Discussion, Consideration and Possible Action Regarding Local Workforce Development Board Performance Measures and Targets for Board Contract Years 2017 and 2018

Introduction – The workforce system is just reaching the one year anniversary of the implementation of Childcare Reauthorization (CCR) which made several changes that greatly reduce flexibility in operation of the program. During this year we have seen a dramatic increase in the number of Mandatory children served per day. Because this care generally has no copay, the increase in mandatory care has resulted in an increase in the overall average cost that the system pays for care.

In BCY17, with so much about CCR being unknown, TWC elected to take responsibility for the Mandatory Care. This involved TWC holding funding for the care with Boards operating the program and drawing down funds to pay for it as needed but with Mandatory care being excluded from the Boards’ accountability. However, the Boards requested that we return to the old childcare allocation and accountability model for BCY18. The Commission accepted this recommendation in August when allocations were approved.

One of the key differences between childcare management in BCY18 compared to BCY16 and BCY17 is that for the first time in over a decade, Boards will be expected manage a childcare program where the trends are towards “restriction” rather than “opportunity.” Prior to Reauthorization, Mandatory Care was ever-shrinking. That meant that as demand for Mandatory Care fell, Bds could easily serve more Discretionary care (as well as have additional funding for other activities). In October 2014, there were 7,396 Mandatory Kids per Day. In October 2015, it was 6,363. That was a savings of roughly $469K for just one MONTH.

In BCY17, that trend dramatically reversed as the more expensive care – the Mandatory Care – grew and grew. However, Boards were somewhat insulated from the impact of this trend. The program that Boards are now fully responsible for in BCY18 is not the one they were fully responsible for in BCY16. Instead they will be responsible for a program where Mandatory Care will go from roughly 18.75% of all kids in care in September 2017 to 24.9% in September 2018. Mandatory Direct Care direct care costs will go from 24.3% to 32% over the same period.

Note of Caution – In setting targets, we could not account for the impact of Hurricane Harvey nor the impact of potential waivers or additional childcare funding because events are too much in flux to allow us to meaningfully project an impact yet.[1] Likewise, we did not account for any potential changes that the Department of Family and Protective Services (DFPS) may be making related to General Protection care and its funding. While it is possible that such changes will be made, their focus over the past several weeks has been on responding to the needs of their customers in hurricane-affected pasts of the state and so we don’t know what if, any changes, might occur nor how those changes would roll out and thru TWC care. Therefore, is it possible that staff will be back with recommended target adjustments later this year when these potential changes become known.

Target Setting – We have been using the same basic target setting methodology for the Average Children Served Per Day performance measure since BCY08 and that methodology is driven by four components: Total Allocation, amount set aside for administrative/operational expenditures, Casemix (combinations of age of child, type of provider, full/part day care, and quality ratings), and Maximum Reimbursement Rates.

In terms of the specifics for BCY18:

1)  Allocations – Allocations totaling $534,301,686 were approved by the Commission on August 29. 2017. 2% of this amount ($10,686,049) is reserved for Quality Activities leaving a total of $523,615,819 to be spent on Direct Care and Admin/IS/Ops.

2)  Admin/IS/Ops – TWC’s Legislative Appropriations Request followed a methodology for target setting similar to the way we set Board targets and it reserved $65,771, 300 for Admin/IS/Ops expenditures. Therefore, Board Admin/IS/Ops set asides for BCY18 were developed to scale to this amount. The basic methodology is as follows:

a.  Each Board’s BCY16 Admin/IS/Ops % is applied to 98% of their total childcare allocation and the result was adjusted to the $65,771,300 amount assumed to be needed for Admin/IS/Ops when developing the LAR.

b.  For the 21 Board with the largest childcare allocations, the amount computed above is the BCY17 Admin/IS/Ops Set Aside.

c.  For the 7 Boards with the smallest CC allocations, BCY16 Admin/IS/Ops Set Aside is the greater of their amount calculated in above or their actual BCY16 Admin/IS/Ops Expenditure Total. [2]

3)  Amount Available for Direct Care Expenditures is the Allocation minus 2% quality, minus the Admin/IS/Ops Set Aside.

4)  Casemix is complicated by the fact that we have several types of care to consider and each has its own casemix and set of costs

a.  Mandatory Care is primarily made up of Choices and ExGenPro care and each has its own casemix/costs and because they are growing at different rates, we have to project growth out for each month by month separately to determine how much money will be needed for Mandatory Care;

b.  Discretionary Care has a different casemix and is generally less expensive since it involves a Parent Share of Cost (PSC). However, as Mandatory Care rises each month, the amount left over for Discretionary Care falls and the number of kids per day in Discretionary care falls faster than the number per day in Mandatory Care.

5)  Targets involve Projecting Mandatory Care needs as discussed, determining how much money is needed to pay for the care, and then allocating the rest of the funding to Discretionary Care. The actual Board targets are the sum of the Mandatory and Discretionary subtargets.

We will be providing Boards with detailed month-by-month projections used to develop these targets so that they can use them as a guide to help them manage the program.

Commission Request – Staff request the Commission approve staff recommendations for BCY17 Board targets presented as on page 3 of this material and developed with the above-described methodology.

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Board Name / # / Total Allocation / 2% Quality / BCY18 Admin/IS/Ops Set Aside / Available for Direct Care / Mandatory Kids Per Day SubTarget / Projected Mandatory Expenditures / Amount Available for Discretionary / Discretionary SubTarget / Total Target
Panhandle / 1 / $8,722,397 / $174,448 / $1,406,402 / $7,141,547 / 292 / $1,437,365 / $5,700,527 / 1,567 / 1,861
South Plains / 2 / $8,669,978 / $173,400 / $1,178,984 / $7,317,594 / 441 / $1,994,750 / $5,283,941 / 1,575 / 2,028
North Texas / 3 / $3,848,582 / $76,972 / $825,704 / $2,945,906 / 336 / $1,599,250 / $1,326,074 / 378 / 719
North Central / 4 / $37,991,786 / $759,836 / $5,333,617 / $31,898,333 / 1,452 / $9,541,954 / $22,225,703 / 4,322 / 5,796
Tarrant County / 5 / $36,661,447 / $733,229 / $4,428,534 / $31,499,684 / 1,820 / $12,161,918 / $19,162,384 / 3,731 / 5,582
Dallas County / 6 / $58,447,157 / $1,168,944 / $4,239,240 / $53,038,973 / 3,841 / $22,331,634 / $30,539,324 / 7,310 / 11,190
North East / 7 / $5,612,772 / $112,256 / $791,271 / $4,709,245 / 273 / $1,319,360 / $3,365,952 / 923 / 1,202
East Texas / 8 / $15,525,181 / $310,504 / $2,553,518 / $12,661,159 / 566 / $3,037,928 / $9,593,745 / 2,376 / 2,949
West Central / 9 / $6,009,664 / $120,194 / $1,140,455 / $4,749,015 / 265 / $1,099,745 / $3,641,490 / 1,199 / 1,469
Upper Rio / 10 / $20,145,843 / $402,917 / $2,688,828 / $17,054,098 / 1,287 / $5,332,973 / $11,599,166 / 3,740 / 5,062
Permian Basin / 11 / $8,303,265 / $166,066 / $1,249,267 / $6,887,932 / 194 / $899,801 / $5,961,166 / 1,623 / 1,824
Concho Valley / 12 / $2,675,097 / $53,502 / $559,483 / $2,062,112 / 59 / $271,427 / $1,791,354 / 546 / 605
Heart of Texas / 13 / $7,325,346 / $146,507 / $1,224,594 / $5,954,245 / 392 / $1,832,874 / $4,099,778 / 1,219 / 1,618
Capital Area / 14 / $21,051,420 / $421,029 / $3,753,826 / $16,876,565 / 527 / $3,707,805 / $13,201,081 / 2,479 / 3,004
Rural Capital / 15 / $13,510,341 / $270,207 / $2,962,834 / $10,277,300 / 484 / $3,130,243 / $7,105,310 / 1,438 / 1,930
Brazos Valley / 16 / $6,448,113 / $128,963 / $1,112,718 / $5,206,432 / 161 / $887,148 / $4,300,593 / 1,016 / 1,180
Deep East / 17 / $7,342,461 / $146,850 / $1,248,573 / $5,947,038 / 166 / $768,886 / $5,173,596 / 1,428 / 1,595
Southeast / 18 / $7,209,939 / $144,199 / $1,149,572 / $5,916,168 / 212 / $945,631 / $4,976,525 / 1,397 / 1,609
Golden Crescent / 19 / $3,701,843 / $74,037 / $688,049 / $2,939,757 / 84 / $373,588 / $2,550,929 / 736 / 824
Alamo / 20 / $45,890,073 / $917,802 / $5,448,446 / $39,523,825 / 2,559 / $16,022,682 / $23,226,254 / 4,663 / 7,276
South Texas / 21 / $9,142,216 / $182,845 / $1,313,044 / $7,646,327 / 215 / $1,007,449 / $6,629,148 / 1,875 / 2,093
Coastal Bend / 22 / $11,480,386 / $229,608 / $1,809,828 / $9,440,950 / 729 / $3,936,675 / $5,417,992 / 1,336 / 2,083
Lower Rio / 23 / $28,484,270 / $569,686 / $3,253,882 / $24,660,702 / 989 / $3,993,389 / $20,599,043 / 7,125 / 8,136
Cameron / 24 / $13,130,702 / $262,615 / $1,596,750 / $11,271,337 / 722 / $2,805,632 / $8,292,519 / 3,064 / 3,832
Texoma / 25 / $3,367,583 / $67,352 / $433,423 / $2,866,808 / 147 / $872,624 / $1,978,013 / 424 / 573
Central Texas / 26 / $10,026,325 / $200,527 / $2,138,408 / $7,687,390 / 690 / $3,013,036 / $4,676,629 / 1,570 / 2,263
Middle Rio / 27 / $4,288,691 / $85,774 / $1,013,338 / $3,189,579 / 156 / $633,893 / $2,547,671 / 902 / 1,060
Gulf Coast / 28 / $129,288,990 / $2,585,780 / $10,353,576 / $116,349,634 / 4,359 / $27,352,838 / $88,985,963 / 19,800 / 24,179
Sum of Boards / 99 / $534,301,868 / $10,686,049 / $65,896,164 / $457,719,655 / 23,418 / $132,312,497 / $323,951,870 / 79,762 / 103,542

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[1] However, we reviewed TANF and Choices childcare caseloads during and after Hurricanes Katrina, Rita, and Ike and did not see spikes that suggest that Harvey will impact Choices childcare.

[2] TWC has historically used this approach to ensure that the smallest Boards are never expected to operate the program with less Admin/IS/Ops than the amount they actually spent in the last complete BCY (BCY16 in this instance). This came into play for North Texas, North East Texas, West Central Texas, and Middle Rio Grande.