Essex County Council

Developing Single Funding Formula for Early Years Education in Essex

Annex B

2222

Presentation Outline

• Background and context• Key issues from the working group and

consultation • Understanding current funding and

service delivery• Basic formula content and structure• Supplements to the basic formula• Delivery and implementation issues

3333

New Funding Formula: Rationale• Support the extension and increased flexibility

of the free entitlement for 3 and 4 year-olds• Tackle inequalities in access and outcomes

particularly for children from deprived areas• Address inconsistencies in current funding

mechanisms across the maintained and PVI sectors e.g. participation vs place-led funding

• Review surplus places in maintained sector• Raise quality of provision across all settings• Deliver fully flexible offer and support other

developments in early years education

4444

The Fully Flexible Offer - DefinitionFrom September 2010, every local authority

must offer 15 hours of free early education to all 3 and 4 year olds, over a minimum of 38 weeks. That offer must be made available flexibly, to meet parental demand over a minimum of three days.

As a step towards that, from September 2009, all local authorities will be required to make the offer available to 25 per cent of their most disadvantaged 3 and 4 year olds.

5555

New Funding Formula: Requirements• To be implemented by April 2010• All settings must be included in the formula• Formula must be participation-based• Formula should not simply replicate existing

funding differences or use lump sums to continue existing funding differences

• Formula must include deprivation element• Authorities should strongly consider including

supplements supporting quality and flexibility• All costs need to be validated

6666

New Funding Formula: Learning from Pilots• Follow the core principles (see handout)• Simple formula structures have been more

straightforward to implement • Consistency with schools formula has been

important e.g. deprivation• Authorities have tried to future proof the

formula to support the delivery of the fully flexible offer

• Additional work will be required after implementation – formula needs to be reviewed

• Supplement for quality has been supported but not generally incorporated

7777

Views from the Early Years Working Group• New formula needs to be simple to understand and

funding differences should be much more transparent• Existing funding is not (always) sufficient to deliver

quality therefore cost of quality provision needs to be acknowledged

• Settings currently have to make use of funding from other sources (e.g. fees from parents) to cross-subsidise current funding levels

• Existing funding levels should be maintained where possible and increases would be needed to improve quality

• Additional funding should be allocated to deprivation but not at the detriment of overall funding available (or other children will be penalised)

8888

Views from the Early Years Working Group (2)Implications of reductions to existing funding:• Lower quality provision• Children less prepared for starting school with

knock-on impact on primary outcome and performance indicators

• Lack of choice / flexibility for parents• Essex not able to deliver statutory duties on

access and flexibility

9999

Understanding Costs and Delivery • Following DCSF good practice, extensive

work undertaken to understand and profile the differences in costs and delivery of free entitlement between different setting types

• Why? To identify significant cost variations between settings

To identify elements of quality provision

To create a more transparent funding formula ensure any differences in future funding reflect actual differences in costs

10101010

Current Funding in Essex

Maintained funding only includes direct nursery funding or funding relating to nursery pupils (excludes school and site funding, plus other grants)

Total funding is approximately £35million for 2009/10

Maintained nursery schools,

£772,950 Maintained

nursery classes, £6,810,504

PVI Settings, £27,187,658

11111111

Outcomes and Impact in Essex

• Essex has high proportions of good and outstanding settings in maintained and PVI sectors – quality of provision is high and continually improving

• Outcomes for children have been improving over the last five years

• Number of children in maintained settings has been decreasing – more parents are choosing PVI settings for the free entitlement

12121212

Current Funding: Maintained Sector• 3,000 pupils

• Annual budget related to funded places/headcount (90:10)

• Pupil-led funding in schools formula for nursery places of £3,240 per FTE place in 08-09 and increased to £3,395 in 09-10

• Rate is highest in East of England

• Not all settings actually receive the same amount per pupil due to impact of place-led funding and occupancy rates – actual per pupil hourly rate varies from £3.50 to £15 per hour

• Other funding in the schools formula covers AEN, premises costs, London allowances, lump sums covering management costs and small school protection – this increases the average hourly rate to approximately £4.76

• Occupancy rates have fallen since introduction of free entitlement

13131313

Current Funding: Differences in Maintained Sector

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000

Funding per FTE Pupil

Occ

up

ancy

(P

up

il C

ou

nt

as a

% o

f F

un

ded

Pla

ces)

14141414

Participation Rates in Maintained Sector

Number of Funded Places

Number of Schools

Average Number of Pupils for Pupil-led

Funding

13 3 12

26 49 20

30 1 25

39 4 23

45 1 20

52 6 36

15151515

Current Funding: PVI Sector

PVI Sector• 15,000 pupils • Termly payments based on headcount• Sessional rate of £9.02 (equivalent to hourly rate of £3.61) in

2008/09• Increased to £9.28 in 2009/10 (£3.71 per hour)• Rate is highest in East of England• Termly payments and adjustments calculated from termly

census• Settings can apply for additional funding related to EYPs,

capital projects etc.• All settings essentially receive an equivalent hourly rate for all

children• Some settings receive additional funding for other services

they provide (e.g. full day care)

16161616

Main Differences in Delivery/Costs between Maintained and PVI settings• Staffing ratios and impact of statutory

minimum ratios • Staff profile / qualifications• Availability of wraparound provision• Management costs• Class size• Age profile of children• Number of sessions per week per child

– fewer full-time children in PVI settings• Occupancy levels

17171717

New Funding Formula: Design

18181818

Formula Content for Basic Hourly Rate

Formula Element

All Settings

Direct Teaching Time

All costs associated with the delivery of the free entitlement when the children are present at the setting and in their learning environment – this covers all staff involved and costs reflect teaching group size and staff to child ratios.

Indirect Teaching Time

All costs associated with the planning and preparation for the free entitlement, plus record keeping and parental contact.

Management Time

All costs associated with the management of the free entitlement for setting headteachers / deputy headteachers or managers / deputy managers.

Administration Time

All costs associated with administration of the free entitlement e.g. arranging parent/teacher meetings, completing statutory paperwork

Supplies and Materials

All costs incurred in providing supplies and materials to support the free entitlement e.g. art materials

Building Resources

Premises related costs e.g. outside space, utilities, cleaning supplies, maintenance

19191919

Basic Formula Content

• Until Schools Forum approves new formula and agrees how much funding can be allocated to it, final hourly rates have not be published beyond working group

• However, hourly rates:Reflect variations in occupancy across the year (based on

average occupancy levels) and impact of occupancy on teaching group size

Reflect higher costs in some settings (e.g. day nurseries compared to pre-schools for different building costs for example)

Be supported by existing processes related to sustainability and sufficiency

Not be lower than current levels on an average hourly rate basis (but may be lower for some settings overall)

Be subject to growth in 2009/10 as per current process for calculating inflationary increases

20202020

Hourly Rates Estimates for 2010/11

• Rates are based on 2009/10 prices at present• Can be delivered within the current cost envelope• Reflect statutory levels for staff to child ratios with

additional time allocated for supernumerary management staff

• Staffing assumptions reflect training, annual leave and other employment requirements

• Salary rates reflect Essex standards or national rates where appropriate

• Range of rates (except for childminders) reflect variation in occupancy levelsLower occupancy level reflects quality aspiration (i.e. fewer

children per staff)Occupancy at 90% reflects funding within current funding

constraints and overall affordability

21212121

Hourly Rate Estimates

Setting 1 (Nursery School)

Setting 2 (Nursery Class)

Setting 3 (Full Day

Care)

Setting 4 (Sessional Day Care)

Setting 5 (Childminder)

Teaching Group 26 26 24 24 3

Staff Ratio 1:13 1:13 1:8 1:8 1:3

Hourly Rate (80% Occupancy) £5.69 £4.54 £4.26 £4.17 £4.37

Hourly Rate (85% Occupancy) £5.36 £4.28 £4.01 £3.93 £4.37

Hourly Rate (90% Occupancy) £5.06 £4.04 £3.79 £3.71 £4.37

Hourly Rate (95% Occupancy) £4.79 £3.83 £3.59 £3.51 £4.37

Hourly Rate (100% Occupancy) £4.56 £3.64 £3.41 £3.34 £4.37

22222222

Supplements: Deprivation

• Purpose: additional funding to support settings working with disadvantaged children whose background might impact on outcomes and achievement

• Working Group and early consultation has discussed:How much funding should be allocated to deprivation?

How should children be identified?

How should funding be allocated to individual children?

Which settings will benefit?

23232323

Deprivation Funding: Proposal

• Methodology should be consistent with schools formula• Funding will be linked to home postcode of individual

children (calculated through January Census) and mapped using IDACI

• Children in bottom 5 deciles will benefit (weighted so that children from most deprived areas will receive more funding)

• Approximately £900,000 (2.5%) to be allocated to deprivation funding in first year

• Settings will receive annual allocation (as lump sum) which reflects the total number of hours they provide to individual children from deprived area

• Allocation will be weighted to reflect different hourly rates for different sectors

24242424

Deprivation Funding: Application• Settings with more children from deprived

areas will receive more funding• Settings can choose how to spend their

allocation but will be accountable for choices• Funding can be spent to benefit some or all

children in a setting e.g.Additional staff hours to reduce class sizes

New equipment or teaching materials

Wraparound provision / lunch clubs

Extra hours / sessions

Specialist support e.g. English as additional language (EAL)

25252525

Deprivation Funding: Allocations

Sessional Day Care34%

Nursery Class35%

Full Day Care27%

Nursery School2%

Childminders0%

Independent School2%

600+ settings would receive allocation in 09-10

26262626

Deprivation Funding: Examples

Setting TypeNumber of Children Total Hours

% of Deprivation

Hours Deprivation

Funding

Full Day Care 1 40 18,810 18% £1,085

Full Day Care 2 114 45,790 51% £7,360

Full Day Care 3 21 9,215 7% £208

Sessional Care 1 26 8,550 46% £1,217

Sessional Care 2 49 18,430 99% £5,644

Sessional Care 3 7 3,040 31% £293

Nursery Class 1 46 21,850 43% £3,466

Nursery Class 2 29 13,775 122% £6,152

Nursery Class 3 52 24,700 10% £867

Nursery School 1 178 84,550 44% £14,717

Independent 1 61 28,975 5% £446

27272727

Transitional Funding: Proposal

Transitional arrangements should be as follows:

• They will be time-limited to minimise ongoing impact of transition

• Settings which lose funding will be protected against a proportion of the reduction in their funding e.g. up to 50% in the first year (based on replacing place-led funding)

• Some maintained settings may need special transitional support due to impact of changes

• Settings which have sustainability issues as a result of the new formula will be assessed according to the existing criteria and approaches for sustainability and sufficiency – additional funding from transitional arrangements may be required to support this

• All settings should move to the new funding arrangements within 2 years (rather than 3 years as originally suggested)

28282828

Overall Affordability: Risks

• Requirement: proposals are affordable within current funding constraints and should still be affordable beyond 2011 if additional funding is at lower levels than currently

• Proposal is affordable at 95% occupancy rate and has a shortfall at 90% (which closely reflects current practice)

• The proposal is affordable at 85% occupancy levels with the additional funding from the fully flexible offer

Proposals therefore take account of three major risks in fundingFormula changes could increase / change participation across

sectors

Size of allocation for 2010-11 to support increased flexibility has not been confirmed

Potential limited increases in funding to all education elements from the next comprehensive spending review (2011-2014)

29292929

Overall Affordability

£-

£5,000,000

£10,000,000

£15,000,000

£20,000,000

£25,000,000

£30,000,000

£35,000,000

£40,000,000

£45,000,000

Tot

al F

undi

ng (

80%

Occ

upan

cy)

Tot

al F

undi

ng (

85%

Occ

upan

cy)

Tot

al F

undi

ng (

90%

Occ

upan

cy)

Tot

al F

undi

ng (

95%

Occ

upan

cy)

Tot

al F

undi

ng (

100%

Occ

upan

cy)

Bre

ak e

ven

posi

tion

with

out r

elea

sed

reso

urce

s

Bre

ak e

ven

posi

tion

with

rel

ease

dre

sour

ces

Cur

rent

Fun

ding

Maintained School Maintained Class Full Day Care Sessional Care

Childminder Social Deprivation Transition

30303030

Overall Affordability – Fully Flexible Offer

£-

£5,000,000

£10,000,000

£15,000,000

£20,000,000

£25,000,000

£30,000,000

£35,000,000

£40,000,000

£45,000,000

£50,000,000

Tot

al F

undi

ng (

80%

Occ

upan

cy)

Tot

al F

undi

ng (

85%

Occ

upan

cy)

Tot

al F

undi

ng (

90%

Occ

upan

cy)

Tot

al F

undi

ng (

95%

Occ

upan

cy)

Tot

al F

undi

ng (

100%

Occ

upan

cy)

Bre

ak e

ven

posi

tion

with

out r

elea

sed

reso

urce

s

Bre

ak e

ven

posi

tion

with

rel

ease

dre

sour

ces

Cur

rent

Fun

ding

Maintained School Maintained Class Full Day Care Sessional Care

Childminder Social Deprivation Transition

31313131

Formula Development in 2010/11There will need to be ongoing work on the

formula beyond implementation to address:• Impact of fully flexible offer on parental choice

and take-up of free entitlement (reflecting how settings can deliver flexibility)

• Impact / outcomes of next comprehensive spending review and allocations for 2011-14

• DCSF work on reflecting the cost of quality provision in funding formulae

• General review of places in maintained sector