ECE funding changes

The taxpayer’s contribution in this sector has risen from $428 million in 2004/05 to $1.17 billion in 2009/10.  In order to control future unsustainable growth in costs, the Government has reallocated ECE funding to its main priorities.

The Government is retaining and expanding 20 hours ECE. From 1 July 2010, all playcentres and kōhanga reo will be eligible to provide 20 Hours ECE and five year old children will be eligible.

Savings have been made by replacing the 80% to 99% and 100% teacher registration funding rates with new 80%+ funding rates. This change will align the ECE funding system with the Government’s 80% ECE teacher registration target, and contribute to net ECE savings of nearly $280 million over four years.

A cost adjustment to ECE funding rates will help centres meet increased costs. Through the cost adjustment the Government is providing an additional $46 million over the next four years for ECE funding rates.

Main changes to ECE funding rates

All ECE funding rates have increased by a 2.4% cost adjustment for non-teacher costs. These rates are effective from 1 July 2010.

From 1 February 2011, some of the funding rates will be aligned to the Government’s 80% teacher registration target. This means the subsidy funding rates for ECE services with 80-99% and 100% registered teachers will be removed and replaced with new 80%+ funding rates.

New 80%+ funding rates

ECE centre-based teacher-led services, sessional and all-day, that receive an 80-99% or 100% funding rate in the July 2010 payment will be affected by the new 80%+ change. Sessional kindergartens*, most kōhanga reo, playcentres and home-based services are not affected by this change.

From 1 November 2010, no services that are not already on 80-99% or 100% funding bands may access those bands.

* Sessional kindergartens refers to those kindergartens that are controlled by a Kindergarten Association and whose licence permits no child to attend for a period of more than four hours.

How many services are affected by the change to 80%+ funding rates?

At least 2,300 services with 86,400 enrolments will not be affected by funding rate changes. This includes all sessional kindergartens*, most kōhanga reo, playcentres and home-based services.

As at May 2010, around 2,000 services were funded for 80% or more registered teachers. 92,800 children were enrolled in these services. 760 out of the 2000 services currently receive funding for 100% registered teachers.

* Sessional kindergartens refers to those kindergartens that are controlled by a Kindergarten Association and whose licence permits no child to attend for a period of more than four hours.

When will the 80%+ funding rates apply?

The new 80%+ funding rates are effective from 1 February 2011 and will be paid in the 1 November 2010 advance payment. This will give services time to make necessary adjustments.

Why is the new 80%+ change being introduced?

ECE spending is forecast to keep increasing at an unsustainable rate. The Government has reallocated ECE funding to its main priorities. The new funding rates align to the Government’s target of 80% of teachers registered by 2012.

Will the 80%+ changes impact on quality?

A minimum level of 80% registered teachers by 2012 will maintain high standards across the sector. The Government is committed to a high standard of ECE, and supports the role qualified teachers play in providing this.

Do ECE services need to make changes now?

The Government is announcing the change several months ahead of the implementation date to give ECE services and teachers time to plan any changes they may need to make.

The Ministry of Education recommends you review your annual budget taking into account the changes from 1 July 2010 and February 2011, and plan accordingly.

Further budgeting information can be found at: www.lead.ece.govt.nz and www.business.govt.nz.

The Ministry of Social Development also offers specific services to employers: phone 0800 778 008, or see www.msd.govt.nz/what-we-can-do/business/index.html.

Why does the 80%+ change not affect sessional kindergartens*, kōhanga reo, playcentres and home-based services?

Sessional kindergartens* are legally required to employ 100% registered teachers. This is higher than the 80% teacher registration target that applies to other teacher-led services, sessional and all-day. Kōhanga reo, playcentres and home-based services have different qualification requirements and funding rates.

* Sessional kindergartens refers to those kindergartens that are controlled by a Kindergarten Association and whose licence permits no child to attend for a period of more than four hours.

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Cost adjustment for all rates

Why has the increase been set at 2.4%?

The 2.4% reflects Treasury’s predicted forecast inflation figure to the end of the financial year 2010/11.

Why are there different rate increases?

The cost adjustment applies only to the non-salary proportion of your costs so rates have increased by different amounts. The total increase per funded child hour ranges between three and ten cents.

When does the cost adjustment take effect?

The cost adjustment will be effective from 1 July 2010 and be included in the July 2010 payment.

20 Hours ECE

What changes are occurring for 20 Hours ECE?

The Government is retaining and expanding the 20 Hours ECE policy. From 1 July 2010, all playcentres and kohanga reo will be eligible to offer 20 Hours ECE. Five-year-olds will also be eligible.

Why is 20 Hours ECE being extended to five-year-olds?

Extension of 20 Hours ECE to five-year-olds recognises that that some parents may choose for their children to begin school at the compulsory age of six.

Is the 6-Hour per Day Funding Cap being removed?

No. The Government has decided that this cap will not be removed at this stage.

Can I start charging compulsory fees for 20 Hours ECE when the 80%+ funding rates start?

No. The same funding rules for 20 Hours ECE apply. No fees may be charged for hours claimed as 20 Hours ECE.

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New ECE funding rates for all services

Why are two sets of funding rates being published?

One set of rates will apply from 1 July 2010 – 31 January 2011 and the second set will apply from 1 February 2011 onwards. The main difference is that the 1 February 2011 rates remove the 80-99% and 100% funding rates and replace them with new 80%+ funding rates.

The Government is announcing the change several months ahead of implementation date, which will give ECE services time to manage any necessary changes.

When will I receive funding at these new funding rates?

The first set of funding rates are effective from 1 July 2010, and will be paid to services in the July 2010 funding payment.

What are the new ECE Funding rates effective from July 2010?

The ECE funding rates in this table are GST inclusive.

As part of Budget 2010, the Government announced that the rate of GST will increase to 15% from 1 October 2010. The change to GST is reflected in the rates below that apply from 1 October 2010 and from 1 February 2011.

¹ applies to sessional kindergartens* only.

* Sessional kindergartens refers to those kindergartens that are controlled by a Kindergarten Association and whose licence permits no child to attend for a period of more than four hours.

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How should services respond to these changes?

The Budget changes will affect services differently so it is important for services to make decisions based on individual circumstances. The Ministry of Education recommends services calculate how their funding will change and discuss with parents and staff how best to manage that change.

Why are there so many funding rates?

Funding rates are subsidies to offset the cost of ECE. They are different levels to reflect different operating structures and priorities.

What are ECE funding rates made up of?

The ECE funding rates for licensed services are subsidies that reflect teaching salary costs and four components of operating costs (operating, capital, property operating and non-teaching staff costs).

Childcare Subsidy

The Childcare Subsidy is administered by the Ministry of Social Development.

Who is eligible for the Childcare Subsidy?

The Childcare Subsidy is available for up to 9 hours a week where the parent is not working and up to 50 hours a week where the parent is working or training. A person may get a Childcare Subsidy if they:

• are the main carer of a dependent child
• do not have a partner who can provide childcare
• are a New Zealand citizen or permanent resident
• normally live in New Zealand and intend to stay here.

It also depends on how much you and your spouse or partner earn.

If you are claiming 20 Hours ECE, you can not get Childcare Subsidy for those hours.

For further information, please see www.workandincome.govt.nz.

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Service specific questions

Kindergartens

Main funding changes:

• Removal of the 80-99% and 100% funding rates will affect kindergartens licensed as all day. Sessional kindergartens* are not affected.
• 2.4 % cost adjustment to the non-teacher part of funding rates.

* Sessional kindergartens refers to those kindergartens that are controlled by a Kindergarten Association and whose licence permits no child to attend for a period of more than four hours.

Kōhanga Reo

Main funding changes:

• Extension of 20 Hours ECE to all kohanga reo.
• 2.4 % cost adjustment to the non-teacher part of kōhanga reo funding rates.

20 Hours ECE:

Each kōhanga reo will be able to receive either a standard or quality 20 Hours ECE rate. If a kōhanga currently receives the standard funding rates, then the standard 20 Hours ECE rate will also apply.

Kōhanga do not have to offer 20 Hours ECE. As with all centres, it is optional.

Playcentres

Main funding changes:

• Extension of 20 Hours ECE to all playcentres.
• 2.4% cost adjustment to the non-teacher part of playcentre funding rates.

20 Hours ECE:

Each playcentre will be able to receive either a standard or quality 20 Hours ECE rate. If a centre currently receives the standard funding rates, then the standard 20 Hours ECE rate will also apply.

Playcentres do not have to offer 20 Hours ECE. As with all centres, it is optional.

Education and care services

Main funding changes:

• Removal of the 80-99% and 100% funding rates from 1 February 2011.
• 2.4% cost adjustment to the non-teacher part of funding rates.

Home-based ECE services

Main funding changes:

• 2.4% cost adjustment to the non-teacher part of home-based services funding rates.

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Other changes in Budget 2010

From 1 November 2010, registered primary teachers can be included in ECE services’ funding claims. This means that registered primary teachers can be included in the staff hour count. This may mean that some services become eligible for higher funding rates. The Government has set aside $19.5 million over four years to cover this additional cost.

The New Zealand Qualifications Authority (NZQA) is expanding the recognition of some overseas ECE qualifications (that are equivalent to New Zealand Level 7 bachelor degree or diploma qualifications). Government has set aside $15.4 million over four years to support this initiative.

Some changes are being made to the teacher supply initiatives which will be more targeted and re-focused.

Need more information

We recommend you:

• check all the ECE factsheets on Budget 2010
• contact the Resourcing Contact Centre for any specific funding questions – 0800 ECE ECE (323 323)