5 - Conclusion

This evaluation has assessed: changes in patterns of expenditure and revenues of ECE services that may be associated with the implementation of the Strategic Plan; whether services have become more sustainable since the introduction of the Strategic Plan and the new funding system; whether the new funding system is having the intended effects of avoiding cost increases to parents and providing incentives for teacher-led services to meet teacher registration targets; and the impact of sustainability on quality and participation outcomes. Conclusions in relation to each of these areas are summarised below.

Changes in Expenditure and Revenues

The implementation of the Strategic Plan has brought cost increases for ECE services as anticipated. The most marked cost increases are associated with the implementation of targets for registered qualified teachers in teacher-led services. Analysis of the available data together with qualitative feedback from a range of ECE stakeholders suggests that additional Government funding is largely covering these increased teacher salary costs. The teacher shortage is said to be impacting on teacher salary costs in some regions. Although this was not detected in the 2006 operating cost survey, further monitoring is warranted.

Some of the costs associated with implementing the Strategic Plan (as well as other factors) are not financial, but nevertheless represent a risk to the quality and sustainability of ECE. Additional administrative work is often being absorbed by existing staff and/or volunteers in both parent-led and teacher-led services, causing stress and fatigue. Insufficient time and conditions to support effective teaching and learning processes, and high volunteer workloads have also been identified by NZCER and TKRNT as impediments to improving quality.

Changes in Sustainability

Analysis of the available national-level data suggests that the ECE sector as a whole is sustainable, and perhaps becoming gradually more so. The most striking observation is the stability in the indicators of occupancy, operating surplus/deficit, and working capital throughout a time period of several years pre and post introduction of the Strategic Plan. Some indicators also suggested a recent improvement in sustainability, but a longer time series is needed to establish whether this is a trend.

ECSs have shown the greatest overall changes in capacity, participation, quality (employment of registered teachers), revenues, and costs. Meanwhile, indicators of sustainability for ECSs have remained relatively stable or improved. The stability in these indicators at a systemic level masks the fact that the financial positions of individual services can fluctuate markedly over time. Despite this variability, however, very few ECE services close for financial reasons, and this further supports the impression of a sustainable ECE sector.

The ongoing decline in the utilisation of parent/whānau-led services does not appear to have been impacted by the implementation of the Strategic Plan. Playcentre stakeholders believed the Strategic Plan should be doing more to promote parent/whānau-led services as a high quality option.

The findings overall are consistent with the Ministry’s provisional ECE Monitoring Framework finding that the majority of ECE services in NZ are operating at a sustainable level, and with the NZCER/TKRNT evaluation which found sustainability was “good” and did not change for the locality-based case studies between 2004 and 2006. Sector stakeholders generally considered that the Strategic Plan and the new funding system had not had a noticeable effect on the sustainability of ECE services.

There is a gradual trend toward clustering of services within community-based umbrella organisations and corporate entities. Clustering of services can improve sustainability by realising economies of scale and providing access to managerial and other expertise that stand-alone services would struggle to afford. Some of these benefits could also be realised through less formal networking of services – for example, clustering new services with more established services with experienced managers.

Effects of the Funding System

The available data did not provide direct evidence of whether the increased funding through the new ECE funding system is covering cost increases brought about by the Strategic Plan.

Analysis of Statistics New Zealand data for the two years following the introduction of the new funding system shows that on average, growth in ECE prices has been less than growth in the general cost of living and in average hourly earnings. Meanwhile, participation in ECE has continued to increase. Both of these findings support the proposition that services have not passed cost increases on to parents.

Stakeholder feedback and quantitative evidence are in agreement that incentives to meet teacher registration targets appear to be working. Based on these findings (including increased employment of registered teachers, continued increases in participation, stable or improving sustainability, and low average growth in fees), it can be cautiously concluded that the funding system is having the intended effects overall.

A shortage of teachers may be responsible for the increased teacher turnover following implementation of the new funding system, and has also been identified by NZCER and TKRNT as an impediment to improving quality. The teacher shortage is creating opportunities for rapid progression for new teachers. Stakeholders identified potential risks associated with having relatively inexperienced teachers in leadership positions, and suggested that these transitional risks may be managed through appropriate PD, mentoring, advice and support.

Impact of Sustainability on Quality and Participation Outcomes

Sustainability of ECE services is an important precondition to participation and quality. The majority of additional ECE funding during the period of this evaluation was associated with quality (registered teachers) and the available evidence suggests this funding has been successful in increasing the proportion of registered qualified teachers while avoiding negative impacts on participation. Free ECE funding (from 1 July 2007) represents a significant investment in participation, the impacts of which will only be known after further monitoring and evaluation.

The available data did not permit the evaluation to determine how sustainable an ECE service has to be, in order for financial factors not to be an impediment to achieving the goals of the Strategic Plan. However, findings across the sustainability indicators suggest that somewhere in the order of 5-10 percent of ECE services may not be comfortably sustainable.

If common characteristics of less sustainable services can be identified, strategies can be developed to improve their sustainability. Risk ratios could be calculated for a range of factors such as service type, ownership structure, rurality, socio-economic status, number of years ECE service has been in operation, percentage of registered teachers, teacher turnover, head teacher years of experience, financial expertise of manager/treasurer, etc. This would require further analysis against existing data sets, supplemented by primary data collection which could be carried out through subsequent operating cost surveys.

Feedback from stakeholders and experience with the operating cost and treasurer surveys suggest that some managers and treasurers struggle with the financial management aspects of operating an ECE service as many have received no formal training in this area. In order to be fully effective, the Government’s investment in ECE must be effectively managed by the people in charge of ECE services. It would be in the interests of the Ministry and sector leaders to work together to develop a package of PD, advice and support on financial management in ECE.