Western Canada: Federal child care program raises difficult question in Alberta: what’s a reasonable profit?

Good morning. It’s James Keller in Calgary.

When the Alberta government signed a $3.8-billion agreement with Ottawa in late 2021 to provide subsidized child care, the structure of the industry in the province posed a special challenge.

Private child-care centres account for 67 per cent of licensed spaces in Alberta, making it an outlier in the country. Any system offering broad coverage to families in the province would need to include private operators.

But that also meant most of that federal and provincial money would be going to operators looking to make a profit, which in turn raised difficult questions about what costs those centres should be passing on to parents – and how much profit they should be making.

While the child-care agreement is more than a year old, and money started flowing into the system – and into parents’ hands – at the start of 2022, a related agreement that would seek to answer some of those questions had yet to be hammered out. The resulting uncertainty prompted some operators to warn that they were caught in limbo while they waited and even risked going out of business.

Existing private operators were grandfathered into the child-care program, but any spaces created after March of last year were not, meaning that the parents of children in such spaces were paying rates that in some cases were more than twice what someone in a subsidized space would pay.

The provincial and federal governments have now revealed the details of that second agreement, known as a “cost control framework.” The upshot for parents is that about 1,600 private spaces will be eligible for funding “almost immediately” and another 2,000 would become available soon.

But the impact for operators is less clear.

The provincial government provided a document explaining the cost control guidelines, which said the rules were designed to “establish the parameters for a reasonable profit or surplus and the sound and reasonable use of public funds.”

But the framework doesn’t include hard targets, but rather says total government funding, plus parent fees, should equal the cost of delivering “core child care services.” These expenses will vary by operator and region, but must fall within Alberta’s legislated parameters.

More than 112,000 spaces for children up to kindergarten-age were eligible for funding, in both private and non-profit licensed child-care programs, as of last September. The province said parents with a child in full-time care will save between $450 and $635 a month under the expanded agreement.

This is the weekly Western Canada newsletter written by B.C. Editor Wendy Cox and Alberta Bureau Chief James Keller. If you’re reading this on the web, or it was forwarded to you from someone else, you can sign up for it and all Globe newsletters here.