Chapter 4 - Impact of Changes to Child Care Funding on Child Care Services

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Chapter 4 - Impact of Changes to Child Care Funding on Child Care Services

Introduction

4.1 The state of the child care industry at the present time is complex and dynamic. The changes to child care funding arrangements introduced by the Commonwealth Government in 1996-97 and 1997-98 have impacted, to varying degrees, on all those connected to the industry: the providers of child care services, the families and children using those services and child care workers. Some changes are still in their earliest stages of implementation, particularly in the out of school hours care area, while in the case of others, services and families are still adjusting and final outcomes are not clear. A further consideration is the difficulty in analysing changes in isolation – some of the changes have flow on effects, for example, changes introduced which affect parents' ability to access and pay for child care also impact on other variables such as utilisation rates.

4.2 At the same time, structural problems within the sector and demographic changes are also emerging as significant factors influencing the child care industry. For example, the over supply of child care places in some areas is impacting on the viability of some services and the decrease in the growth rate of the number of children in the age group 0-4 years in Australia will influence the future demand for child care services. The Government's reforms are therefore just one of the factors leading to change in the child care industry.

4.3 While the Committee received a great deal of anecdotal evidence about impacts on services and families, there have been difficulties in gaining up-to-date statistical information which accurately reflects the state of the industry at the moment. Part of the problem is the dynamic nature of the industry at present, and part is due to the complexity of data collection and long delays in analysing data. The problems of data collection have been discussed in Chapter 3, however, the Committee notes that this did hamper its ability to assess the anecdotal evidence received.

Changes involving long day care centres

4.4 The first of the changes discussed, the abolition of the operational subsidy, applies only to community-based centres. The other changes – the 50 hour limit on Childcare Assistance and the 20 hour limit on non-work related care – apply to both community-based and private centres. The factors that the Committee has considered in measuring the impact of these changes include fee changes, utilisation rates of care, closures of centres and the quality of services delivered.

Operational subsidies

4.5 In the 1996-97 Budget it was announced that operational subsidies for community-based long day care centres (excluding occasional care, family day care, multifunctional and multifunctional Aboriginal children's services) would cease from 1 July 1997. The Department of Family and Community Services (DFCS) stated that the abolition of the operational subsidy for community-based centres `removes a significant inequity for families using private rather than community based child care'. The removal of the operational subsidy was also aimed at encouraging community centres to be more efficient and cost competitive with private sector centres.

4.6 The Department stated that the operational subsidy equated to approximately $20 per place per week for community-based services. However, it noted that:

4.7 The Department also noted that the subsidy had never been paid to private services `even though private centres currently provide 74% of all centre based care, catering for more than 206,000 families'. [2]

4.8 In recognition that the loss of the operational subsidy required the community-based centres to make significant adjustments to their operations, $8.3 million has been allocated over two years to help community-based centres purchase financial and management advice. A further $11.5 million is also available over three years to assist centres with capital funding to upgrade and amalgamate. The Department commented that this assistance should minimise the need for centres to increase their fees. Further, funds for minor capital upgrading could result in an increase in licensed capacity and assist with the viability of the services.

4.9 The Department noted that consultants' reports on restructuring of community-based services indicated that generally it was possible for services, in almost all cases, to increase efficiencies without the need to pass on in full to parents the impact of the removal of the operational subsidy. It was noted that many community-based centres used the operational subsidy to provide services which were additional to quality and accreditation requirements. The Department submitted that the consultants' reports `acknowledge that many community based services would need to increase fees to increase income and hence viability, either through a straight fee increase' or through other means. [3] The following recommendations to improve efficiency of centres were made by consultants:

4.10 Evidence received from community-based organisations indicated that they did not consider that there was room within services for increased efficiencies to make up for the loss of the operational subsidy. The NSW Children's Services Forum stated that:

Concerns were expressed that there were few significant savings that could be made without significantly reducing the quality of care that was provided. [5] As staffing costs account for up to 85 per cent of centre costs, this was the main area of cost savings. However, reductions in staffing levels in particular were not seen as increases in efficiency rather as contributing to a decline in standards and quality. [6]

4.11 Witnesses indicated that generally fee increases have been the means sought by most centres to make up the loss of the operational subsidy and to maintain the level of services previously provided. Access to financial and management advice had not been enough to contain increases in fees. These increases have occurred across the community-based sector, with increases ranging from relatively small amounts to substantial increases in the range of $30 per week. [7]

4.12 Some sponsoring bodies indicated that the increased fees did not cover the full impact of the loss of subsidies but the sponsoring body had agreed to carry the short-fall in recognition that further increases would result in low-income families being unable to access care. [8] Other services indicated that increases in fees were a `last resort' as they were aware that many families could not afford the additional cost, however `the only way to recoup the loss of subsidies and grants is to pass on the shortfall to parents by way of substantially increased fees'. [9]

4.13 Other means of overcoming the loss of the subsidy included:

4.14 Some witnesses noted that an added difficulty for community-based long day services to absorb the abolition of the operational subsidy was size of the services. Many community-based services are for 35 children or less and these small services find it difficult to implement the same cost savings as larger private centres: costs are spread over a smaller number of children and economies of scale are unavailable to small centres. Small centres thus have difficulty in keeping their fees at an affordable level without the operational subsidy.

4.15 It was stated that the proliferation of small community-based centres was the result of Federal Government policy which had kept the growth of the community sector to a minimum over the past five years. As well, since the 1970s capital funds have been provided for services of less than 50 places. [12] The Government in allocating capital funds had set the number of places, the mix of staff and balance of enrolment. The community sector had not had an open hand in deciding where centres would be established or in determining the way in which centres operated and as a result `had been left with a legacy of buildings, child care license and existing staff that would not have been prudently adopted if they were set up under the present operating environment'. [13] In Victoria, for example, less than 10 per cent of centres are 50 places or more, 33 per cent are less than 30 places while the remaining are between 35 and 40 places. [14] NACBCS concluded that the sector was `intrinsically disadvantaged by government policy'. [15]

4.16 Many witnesses representing the community-based sector supported the reinstatement of the operational subsidy. While giving evidence, the ACTU representatives stated that ACTU policy supported the reintroduction of the operational subsidy. [16] Subsequently the Committee received clarification of this statement. ACTU policy states:

It was noted that `the re-introduction of the operational subsidy would be of great assistance in achieving this policy objective of the ACTU and as such is supported'. [17]

4.17 However, the abolition of the subsidy was supported by some witnesses on equity grounds. The Shop Distributive & Allied Employees' Association (SDA) stated that:

In support of the abolition of the operational subsidy to community-based centres, the SDA also noted that:

4.18 While the SDA concluded that there was no justification for differential government assistance to services in the child care sector and that the abolition of the subsidy removed a significant inequity in government assistance, it went on to note that `services previously receiving operational subsidy must be able to operate in the same business environment, on the same basis, as private services, that is, they must be able to access the same tax advantages and reinvestment opportunities as private services'. [20]

4.19 Other witnesses also disputed that the abolition of the operational subsidy would put the community-based sector on an equal footing with the private sector. NACBCS stated that:

4.20 It was also noted by witnesses that the management structure of community-based centres was a cost additional to the general operating costs of running a business. A paid coordinator supports this management structure and this is `an additional burden placed on community owned services that private operators do not accrue. The operational subsidy contributed to meeting this cost.' [22] It was estimated that the cost of the management structure was $10,000 per year. [23]

4.21 Many submissions were received supporting the community-based sector and pointing to the benefits of maintaining the sector and to its history of supporting low income families and children with special needs. It was stated that community-based centres provided care for a high proportion of babies (38.6 per cent compared to 28.3 per cent for private centres), children with special needs, such as those from non-English speaking backgrounds (14.2 per cent compared to 9.2 per cent) and children with disabilities (3.1 per cent compared to 2.1 per cent) and children at risk (0.7 per cent compared to 0.3 per cent). [24] In rural and remote Australia, there are over twice as many community-based long day care places as there are private-for-profit places. [25] Uniting Community Services Australia noted:

4.22 The City of Yarra noted that community-based centres had traditionally supported families experiencing difficulties or requiring additional assistance and support and have been a point of referral for government and/or community agencies. The City noted that `current financial pressures make it difficult for the community sector to continue to support such families. Timely and regular fee payments are unlikely to be a high priority for families under such stresses, however are critical to the ongoing viability of the services.' [27]

4.23 The SDA noted that the community-based sector had made a significant contribution to the overall development of the Australian child care system and that this contribution must be recognised. Further, there is inherent value in maintaining the sector and that the Government `should ensure that this is in fact achieved'. [28]

4.24 NACBCS stated that:

4.25 The Australian Catholic Social Welfare Commission noted there were benefits of the community-based model of child care. The Commission stated that it encouraged active parent participation which puts in place appropriate checks and balances and is one way of ensuring that high quality services are provided; promoted the notion of shared parenting; and it provided an important source of social capital in many communities. [30] The Council of Social Service of NSW (NCOSS) also pointed to the benefits of the community model and concluded that:

4.26 In order to maintain the viability of the community-based sector a number of suggestions were put to the Committee. These ranged from the reinstatement of the operational subsidy to the provision of grants for specific resources, greater transitional funding and more targeted funding for centres operating in low income or disadvantaged areas. (The needs of families from low income and/or disadvantaged areas are discussed in Chapter 5.) Other witnesses suggested that new funding models be developed. [32]

4.27 One model already being trialed was presented by the City of Darebin. This model was designed not only to assist centres to adapt in the current period of change, particularly changes in utilisation rates, but also to ensure the future viability of centres. It is based on the community development approach rather than the traditional service delivery model. Cost cutting is not the overriding aim, rather a better and more equitable sharing of resources is intended.

4.28 Community-based centres operating in Council owned facilities have a primary role in the model, however, other community-based services and the private sector have a secondary or associated role. The model incorporates a `peak group' representing all children's services including family day care and kindergartens. This representation recognises that utilisation and the location or close proximity to other services determines viability. Training is provided for children's services workers and, most importantly, for members of committees of management. The Council plays a significant role in relation to planning, training, central enrolment and monitoring. It was indicated that Council subsidy for training and other costs was in excess of $300,000. [33]

Conclusion

4.29 The Committee has considered the evidence before it and concludes that the operational subsidy should be not reintroduced for community-based long day care centres. The evidence is clear that the subsidy benefited only a small proportion of those families, be those low, middle or high income families, who were able to access community-based care. Those families using private long day centres, the majority of child care users, did not benefit from the operational subsidy. Therefore, the reintroduction of the operational subsidy cannot be supported on equity grounds.

4.30 However, the Committee supports the concept of the `mixed economy' model for the child care sector. It considers that both community-based services and private-for-profit services have a valuable role to play in the provision of child care in Australia. The community-based sector and private sectors provide alternative models for the management of child care services and provide families with choice of care and choice in level of participation in the provision of services for their children. The Committee also notes that the community-based sector makes an important contribution to the social capital and infrastructure of communities. Further, the Committee considers that the growth of one type of service provider to the detriment of the other would not be a positive outcome for the industry. The emergence of one provider type to act in a monopoly position may lead to price increases and adversely impact on families and children.

4.31 The maintenance of the mixed economy model requires that both the community-based and private services are encouraged and supported. At the present time, the community-based sector is not only dealing with the loss of the operational subsidy but also facing structural problems, such as the proliferation of small centres and the unregulated growth of the private sector. Services are also facing problems associated with falling utilisation rates and increasing fees.

4.32 While many centres have attempted to improve efficiency through cost-cutting and other measures, community-based centres are faced with additional costs that private operators do not have. In particular, community-based centres must meet the cost of running committees of management. Community-based centres must also undertake investment in computerised management facilities to ensure efficient operations. The Committee considers that recognition should be given to the extra costs imposed by the community-based model on service providers.

4.33 Although $8.3 million has been allocated over the next two years to assist centres with restructuring, the Committee considers that further direct support for community-based long day care centres is required to assist these centres to maintain viability. Many community-based centres will have to undertake major changes to remain viable: to amalgamate or co-locate or extend existing facilities. The capital costs of either of these choices may be beyond the financial means of many centres and government assistance should be provided to enable them to undertake restructuring.

4.34 In providing such assistance the Committee is mindful that careful planning must be undertaken to ensure that informed decisions are made that will enable community-based centres to remain viable in the future and that supply and demand considerations within the local areas are taken into account. While the new National Planning System (see paras 2.43, 4.78) will go some way towards this, the Committee considers that models such as that established by the City of Darebin may provide an effective means of ensuring efficient delivery of child care services. The model not only incorporates community-based and private sector services, but also it recognises the unique position of local government in balancing the needs within communities by maintaining and enhancing the role of local government.

Recommendation: The Committee recommends that the Government support the `mixed economy' model, whereby both community-based and private-for-profit services play a valuable role in the provision of child care, by encouraging both services and especially ensuring that community-based services continue as viable service providers.

Recommendation: The Committee recommends that to ensure the continuing viability of community-based services:

 

50 hour limit

4.35 From 1 April 1997, a limit to Childcare Assistance of 50 hours per week per child was introduced. The Department noted that Childcare Assistance is calculated on the number of hours of care paid for, not the number of hours used. The Commonwealth introduced the 50 hour limit on Childcare Assistance for work related care to address the issue of payment for care not actually used. However, working families who can show that they have a genuine need for in excess of 50 hours of care per child can be exempted from this limit. The Minister for Family Services stated that `this limit reflects the view of the government that it is not reasonable for the community to support payment of care for more than 50 hours per week, unless it is actually being used for work related purposes'. [34] The Minister went on to note that `any financial impact on centres and individuals from the 50 hours measure depends solely on the charging practices of individual services'. [35]

4.36 The Department stated that under charging practices in the sector, many families are increasingly paying for care they do not use. For example, a family who uses child care for six hours a day may well be charged a full day fee, that is for an average of 10 hours. The Department indicated that at the time of the announcement of this change, only 2 per cent of families actually used more than 50 hours of care while charging practices of services resulted in approximately 12 per cent of families who receive Childcare Assistance paying for more than 50 hours of care. Approximately 25,000 families pay for more than 50 hours of child care per week but use less. The average number of hours of care per child per week was 26 hours. The imposition of the 50 hour limit was designed to encourage centres to reform their charging practices to better match fees to hours used. As a result of the change, the number of families paying more than 50 hours while using less had fallen to 6 per cent while operating hours of services had remained constant. The Department estimated that current practices still cost the Commonwealth approximately $90 million annually. [36]

4.37 The Department indicated that the Government had announced its intention to review centres' charging practices in consultation with the child care industry and families. This is to be undertaken by the Child Care Advisory Council. The establishment of the Council was announced in March 1998. The Council is to provide advice on strategic policy directions related to child care, research and reform of the Government's child care responsibilities. In doing so it is to have primary focus on improved outcomes for families and implications for industry and government.

4.38 Both the community-based sector and private-for-profit sector raised concerns about the introduction of the 50 hour limit. It was suggested that the imposition of the 50 hour limit did not reflect the way in which child care was used and that the hours of opening reflected the needs of the community. At a centre not every child is in care for the same 50 hours a week or the same 10 hours per day. Centres have to open early and close late to accommodate parent's work arrangements. Providers asserted that the current charging practices reflect this demand for extended hours as it is necessary to cover the overhead costs associated with opening for a certain number of hours per day, which for some services was 11 or 12 hours per day. [37] It was indicated that little could be done to decrease costs during periods of low utilisation, usually the beginning and the end of the day, as state regulations relating to staffing required minimum numbers of staff to be on duty. [38]

4.39 To cover the overhead costs of extended hours of opening, services cross subsidise `in order to share the high cost of providing care for the few families who need care at the very beginning and very end of the day. If services were to charge only those families the operational costs to provide this care the families would be unable to afford care and services would be unable to offer these extended hours.' [39]

4.40 The Multicultural Childcare Unit stated:

4.41 It was also stated that families who did not use a full week of care were little affected by the change. However, those who used five days of care faced increased costs. As the change fell most heavily on those who worked five-days per week some witnesses commented that the change was inequitable by penalising a five-day a week worker. [41] Evidence was also received that indicated that parents had responded to the limit by reducing the number of days a child was in care, usually a reduction from five days to four, and utilising informal care for the remaining time. [42] This change in care patterns impacted on utilisation rates of centres and affected the viability of centres.

4.42 In evidence it was suggested that some centres had decreased opening hours to accommodate the 50 hour limit but `this has caused significant distress to some working parents and resulted in some loss of existing and prospective enrolments'. [43]

4.43 On the question of payment of Childcare Assistance based on hours used, it was noted by the Child Care Industry Association of Queensland that Childcare Assistance is calculated on $2.30 per hour which, the Association asserted, was a very low rate. The Association stated that if there was a move to payment on hours used and hours booked, a totally different rebatable hourly fee structure would have to be developed or child care would become unaffordable. [44] The NSW Children's Services Forum concluded that the hours used by parents could not be the sole determinant for the cost of the service. [45]

Conclusion

4.44 The views received concerning the 50 hour limit reflect both the competing interests over the question of child care funding and the complexity of the situation within the industry. First, the Commonwealth has imposed a 50 hour limit on Childcare Assistance as a means of ensuring that assistance is provided for care that is actually used and encouraging providers to set their fee schedules so that families are not financially disadvantaged by the imposition of the limit.

4.45 Secondly, providers of services argue that they must meet the demands of the community which requires them to open for more than 50 hours per week. By doing so, providers incur costs which cannot to any significant degree be decreased because of licensing regulations, particularly those concerning staff/child ratios, and staffing considerations such as the employment of casual staff rather than permanent full-time staff which may compromise quality of care.

4.46 Thirdly, while evidence was received that many centres provide session rates for care which allow families to access only the care that they require, there appears to be a lack of flexibility in fee structures that allows fees paid to more accurately reflect hours used. Families are financially disadvantaged in this situation. Anecdotal evidence received suggests that this is contributing to decisions to decrease the days of care or change work patterns or use informal care for part of a week.

4.47 The Committee considers that it is appropriate that limits should be placed on access to assistance that goes to unused care. Further, those families who genuinely are in need of more than 50 hours of care are able to apply for an exemption to the limit.

4.48 However, the Committee also considers that finding a mechanism which meets the Government's aim of reducing the proportion of assistance paid for unused care and reflects centres' charging practices that are imposed because of community demands for extended hours of opening, regulatory restrictions and economic viability constitutes a significant problem and should be addressed.

Recommendation: The Committee recommends that the review of centres' charging practices referred to the Child Care Advisory Council be conducted as a matter of priority.

20 hour limit

4.49 From 27 April 1998, a limit of 20 hours per week was applied to access to Childcare Assistance for each child utilising child care for non-work related purposes. The then Minister for Family Services, the Hon J Moylan, MP, stated that:

4.50 The amount of care used for non-work related purposes in long day care centres varies between States and Territories. Preliminary results of the 1997 Census of Child Care indicated that Queensland had the highest proportion of children in care for non-work related purposes.

Table 4.1: Proportion of attendance hours used for work related and non-work related care in long day care, 1997*

% total hours NSW VIC QLD SA WA TAS NT ACT AUST
Work related 86% 93% 84% 92% 89% 91% 95% 96% 88%
Non-work related 14% 7% 16% 8% 11% 9% 5% 4% 12%

*Preliminary results from 1997 Census of Child Care Services

Source: Budget Estimates 1998-99, Answer to Senate Question on Notice 201, DHFS.

4.51 The Department indicated that the introduction of the 20 hour limit will improve access to families who need care for either work related or non-work related needs by freeing up 17,000 additional child care places. The Department also stated that it should encourage operators to establish new services in areas of work-related demand. Consultations with the child care industry prior to the 1997 Budget showed that the vast majority of working and non-working families approved of a limit on non-work related care, with 70 per cent of families approving a limit of up to 20 hours. [47]

4.52 Evidence received indicated that in some sections of the child care industry the need for a limit to access to child care by non-working parents was recognised and that the 20 hours per week was a more realistic and acceptable proposal than the recommendations made by EPAC of a cap of 416 hours per year per child. [48] ACOSS also stated that the limit was not unreasonable, especially as there are exemptions for children at risk, children with disabilities and their siblings and children who have one or both parents studying. [49]

4.53 However, some saw the 20 hour limit as `unfair and unwise', as a `bureaucratic decision' made without consultation with the industry which severely disadvantaged those centres which opened for more than ten hours per day. [50] It was suggested that the limit will have an adverse impact on the viability of centres. [51] Further, that `loss of these children due to the 20 hour restriction adds to the cost for working families as centres will need extra finances to remain viable'. [52] It was also stated that loss of staff numbers throughout the industry will be considerable with the introduction of the 20 hour limit.

4.54 Some concern was expressed that special needs and disadvantaged families may be adversely affected by this change. [53] For example, the NSW Government indicated that one NSW centre had a large intake of children of newly arrived migrants who used child care as an opportunity for their young children to gain language skills, interaction in the community and cultural skills. However, these children were being withdrawn from the centre, in part, because of the imposition of the 20 hour limit. [54] A further matter of concern was that rules for increased access and the payment of fees for disadvantaged children and those at risk is unclear. [55] It was also suggested that many children who benefited from attending formal child care would be disadvantaged:

The needs of disadvantaged children are discussed further in Chapter 5 of this report.

4.55 An option put to the Committee was that the limit should be two days of care to recognise that many child care centres are open for 12 hour days. It was also stated that a two day limit would also `take into account the way services cross subsidise in order to make child care affordable and accessible to all families'. [57] Further, such a change may be cost neutral as:

4.56 In response to questions during the June 1998 Estimates hearings, the Department stated that the 20 hour limit did not apply only to long day care centres which charged on a daily basis: it applied also to family day care which charges on an hourly basis, to long day care which charged on a session basis and to parents who used care sporadically. To change to two days would be helpful to some services but would be almost impossible in other contexts, while giving an option of either two days or 20 hours would lead to some types of services being treated differently. [59]

Conclusion

4.57 The Committee considers that the 20 hour limit is adequate to meet the needs of families for non-work related care. Provisions are in place to exempt families in crisis situations and families with a child who has a disability from the limit. The concerns raised about the needs of disadvantaged children are discussed in Chapter 5.

Recommendation: The Committee recommends that the 20 hour limit continue, providing that the current provisions to exempt families in crisis situations and families with a child who has a disability from the limit remain in place.

Indicators of the impact of changes on long day care centres

4.58 Many witnesses indicated that the major impact of the changes on the child care industry has been to the viability of the industry. Witnesses pointed to a number of issues as evidence of adverse outcomes of the changes which were now compromising viability: fee increases as a direct result of the changes at a time when changes to the amount of assistance offered to families has decreased; the flow-on effect of fee increases on utilisation rates; and cost cutting, particularly in the area of staffing, which has impacted on quality and variety of services offered.

Increases in fees

4.59 The Department indicated that from 1991 to 1996 fee increases have been consistent for both private and community-based services. However, the preliminary 1997 Child Care Census data showed that fee increases for community-based service had increased significantly more than for private services, 9 per cent compared to 1 per cent. The average weekly long day care fee in community-based centres is now $163 per week compared with $157 per week in private centres. [60]

4.60 Most services also charge daily attendance fees to accommodate part-time users. In 1997, 96 per cent of community service and 87 per cent of private services charged a daily fee. The Department indicated that daily fees had increased 19 per cent in the community services and 11 per cent in private services between 1995 and 1997. This represented an increase of $5 and $3 in community and private centres respectively.

4.61 As already noted above, the community-based sector indicated that as a result of the loss of the operational subsidy, many centres had attempted to cut costs, particularly in the areas of staffing, however fee increases had occurred. Evidence from the private sector indicated that fees, on average, for private centres had not risen to any great extent. Private sector witnesses noted that factors other than the Commonwealth's reforms had contributed to cost increases for service providers. For example, since January 1997, there had been increases in award wages (for NSW workers between 3 and 5 per cent in July 1997 and 3 per cent for some classifications in October 1997). Other areas of cost increases included superannuation, workers compensation cover, changes to child care regulations, in particular requirements for two staff to be on duty at any one time, and changes to building codes. [61]

4.62 The Department concurred with the view that there were a number of factors that influence fee structures in child care centres. These include movements in award wages, centres' charging practices, changes to regulations or increases in overheads such as rates, insurance and utilities. As a result, `in recent years, and well prior to the Government's reform decisions, there has been a steady trend in fee levels with fees increasing at around 6% ($6-$10 per week)'. [62]

4.63 The Department concluded that although the community sector had faced significant increases in fees:

Utilisation rates

4.64 Evidence received indicated that both the community-based and the private sectors were experiencing marked changes in utilisation rates. Witnesses pointed to decreases in waiting lists for child care places, withdrawal of children from care and changes in patterns of care.

4.65 While the use of waiting lists as an indicator of unmet demand must be treated with caution as parents may place a child's name on more than one waiting list, centres indicated that waiting lists in some areas were now virtually non-existent. For example, Fairfield City Council indicated that at its centres, there were no waiting lists for immediate enrolments. [64]

4.66 In general, average utilisation rates have fallen across the whole sector, with both community-based and private centres reporting vacancies. The Department indicated that at one time utilisation had been close to 100 per cent and there were waiting lists. [65] However, witnesses stated that the utilisation rates in some centres are now so poor that the viability of services were seriously jeopardised. The Childcare Industry Association of Queensland, for example, indicated that while a utilisation rate of 75 per cent was considered necessary for continued viability, some private centres in Queensland were operating at rates as low as 25 or 30 per cent. Operators were struggling to keep services open, with many using mixed age groups in one room to lower staffing requirements. [66] In other States the picture was similar. In South Australia, for example, over 40 per cent of community-based child care centres indicated that they had full or part-time vacancies, while a similar proportion of private centres reported vacancies. [67] In Victoria utilisation rates varied from 24 to 100 per cent with a mean average of 86 per cent in community-based centres. [68]

4.67 An example of the fall in utilisation was provided by Fairfield City Council. In 1997 in the ten Council-run long day care centres there were 46 vacancies. This had increased to 627 vacancies in March 1998. [69] The QCCC, in its survey of child care services in Queensland in July 1998, found that in the 297 centres surveyed 5,037 children had been removed from care between January 1998 and June 1998. [70]

4.68 It was reported that demand for family day care was flat and utilisation rates did not reflect an increase in demand. [71] In its evidence, the Department noted that in the period 1995-97, the number of children using family day care decreased by around 11 per cent. [72]

4.69 Witnesses indicated that changes to utilisation rates are the result of some or all of the following factors: families withdrawing children from care altogether; families decreasing the hours of centre-based care used and opting for a mix of care arrangements including informal care and family day care in order to keep costs down; and families not seeking to enrol children in formal care when parents return to work. [73] The Salvation Army, giving evidence about its centre at Macquarie Fields, noted:

4.70 In evidence it was stated that many centres responded to vacancies by trying to fill gaps with part-time placements. The City of Maribyrnong indicated that one vacant place in a centre can be filled by up to five children in a week and that `this change to utilization patterns has dramatically increased administrative tasks of operators, both in the management of families using the centre and the continual re-visiting of waiting lists to find age appropriate matches for each vacancy'. [75] Other centres had closed rooms and amalgamated age groups. This has had an effect on licensing with some centres being forced to re-license at a decreased capacity. [76] Some operators of private centres indicated that they had taken on extra jobs to keep costs down as demand had fallen:

4.71 Many witnesses argued that the changes in utilisation rates were a direct result of government changes to child care funding arrangements. The community-based sector pointed to the large increases in fees that had occurred following the abolition of the operational subsidy which had led to a decline in the ability of families to afford child care costs. Witnesses pointed to anecdotal evidence that parents had given `increased fees' as the main reason for withdrawal of children from full to part-time care. [78] At the same time, other changes, particularly to Childcare Assistance, had made child care less affordable for families. The impact of changes on affordability of child care is discussed further in Chapter 5 dealing with the impact on families.

4.72 However, evidence pointed to a variety of other factors that are influencing demand for child care, including:

4.73 The Association of Child Care Centres of NSW, along with other private-for-profit peak groups and providers, indicated that they considered that the fall in utilisation rates was primarily due to a lack of new enrolment in child care centres, particularly from August 1997. The reason put forward for this was that parents thought that child care fees had gone up in all types of child care centres. The Association stated that in fact, fees had not greatly increased in private centres but the media had exaggerated and overstated the impact of the Government's reforms to the child care sector. As a result it was estimated that private centres now had vacancies of approximately 30 per cent across Australia. [80] A representative of the Association of Child Care Centres noted:

I believe that we have been caught up in misleading media information and that it has affected our consumer confidence. That is not the only effect of the declining utilisation, though; government measures have also impacted. [81]

4.74 One private centre operator stated to the Committee:

Private centres indicated that they had undertaken advertising in order to overcome the public's perception that fees had risen in all child care services. [83]

4.75 In response to the concerns raised by private centres regarding the impact of the media, the Department indicated that it was concerned about inaccurate or incomplete media coverage of changes in child care funding, but there was no way of assessing the extent of the impact.

4.76 The Department also pointed to a number of factors that it considered were impacting on utilisation rates. It noted that between the 1995 and 1997 Census of Child Care, the number of children in long day care centres increased by about 17 per cent and the number of Childcare Assistance hours paid to centres had increased by about 10 per cent. However, some services were still struggling. A major factor contributing to this has been the growth in supply of child care places since the early 1990s. In particular, there had been a significant increase in private centre places, a 58 per cent increase, between 1994 and 1996 which far exceeded the demand for them. At the same time, the number of 0-4 year olds in the population declined. [84]

4.77 The Department indicated that the problem of oversupply was particularly prevalent in Queensland where, between December 1991 and December 1997, private long day care places had nearly quadrupled (from 11,658 placed in 1991 to 46,380 places in 1997) which represented 36 per cent of the increase in places Australia wide during that period. [85] The Department noted that Queensland is the only state in Australia that has no high need areas for child care centres, because of the over supply. [86] Evidence from Queensland child care providers supported the Department's concern about the over supply of places in Queensland and impact on utilisation.

Table 4.2: Proportion of growth in long day care places by State and Territories from 31 December 1991 to 31 December 1997

State NSW VIC QLD SA WA TAS NT ACT AUST
Proportion of Growth 31% 19% 36% 4% 9% 1% 0% 1% 100%

Source: Submission No.894, Revised Appendix 4, DHFS.

4.78 The Department noted that improved planning is an important part of the Government's changes to child care. The new National Planning System will provide an `integrated approach to child care planning and help address the long standing problem of uneven supply of child care services'. The system will ensure that poorly serviced areas and geographically disadvantaged areas will be given priority for Government funding. [87]

4.79 Under the new arrangements, over the next four years funding for 83,000 (44,000 private and 39,000 community-based) additional places has been allocated. As a result, approximately 140,000 additional children will have access to care. In 1998 and 1999 new centre places eligible for Childcare Assistance will be restricted to 7,000 places a year. These places are in addition to existing commitments for new centre places to be established with capital assistance.

4.80 Evidence received by the Committee indicated strong support for the new planning mechanism. [88] It was stated that the failure of the Commonwealth and the States to coordinate jointly funded services, the non-inclusion of the private sector within any planning framework and the lack of transparency and consultation in the process has resulted in problems of oversupply in some areas and undersupply in others. Further, lack of planning had contributed to high unmet demand for baby places which are more expensive to provide and to competition to survive between community-based and privately run centres, and between private centres themselves. [89]

4.81 While the National Planning System was welcomed, evidence was given indicating that some concerns still existed about the implementation of the Planning System. The NSW Children's Services Forum, among others, noted that there was still little evidence of cooperation between governments, pointing to the problems in New South Wales where it was uncertain whether or not new places would be eligible for Childcare Assistance because of different assessments of high needs areas between the Commonwealth and the State. A further example given was the offer of OSHC places to highly serviced areas when areas in desperate need of funding were overlooked. [90] The Sydney Day Nursery and Nursery Schools Association noted a similar problem when it had successfully lodged a submission for capital funding for baby places with the State Government only to find that there was no agreement that the new places would be eligible for Childcare Assistance. [91]

4.82 A further concern raised was the use of out of date data and the lack of evaluation processes for the Planning System. The Queensland Child Care Coalition (QCCC) stated that the planning process is not as open and accountable as it should be; that although the process has attempted to address supply gaps in geographical locations, other areas such as appropriate provision of extended hours care for shift workers, weekend and extended care have not been addressed. [92]

4.83 In its submission, the Local Government and Shires Associations of NSW, indicated that NSW councils were generally supportive of the planning process. However, the Associations had raised concerns with the Department about the planning framework and models being used by it and whether the models took into account a wide enough set of factors or were doing so in a sensitive enough manner. It also raised problems of data, with the Associations believing that further work was required to develop better sets of data. It noted that recent attempts by local government to predict work related child care usage for Contribution Plans under the NSW Environmental Planning and Assessment Act had revealed `a broad deficiency in available data. In this context, if new or more customised data is not easily obtainable we stressed that the Department needed to state any estimates or assumptions in a transparent way and communicate these to other planning stakeholders.' [93]

4.84 There was also concern that the proposed system will not deal with affordability issues. For example, in some areas the cost of buying or leasing land will impact on affordability. A further matter that required attention was when demand is masked or depressed by affordability issues. It was indicated that there were already some local government areas which were still regarded as high need according to the present system but where there are vacancies because the cost of care is too high for the potential customers. [94] For example, Fairfield Council submitted that recent planning statistics provided by the Department had indicated that there was an undersupply of 1,100 places for children under five in the city. The Council argued that this information conflicted with the situation in Fairfield where there are 3,570 community-based child care places across the City of which 16 per cent were vacant. [95]

4.85 There were also calls for the restriction on the number of places to remain in force beyond the year 2000 as `unequal growth will result in a lowering of standards and closure of services'. [96] The City of Darebin also commented that a planning policy should be put in place that only allows for proven demand in the foreseeable future. [97]

4.86 The Department commented that under the Planning System, Planning Advisory Committees (PACs) in each State and Territory will identify high needs areas for additional child care. The Department stated `accurately measuring demand for child care is complex as there are many interactive variables that influence a parent's decision to use formal care'. The process will be in two stages which incorporate a core set of statistics based on a nationally consistent methodology and local area knowledge and consultations. Each State office of the Department is introducing processes to ensure that regional knowledge is actively considered in the PAC process. In addition, local government is represented on each PAC and `all committee members are invited and encouraged to bring to the PAC their expertise in assessing child care needs and any data that will improve the assessment process'. [98]

Chapter 4 - Impact of Changes to Child Care Funding on Child Care Services continued

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Footnotes

[1] Submission No.894, p.12 (DHFS).

[2] Submission No.894, p.12 (DHFS).

[3] Submission No.894, p.13 (DHFS)

[4] Submission No.422, p.8 (NSW Children's Services Forum).

[5] Submission No.760, pp.3-4 (Country Children's Services Association of NSW).

[6] Submission No.763, p.2 (Sydney Day Nursery and Nursery Schools Association).

[7] See Submission No.536, p.5 (City of Yarra), Submission No.517, p.4 (Community Child Care of Vic).

[8] Submission No.529, p.2 (Melbourne Citymission).

[9] Submission No.572, p.2 (Hunter Children's Services Forum).

[10] See for example, Submission No.535, p.7 (Local Government and Shires Association of NSW); Submission No.572, p.2 (Hunter Children's Services Forum); Submission No.589, p.11 (Australian Liquor, Hospitality and Miscellaneous Workers Union); Submission No.656, p.2 (Creche & Kindergarten Association of Queensland); Submission No.657 pp.2-5, (Tufnell Child Care Centre); Submission No.731, p.15 (Australian Early Childhood Association).

[11] Submission 316, p.2 (Fairfield City Council).

[12] Submission No.502, p.2 (NACBCS); Submission No.812, p.3 (UTS Child Care Inc).

[13] Submission No.812, p.3 (UTS Child Care Inc).

[14] Submission No.517, p.3 (Community Child Care Association of Victoria).

[15] Committee Hansard, 21.4.98, p.21.

[16] Committee Hansard, 21.4.98, p.73.

[17] Submission No.566, Additional Information, 8.5.98 (ACTU)

[18] Committee Hansard, 21.4.98, p.70.

[19] Submission No.465, p.5 (SDA).

[20] Submission No.465, p.7 (SDA).

[21] Committee Hansard, 21.4.98, pp.18-9.

[22] Submission No.517, p.5 (Community Child Care Association of Victoria).

[23] Committee Hansard, 21.4.98, p.24.

[24] Submission No.418, Additional Information, 29.5.98, (NCOSS).

[25] Submission No 891, p.3 (Australian Council of Social Service).

[26] Committee Hansard, 25.5.98, p.491.

[27] Submission No.536, p.8 (City of Yarra).

[28] Submission No.465, p.7 (SDA).

[29] Committee Hansard, 21.4.98, p.18.

[30] Submission No.732, pp.6-7 (Australian Catholic Social Welfare Commission).

[31] Submission No.418, Additional Information, 29.5.98, (NCOSS).

[32] Submission No.657 p.22 (Tufnell Child Care Centre); Submission No.760, p.2 (Country Children's Services Association of NSW); Committee Hansard, 21.4.98, p.19.

[33] Submission No.664, pp.11-13 (City of Darebin), Committee Hansard, 21.4.98, p.90.

[34] House of Representatives Hansard, 23.10.97, p.9661.

[35] House of Representatives Hansard, 23.10.97, p.9662.

[36] House of Representatives Hansard, 5.11.96, p.6549; Submission No.894, pp.8,15,16, Additional Information, 5.6.98 (DHFS).

[37] Committee Hansard, 21.4.98, p.90; see also, Committee Hansard 16.6.98, p.547.

[38] Committee Hansard, 16.6.98, p.527.

[39] Submission No.466, p.2 (Australian Federation of Child Care Associations).

[40] Committee Hansard, 29.4.98, p.324.

[41] Committee Hansard, 16.6.98, pp.581-2.

[42] See for example, Submission No.794, p.3 (Quality Child Care Association of NSW).

[43] Submission No.657, p.3 (Tufnell Child Care Centre).

[44] Committee Hansard, 16.6.98, pp.581-2.

[45] Submission No.422, p.4 (NSW Children's Services Forum).

[46] House of Representatives Hansard, 26.6.97, pp.6481-82.

[47] Submission No.894, p.16 (DHFS).

[48] Submission No.422, p.5 (NSW Children's Services Forum); see also Submission No.282, p.6 (Ryde Child Care Taskforce).

[49] Submission No.891, p.7 (ACOSS).

[50] Submission No.456, p.12 (Association of Child Care Centres of NSW); Submission No.794, p.4 (Quality Child Care Association of NSW).

[51] See for example, Submission No.836, p.8 (Child Care Centres Association of Victoria).

[52] Submission No.542, p.12 (Childcare Industry Association of Queensland), see also Submission No.422, p.2 (Australian Federation of Child Care Associations).

[53] See for example, Submission No.440, p.2 (QCCC), Submission No.882, p.5 (Uniting Community Services Australia).

[54] Submission No.862, p.16 (NSW Government).

[55] Submission No.763, p.3 (Sydney Day Nursery and Nursery Schools Association).

[56] Committee Hansard, 16.6.98, p.547.

[57] Submission No.466, p.2 (Australian Federation of Child Care Associations); see also Submission No.542, p.2 (Childcare Industry Association of Queensland).

[58] Submission No.794, p.4 (Quality Child Care Association of NSW).

[59] Budget Estimates 1998-99, Community Affairs Legislation Committee, Committee Estimates Hansard, 3.6.98, p.CA149.

[60] Submission No.894, p.20 (DHFS); Committee Hansard, 25.6.98, p.627.

[61] Submission No.456, p.4 (Association of Child Care Centres of NSW); Submission No.836, p.10 (Child Care Centres Association of Victoria).

[62] Submission No.894, p.20; Additional Information, Handout 2, 25.6.98 (DHFS).

[63] Submission No.894, p.21 (DHFS).

[64] Submission No.316, p.2 (Fairfield City Council)

[65] Committee Hansard 25.6.98, p.646.

[66] Submission No.542, p.7 (Childcare Industry Association of Queensland).

[67] Submission No.905, p.2 (South Australian Government).

[68] Submission No.517, p.3 (Community Child Care Association of Victoria).

[69] Submission No.316, p.2 (Fairfield City Council).

[70] QCCC, Stretched to the Limit, September 1998, p.1.

[71] Submission No.131, p.2 (City of Monash); Submission No.905, p.4 (South Australian Government).

[72] Committee Hansard, 25.6.98, p.631.

[73] See for example, Submission No.760, p.2 (Country Children's Services Association of NSW); Submission No.882, p.3 (Uniting Children's Services).

[74] Committee Hansard, 23.4.98, p.264.

[75] Submission No.452, p. 3 (City of Maribyrnong); see also Submission 316, p.2 (Fairfield City Council).

[76] Submission No.440, p.5 (QCCC).

[77] Committee Hansard, 23.4.98, p.282.

[78] Submission No.882, p.3 (Uniting Community Services).

[79] Submission No.440, Attachment 3, p.3 (QCCC); Submission No.731, p.8 (Australian Early Childhood Association).

[80] Submission No.456, pp.3, 7 (Association of Child Care Centres of NSW).

[81] Committee Hansard, 29.4.98, p.335.

[82] Committee Hansard, 23.4.98, p.282.

[83] Committee Hansard, 29.4.98, p.328.

[84] Committee Hansard, 25.6.98, p.628.

[85] Submission No.894, Revised Appendix 4 (DHFS).

[86] Committee Hansard, 25.6.98, p.642.

[87] Submission No.894, p.18 (DHFS).

[88] See for example, Submission No. 463, p.9 (Australian Local Government Association)

[89] Submission No. 422, p.6 (NSW Children's Services Forum), see also Submission 763, p.3 (SDN).

[90] Submission No. 422, p.6 (NSW Children's Services Forum)

[91] Submission No.763, p.3 (Sydney Day Nursery and Nursery Schools Association)

[92] Submission No 440 p.5 (QCCC)

[93] Submission No. 535, p.4 (Local Government and Shires Associations of NSW)

[94] Submission No. 535, p.5 (Local Government and Shires Associations of NSW)

[95] Submission No.316, p.5 (Fairfield City Council)

[96] Submission No 542, p.6 (Childcare Industry Association of Queensland)

[97] Submission No.664, p.5 (City of Darebin)

[98] Submission No.894, Additional Information 28.7.98, p.B6 (DHFS).