Corey Incandela

Luke Masella

Elvira Skuzinski

Muhammad Yahya

November 16, 2022 | PSPA 610

Northville Day Care Program

Northville Day Care Program

Overview:

• Background
• Analysis and Findings
• Balanced Budget Options
• Recommendation

A better future for Northville

Over 40% of Northville’s workforce state “affordable day care for children” is important

• May curb employee absenteeism and lateness
• 35% of City’s 1,800 workers are female
• New center only for city employees’ children
• Local non-profit Tiny Tots runs 3 centers in Northville
• Supported by Councilmembers and Union Leader
• Union members’ children would constitute 60%

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Challenge faced by Northville

How to offer quality day care AND achieve a balanced budget?

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The Budget Office has drafted a baseline budget�and a number of scenarios. Based on the given�non-negotiable terms and what is adjustable,�we recommend a solution that is balanced.

Running the numbers…

Our budget analysis considered:

1. Baseline budget (based on negotiations)

2. Constant 5% increase in enrollment

3. Maximum allowable child/staff ratio (8:1)

4. Two other options for a balanced budget

Let’s run the numbers…

Basis for Day Care Center revenues:

• Opens in January with 120 children enrolled
• February through May: 10% increase per month
• June through December: 5% increase per month
• Union will contribute 75¢ per child per day
• Union members’ children estimated at 60%
• Day care monthly fee of $450 per child
• Based on 8-hour day (9 to 5), 20 days/month
• Fee does not vary if care for less than full day�or attendance below 20 days per month

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Let’s run the numbers…

Northville’s contributions:

• Selected equipment for first 120 children
• Cost is $75/child, will increase as enrollment grows
• First-year space and utilities, per Mayor Spark
• Worth $2,900/month, contingent on Center meeting legal requirements (license, inspection, training)

Budgetary parameters

Expenditures due to legal requirements

• Tiny Tots new day care workers must be trained
• Participate in 3-day state-certified training program
• Center must be licensed and inspected annually
• Tiny Tots must contribute to workers’ benefits
• Social Security, Medicare, unemployment, disability
• Center cannot exceed 8:1 child/caregiver ratio
• Tiny Tots negotiated 6:1 ratio for Center’s first year

1. Baseline budget

Union: $20,430

Monthly fees:

$1,021,500

Revenues:�$1,041,930

Salaries & benefits:

$825,625

Expenditures: $1,201,900

Other:

$376,275

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2. Budget if 5% constant growth

Union: $17,469

Monthly fees:

$873,450

Revenues:�$890,919

Salaries & benefits:

$710,323

Expenditures: $1,035,288

Other:

$324,965

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3. Budget if 8:1 child/staff ratio

Union: $20,430

Monthly fees:

$1,021,500

Revenues:�$1,041,930

Salaries & benefits:

$628,563

Expenditures: $1,001,538

Other:

$372,975

(same as

baseline)

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Comparison of total profits

Profit: $40,392

$40,392

Deficits: ($159,970) ($144,369)

Total profits: $40,392

(but 6:1 ratio preferred)

BASELINE

CONSTANT�5% GROWTH

MAX 8:1�CHILD/STAFF

$40,0092

Why not 8:1 child/staff max ratio?

This scenario presents many challenges:

• Negotiations are based on 6:1 child/staff ratio
• Illegal to exceed 8:1 child/caregiver ratio
• Ratio cannot increase if enrollment exceeds predictions
• Hiring more staff will result in higher costs overall
• 8:1 child/staff ratio may decrease quality of care
• Budget is based on predicted enrollment growth
• Higher training costs if Tiny Tots staff turnover is high

Why not 5% constant growth?

Predicted growth that may differ from actual

• Cost deficits will grow if enrollment above 5%
• Baseline at least predicts 10% monthly (Feb-May)
• Better to adjust monthly fee and/or base 6:1 ratio
• Initial 10% growth is basis for negotiated terms
• 5% may prove insufficient for justifying new venture
• Tiny Tots could back out given 3 existing centers

4. Balanced budget options

Option 1: Increase $450 monthly fee to $521

• Enrollment may decrease if fee is not affordable
• Predicted total profits = $1,200 at end of Year 1

Option 2: $470 monthly fee and 7:1 ratio

• Tiny Tots negotiations are based on 6:1 ratio
• Enrollment may decrease if 7:1 ratio is not suitable
• Predicted total profits = $2,233 at end of Year 1

Option 1: Increased monthly fee

Union: $20,430

Monthly fees:

$1,182,670

Revenues:�$1,203,100

$521/mon

Salaries & benefits:

$825,625

Expenditures: $1,201,900

Other:

$376,275

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Option 2: Increased fee and 7:1

Union: $20,430

Monthly fees:

$1,066,900

Revenues:�$1,087,330

Salaries & benefits:

$710,622

Expenditures: $1,085,097

Other:

$374,475

7:1 vs 6:1

$470/mon

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Our Recommendation

Option1: Increase monthly fee to $521

• Embark on Year 1 with balanced budget
• Can decrease fee if Tiny Tots agrees to 7:1 ratio
• Balances if fee is between $521 and Option 2’s $470
• If growth exceed expectations, positive correlation�exists between fee and enrollment
• If only 6:1 ratio is increased, revenue does not increase
• If enrollment is less than predicted and monthly fee�remains at $450, no profits are realized, only losses

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Thank you!

Questions?

Northville Day Care Program