveraging Federal or State dollars or for targeted investments in specific elements of the QRIS or for implementation in selected communities.
  5. Create New Dedicated Revenue Streams – Engage stakeholders and develop long-range plans to create new revenue through ballot initiatives, special fees, or taxes. Dedicate this new revenue to the sustainability of the QRIS.

The document can be found at

A topical learning table sponsored by the Office of Child Care’s National Center on Child Care Quality Improvement included four webinars and many resource materials on the topic of Financing QRIS.  Presentations by Anne Mitchell and Louise Stoney of the Alliance for Early Childhood Finance and Debi Mathias of the BUILD National Learning Network as well as multiple resources for each webinar can be viewed at

Tax Credit Encourages Business Contributions in Louisiana

In addition to giving tax credits to families, teachers, and directors, the Louisiana School Readiness Tax Credit provides an incentive for businesses to make contributions to child care. Businesses that construct, renovate, or expand a child care center, purchase equipment for a center, maintain or operate a center, or subsidize child care for their employees can receive a tax credit, the amount of which is based on the star rating of the center. Businesses may also receive a tax credit for donations made to CCR&R agencies that provide technical assistance for programs that improve their Quality Start QRIS star status. Additional information is available at

Leveraging the Support of the Private Sector in Virginia

A pilot site in Virginia's Star Quality Initiative, Smart Beginnings South Hampton Roads, leveraged financial support from the private sector. Although the State funded trainings for local ”raters” and ”mentors,” South Hampton Roads leaders were responsible for accessing additional funds to support the local system. The Hampton Roads Community Foundation provided more than $1 million over a 2-year period for implementation in child care centers in the region. The Batten Educational Achievement Fund of the Hampton Roads Community Foundation supported teacher scholarships and education for staff in participating centers. To leverage additional funding, Smart Beginnings South Hampton Roads encouraged businesses to participate in an "Adopt a Center" program, where their contributions paid for one program's participation in the QRIS.

Step Six: Analyzing Costs and Expenditures Annually

As participation in the QRIS grows and providers are able to move to higher levels, ongoing tracking and analysis of administrative expenditures is needed to ensure the best utilization of fiscal resources.  Creating itemized budgets with expenditures by QRIS element and analyzing expenditures over time may yield significant information to support future budget planning. A good place to begin is with the underlying assumptions that were used to create the budget, e.g., participation rates, utilization of incentives. Were those assumptions valid? Analyzing monthly expenditures over time can also offer insights such as if program costs increased following an expansion of outreach efforts. This analysis can assist in determining if the expense of that programelement, e.g. , consumer awareness, is justified.   Are there other elements that yield more impact for less money? In an environment of limited resources, it is essential to steer investments to the most productive initiatives.  A thorough knowledge of the financial performance of the program will also be helpful when persuading policymakers to continue to support the initiative.

Sustained funding is necessary to ensure continued success of the program. The CEM can again be used to project administrative costs over the next several years and allow time to build support for increased resources.

Leaders may also want to engage early care and education service providers in sustainability planning, including an exploration of business models and strategies to attain greater economies of scale. Many early and school-age care programs operate on weak business platforms and are led by individuals with limited skills in fiscal management and, all too often, no time to focus on the business side of their work. Many early care and education programs rely on multiple funding streams, some of a short-term nature, as well as parent fees. Effectively managing the Iron Triangle, especially staying fully enrolled in a recession economy, is challenging but often essential to sustainability. For more information, a document called The Iron Triangle: A Simple Formula for Financial Policy in ECE Programs is available at Given the mixed delivery system of programs that may by involved in the QRIS, including publicly funded and private (for-profit and nonprofit) organizations, providing guidance and support for the business practices of program leaders as well as helping them learn more about ways they can forge shared services is essential to ensuring a good “return on the investment” in  QRIS.  Many States and programs are accessing a new platform, ECE Shared Resources, an initiative to improve quality, share learning and reduce costs among providers through the sharing of pratical tools, available at