Executive Summary

The Ministry of Education developed funding rates for 20 Hours ECE by calculating the:

1. Average cost per hour of ECE: using the total costs of provision from the 2006 Operating Cost Survey for each type of early childhood education service (Sessional Education and Care, All Day Education and Care, Home Based and Te Kōhanga Reo), and dividing costs by the number of hours of early childhood education provided
2. Average government funding subsidies: using the subsidy rates paid in 2005/06 (the period that most services’ Operating Cost Survey related to)
3. Average amounts of cross-subsidisation or cost-smoothing: using information on fees and subsidy rates for different age groups and periods of attendance of early childhood education, this estimates how services currently use fees and subsidies to offset their costs, in particular the estimated additional contribution being made by the first 20 hours per week for three and four year-olds. This amount was then added to the average cost per hour in step 1.
4. Costs not met by government funding: adding the results of steps 1 (average cost) and 3 (cross-subsidisation), then subtracting step 2 (funding subsidies), calculated the amount needed in 2005/06 to provide 20 Hours ECE
5. Cost increases since 2005/06: an inflation increase to the results of step 4 (costs not met by government funding).
6. Total 20 Hours ECE funding rates: by adding the results of steps 4 and 5 to early childhood education funding subsidy rates (from 1 July 2007).