2-5 The link between costs and funding rates
The funding rates for all ECE services vary according to a range of costs usually faced by that service type.
This section explains:
- how the costs involved in providing early childhood education (ECE) are turned into funding rates
- how the funding rates can be changed to reflect changes in costs
- how information about costs will remain current.
How costs are turned into funding rates
The funding rates are made up of basic and variable components.
The basic component reflects standard operating costs for all ECE services, for example:
- administration costs
- educational resources
- professional services (e.g. ICANZ accountants)
- utilities (electricity and telephone).
The variable component provides a subsidy for the main categories of ‘cost-drivers’ that differ between ECE service types.
For example, the variable component recognises that:
- all-day services face higher costs than sessional services because they must meet different ratio requirements
- services that are required to meet teacher registration targets will have higher labour costs
- centre-based services face higher facility costs than services that do not have to maintain a centre.
ECE Funding subsidy and 20 Hours ECE rates
The ECE Funding Subsidy (and the Plus 10 ECE) rates are intended to subsidise the cost of providing ECE and to share the costs between government and parents.
20 Hours ECE Hours are funded at a higher level because they are intended to meet the full average cost of providing ECE for each service type.
Changing the funding rates
The Ministry of Education will regularly review the main costs of ECE provision to advise the Government about the changes in costs faced by ECE services.
Based on this advice, the Government may adjust the value of some, or all, of the funding rates.