The CCS Chronicles: a provider’s perspective

It’s difficult to believe that the seeds of the Child Care Subsidy (CCS) as we know it were sown way back in September 2012.

 

At that point Tony Abbott, whilst still in opposition, announced that childcare would be a key issue at the next election, and that he would instruct the Productivity Commission to launch an inquiry into the sector as a whole with a view to seeking recommendations to improve affordability, flexibility and accessibility concerns.

 

Over the following months the sector, working with Sussan Ley who was the Shadow Minister for Early Education at the time, helped formulate the inquiry’s terms of reference which was sent to the Commission for execution following Tony Abbott’s election success in September 2013.

 

Five years later the CCS was officially launched, but the twists and turns that occurred during the intervening years can easily be forgotten.

 

As Goodstart Early Learning Advocacy Manager John Cherry noted “I don’t think the sector ever realises just how vulnerable this package was.”

 

On reflection, this assessment is entirely accurate.

 

As a first test, Tony Abbott, the originator of the plan, had to win the election in September 2013, which he did.

 

As a second test, the Productivity Commission report had to be initiated and completed after which the Minister for Social Services at the time, Scott Morrison, needed to create and cost a working model that would be included in the 2015 Budget and then prepared for passage to the Senate. He did all of these.

 

As a third test, Malcolm Turnbull, the incoming Prime Minister in September 2015, had to endorse his predecessors’ package, which included a controversial cost-offset mechanism linked to the abolition in some family tax credits, and signal his ongoing commitment to progress it, which he did.  

 

As a fourth test, the package had to survive a resubmission to a Senate inquiry where both the Jobs for Families bill and the Social Services bill were reviewed in detail. The panel recommended that both bills be passed.

 

As a fifth test, having finally agreed to decouple the childcare package from the cuts to family welfare, the Turnbull Government re-presented the bill to the senate where after some last minute concessions to the cross bench on 23 March 2017 it received sufficient votes to pass.

 

A bittersweet victory for a sector focussed on children

 

But although the Senate’s approval was welcomed by the sector any sense of real celebration was muted.

 

The package itself was and remains deeply polarising. The additional funds injected into the sector were deeply welcome, but the focus on workforce participation and the consequent activity-based conditionality of access that was at the heart of the model, has never sat well.

 

The sector had lobbied visibly and persistently to address this right to the bitter end.

 

Indeed, even going into the final sessions of the senate sittings, a fully costed plan to increase the base entitlement from 12 hours to 15 hours per week had been created cready for presentation, but alas for reasons that are still not clear it never saw the light of day.

 

But it is essential to recognise that the years of lobbying by the sector were not entirely futile.

 

Significant concessions around core aspects of the package were extracted from Mr Morrison as far back as 2014.

 

Two key examples were the introduction of the notion of a base entitlement and the increase of the dollar value of the hourly cap up to which subsidies are paid.

 

The former saw the introduction of the 12 hour per week base entitlement replace a zero hour per week base entitlement and the latter saw the fee cap raised from the 50th percentile or $6.61 to the 89th percentile of $11.77.

 

In addition, the securing of the 36 hour pre-school exemption during the subordinate legislation review was also a significant concession.

 

Planning, planning, planning

 

With the final key legislative hurdle passed Mr Birmingham moved to postpone the implementation date by 12 months from July 2017 to July 2018.

 

At the time this was not particularly well received. No notice had been given and another year without the reset meant another year with the old system.

 

But in hindsight it was absolutely the right decision. There was no way that the sector, or the Government for that matter, would have been ready for July 2017 given what we know.

 

With the timetable now set, the sector moved into planning mode.

 

The larger organisations, such as ASX-listed G8 Education Ltd, moved to start their preparations soon after Mr Birmingham’s announcement.

 

As Gary Carroll CEO noted “we set up formal project groups and commenced planning around the middle of last year” with the appointment of a dedicated project manager to coordinate the many facets of the process from start to finish.

 

For Jenni Hutchins, CEO of the Illawarra-based community provider Big Fat Smile, the planning began soon after she joined the provider in February 2017 and had been all consuming since.

 

Smaller organisations started to focus seriously on the transition towards the end of 2017.

 

Childcare Holdings Pty Ltd CEO Terry King commented “we started to look at it at a strategic level in December 2017” and Chris Fischer, CEO of Paisley Park Early Learning, agreed stating “as a business we started to focus on it in December of last year (2017).”

 

Over this period, organisations both large and small, for-profit and not-for-profit were actively engaging with their peak bodies, their 3rd party software providers and their government department representatives to ensure that the information they had regarding the transition was current and then combining this information with their own internal capabilities to create strategies around systems, communications, training, engagement and offers and as we moved into 2018 the implementations kicked off.

 

For example, Goodstart Early Learning initiated a very high-level working group consisting of their CEO, COO, CFO and CIO.

 

This group ran the project, and as Mr Cherry notes “as we moved into 2018 we, as an organisation, threw our weight behind the transition. It was the top priority for six months and took priority over all other work.”

 

Other providers mirrored these sentiments in their actions.

 

Guardian Early Learning moved their centre manager conference into the first quarter of 2018 with the express intention of dedicating a large portion of the agenda to the transition; Big Fat Smile organised for the Department of Education to travel down to the Illawarra and present to their team; Paisley Park Early Learning created had customised centre strategies, a metric tracking system and made computers available at all of their centres for families; and, G8 Education Ltd embarked on a comprehensive training program, created CCS related merchandise to raise its profile and how to guides for managers as well as setting up a dedicated call centre to address family questions and concerns.

 

But not everybody was as fortunate as these providers in terms of resources and skills.

 

Mandi de Silva, an owner-operator of two centres in NSW, was not able to prepare extensively for the transition in a way that would have mitigated some of the challenges experienced post 2 July largely due to a lack of available bandwidth amongst her existing staff.

 

As Paul Mondo, President of the Australian Childcare Alliance which is the peak body for privately owned providers of early learning services in Australia, notes “in an ideal world it would have taken an extra 12 months to ensure that things were ready.”

 

This view reflects the sentiments of a large portion of the ACA’s member base that struggled to have their centres positioned before the transition occurred.

 

And it sure wasn’t cheap though

 

But all of this planning, the reallocation of resources, the cost of marketing material, the staffing of call centres, the engaging with the department and or Centrelink, it all cost money and, in some instances, a great deal of money.

 

The cost question is very real and not only limited to the provider space.

 

Third party software providers have been expected to shoulder huge bills to ensure their systems were compliant for the 2 July 2018.

 

As Ms Hutchins notes “government were supportive in words but not with dollars.”

 

Ms de Silva comments “we had no spare cash to invest in the centre, capex was delayed and we had to transfer money from other pots to keep things going.”

 

Despite submissions made to the government on this matter, their position has been unwavering from the beginning: the cost of transition were business expenses and should be borne by businesses and went on to note that previous resets like the introduction of the NQF or the system changes to CCMS were handled in a very similar way.  

 

The calm before the storm

 

But the reality was that all the planning in the world and all the money in the world couldn’t prepare the majority of centres for what actually occurred post the 2 July.

 

In hindsight this is a logical conclusion to draw after all the change was huge and involved a complex range of stakeholders all of which had to pull together to make it happen.

 

There were bound to be teething problems and there certainly were.

 

The first week’s challenges were highly correlated with which third-party software provider the providers services subscribed too.

 

The mapping of families from the old system to the new system needed to have been a success. The importing of data from Centrelink needed to be accurate. The centre managers needed to understand the new interfaces and entry fields.

 

The degree to which this actually happened varied materially with the differentiating variables being their pre transition preparations and their third-party software provider but the sector weathered this first week intact.

 

What a difference a week makes

 

But nothing was to prepare many providers for the surge in challenges in the following week as the CCS payment cycle actually kicked off.

 

Why was this the case?

 

Largely because of three things:

 

• Firstly, many centres that expected to receive child care subsidy for their families didn’t. No subsidy means no cash. This caused financial concerns for both the provider and the family, and tested relations between them.
• Secondly, the payment cycle coincided with the first billing cycle. With families carrying expectations of what they would receive and unfamiliar with the new formats enquiries surged.
• Thirdly, support needs surged as teams reached for their phones to call either Centrelink, the Department of Education, their software provider, their peak body, or their support office teams for answers.

 

The trifecta of money not flowing, families enquiring, and support services not answering created a perfect storm of different degrees at centres across the country.

 

As Tamika Hicks, a single centre provider with years of experience in the sector, noted “From the family’s perspective, which impacts me, it has been very hard. We are in week six (at the time of interview) and we still have families struggling to get the transition happening.”

 

The devil is in the detail

 

As soon became apparent it was the devil in the detail that had tripped so many providers up in the second week that left their centre directors with no choice but to systematically unpick each family’s specific circumstances in an investigative fashion until resolution was achieved.

 

Was it a registration issue? Is it a billing issue? Have their details mapped over from the old CCMS system to the new? Is this a pre school exemption case? If so why can’t I see the allocation of the 36 hours and why isn’t the funding flowing? Is the difference due to the withholding tax change? The ACCS child wellbeing rules are so different, do I really have to form an opinion on whether the child is eligible? Is this family’s CRN wrong and if so, how can I get that fixed? Is the lack of inclusion funding flowing due to something I did or something that the IDFM can help with? My inclusion funding not flowing? What’s the contact details for the IDFM? Why is Centrelink paying some families and not paying others? Is this the correct number of hours and subsidy percentage? Why does this allocation not match the allocation in the letter? We bought this centre in June, is that why we are not registering? Do I charge this family full fee or gap until their CCS is cleared? If I charge them full fee will they leave? If I charge them gap when will they pay me back? Why has the money not come into our bank account? And so on and so on.

 

The mind boggles at just how challenging this period must have been for all concerned. Even with the best training on the planet no provider could have been prepared for this and their centre directors deserve huge credit for navigating it.

 

The sessional care fix

 

The introduction of a fixed number of subsidised hours for families and a base entitlement that is lower than historically has also influenced how the sector approaches the structuring duration and pricing of their daily sessions and led to providers introducing shorter daily sessions of care for their families.  

 

Ms Hutchins notes “we had concerns around families whose children had access two days a week under the old model and two days a fortnight under the new. We had concerns about those children. Or situations where families had 50 hours but worked five days a week. Under the old model of a 12 hour day they would get five days. But under the new model they would get just over four. This is where the sessional care came in for us.”

 

Although the objective of sessional care is consistent across the sector the application is quite diverse.

 

Some providers have elected to have two sessions, some four. Some providers require families to meet pre-agreed drop off and pick up times, some have adopted for a flexible drop off and pick up. Some are charging the same fee for a 10-hour session as they are for a 9-hour session, some are charging different fees.

 

Irrespective of the variations in application the sessional care initiative has been a game changer for many.

 

Going above and beyond

 

But it is important to recognise that some organisations are going a step further to support their families and their children in the CCS world.

 

Goodstart Early Learning, for example, conscious of the reduction in the base entitlement for low-income families from 24 hours a week to 12 hours a week and concerned at the possibility that those children will miss out, have introduced a package of 2 x 6 hour session of care to enable them to access two days of subsidised early learning per week.  

 

Big Fat Smile has worked hard to plug families not benefitting from the CCS into alternative community funding schemes as an alternative to the CCS.

 

Many providers have also set up volunteer programs for non-working mums to enrol in to try and increase activity hours to a level that will trigger at least some subsidy for their family.

 

Still waiting for the lift

 

Despite the tremendous amount of energy, resources, patience and effort that has been expended sector-wide to ensure a successful transition, it is still unclear whether the increased subsidy dollars flowing into the sector will stimulate additional demand for early education.

 

Providers have reported that overall their families are better off than they were under the old subsidy system.

 

Chris Fischer, CEO of Paisley Park Early Learning summed the sector’s experience well by noting that the percentage of fees, the Gap, that families were paying was 8 per cent lower than it was in the same period last year.

 

However, despite this, providers on balance have yet to see families use these extra savings to book extra days of care for their children or have yet to see any indications that new families are making enquiries due specifically to the new subsidy.

 

When asked about why families may not be committing to extra days Mr Mondo observed that affordability challenges had been building for many years and “rather than increase utilisation (families) are just using the savings to live life a little more easily than what they were before.”

 

This may well be the case but there is another view as well which is simply that family’s utilisation patterns have been more or less set for the year. They are in a routine and happy to stay with that routine for the moment.

 

Next year however could be a quite different story as the school year restarts and families look to reset their routines accordingly with a view to seeking an extra day here or there made possible by subsidy savings they received previously.

 

If history is anything to go by this is how things should play out as Guardian Early Learning’s CEO Tom Hardwick commented “when new money flows into the sector it does tend to stimulate demand. That is what we saw in 2004 and 2010.”

 

Although, that may be the case over the medium term it is doesn’t appear to be the case now.

 

So what’s next?

 

From a CCS perspective, the transition is now complete. The policy has been enacted and the change absorbed by the sector.

 

Providers are now able to free up resources and return to their key focus of providing quality early learning to the children in their care.

 

Meanwhile sector participants will be keenly awaiting two important events due next year.

 

Firstly, the release of the Government-commissioned report from the Australian Institute of Family Studies exploring and evaluating the impact of the CCS on Australian families.

 

Secondly, the result of the next federal election in which a Labour Government could very well win power and reframe the early learning narrative back towards a child-centric rather than an employment-centric model.

 

Although 2018 has been about eventful as they come in the world of early learning, 2019 is shaping up to be the same if not more so.