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Equity Funding For Early Childhood Education

More than a thousand early childhood services will start to receive extra funding from the end of this week as the government starts to introduce equity funding for the early childhood education sector.

Education Minister Trevor Mallard said the first payments are going out to centres this week. The equity funding system will deliver an extra $8 million a year to eligible community-based services.

Trevor Mallard said equity funding was a further step in the government’s commitment to achieve across-the-board improvements to the education of young children.

“In this case, the government is directing most of the additional money to early childhood education services in lower socio-economic communities,” Trevor Mallard said.

2002 is a transition year for the introduction of the equity funding initiative. The first payments will be smaller than services will receive once the initiative is fully implemented in November 2002. The initial allocation in March will benefit 1121 services, with further services coming on board when actual equity indices are determined later in the year following census information from last year becoming available.

Equity funding is available to licensed and chartered, community based early childhood education services:

- In low socio-economic communities;

- In isolated areas;

- Which are based on a language and culture other than English;

- Which have significant numbers of children with special education needs.

“The additional funding means eligible early childhood services will work more effectively with children who have learning and behavioural difficulties or who are from non-English speaking backgrounds,” Trevor Mallard said.

“I am confident that centres will use the extra funding to give their children a better foundation for life-long learning.

“Centres will use the extra funding for things like additional curriculum resources, improved staff:child ratios, professional development for staff and education for families, transport and meeting children’s nutritional needs,” Trevor Mallard said.



Questions and answers on the implementation of the first stage of the Early Childhood Equity Funding policy.

Q: When will the first Equity Fund payment be made?

A: The March 1 subsidy payment to early childhood services will include the first Equity Funding payment to eligible services. This first transition payment will be effective from 1 January 2002. Services will receive a circular, explaining the basis for the Equity Funding calculation, along with their funding advice notices.

Q: Which centres are eligible for Equity Funding?

A: A service must be community based to be eligible for Equity Funding. Community based services are those established as incorporated societies, charitable, statutory or community trusts, or those owned by a community organisation such as a city council. Community based services are prohibited from making financial gains for distribution to members.

Q: What are the components that make up the Equity Fund?

A: The Equity Fund is comprised of the four components described below:

Component A: Low Socio-Economic


Component B: Special Needs and Non English Speaking Backgrounds

Eligibility for the Low Socio-Economic and Special Needs components is based on the early childhood Equity Index (EQI). This index measures the extent to which an early childhood service draws children from low socio-economic communities. Research shows that the incidence of children with low to moderate special needs and for whom English is their second language is 4-6 times higher in low socio-economic services. Because of this, the EQI is used to determine eligibility for both components. Combining the Special Education Needs with the Low Socio-Economic component of the Equity Fund also avoids the compliance and administrative costs of a system tagged to the needs of individual children.

March and July 2002 allocations:

As Census 2001 information is not yet available, the March and July Equity Funding payments will be based on an estimated indicator called the Proxy EQI (Equity Index). The Proxy EQI for an early childhood service is set using the decile values of nearby schools. Services with a Proxy EQI of 1, 2 or 3 will receive payments in March and July 2002.

Services that received funding based on a Proxy EQI, but which are not eligible once actual EQI are known, will not be required to repay the equity funding they have received.

Eligible services opening after 21 August 2001 will not receive Equity Funding until November 2002.

From November 2002:

A service's EQI will be determined from the addresses of the children attending that service and information taken from the New Zealand Census of Population and Dwellings issued by Statistics New Zealand on a 5 yearly cycle. The actual EQI will be calculated when the necessary information from the 2001 Census is available. In August 2001, services were asked to supply addresses for children enrolled to regularly attend in the week of 20-24 August. This information will be used to determine the EQI ratings of individual services.

Community based services that do not have a regular roll were not asked to submit addresses for children. The EQI for casual services is determined using the average for all other EC services in the same area (Census Area Unit).

Services which have an actual EQI indicator of 1, 2, 3 or 4 will qualify to receive funding under the Low Socio-Economic and the Special Needs components of the Equity Fund. They will all receive a wash-up for their full annual entitlement for 2002 with their November 2002 bulk funding payments.

Component C: Language and Culture other than English

Eligibility under this component requires the provision of early childhood education in a language and culture other than English during the formal education and care programme.

A service qualifies where:

i Staff (both paid and unpaid) plan and evaluate the curriculum for children using the kaupapa/cultural framework associated with the predominant language of communication;


ii Staff (both paid and unpaid) deliver the curriculum for children using the predominant language of communication.

Eligibility is determined through an initial attestation process. Services will be required to contact the Ministry where there is any subsequent drop in the use of the predominant language or where there are changes to the cultural nature of the education programme provided.

Component D: Isolation

This component of the Equity Fund recognises that isolated services face different costs when accessing goods and services. Eligibility for the Isolation component is based on the new early childhood Isolation Index. This index rates a service's relative isolation according to its distance in kilometres from centres of three different population sizes (5,000, 20,000 and 100,000).

Services with an Isolation indicator of 1.65 and greater qualify to receive funding.

Q: How many services will receive funding?

A: In March 2002 the following numbers of services will receive funding:

711 services for low socio-economic and special needs components.

408 services for isolation.

623 services for language & culture other than English.

In March 2002 an estimate of the Equity Index is being used to make payments under the low income and special needs components of equity funding. This is because the Census 2001 data needed to determine eligibility for the socio-economic component is not available until mid 2002. The estimated Equity Index is based on the deciles of nearby schools and kura. Only services with an estimated Equity Index of 1, 2 and 3 will receive payments in March and July.

In Nov 2002, when the socio-economic status of services is accurately calculated from Census 2001 data, there will be more services funded under the low income and special needs components. It is expected that 1016 services (40% of those that are community based) will receive funding under these components.

Q: What are the numbers of services eligible for Equity Funding by service type?

A: The table below sets out the numbers of services by service-type that will be eligible for funding at 1 March 2002:

Number of Services to be Funded

Type of service Proxy Proxy Proxy Isolation Language


Hospital services 18 0 0 1 0

Kindergartens 42 34 39 57 0

Playcentres 10 25 22 108 2

Education and Care Services 54 34 49 70 74

Homebased services 2 2 7 10 0

Te Kohanga Reo 112 142 119 162 547

Total number of services 238 237 236 408 623

The figures above were valid as at Feb 15 2002

The table below sets out the numbers of services that will receive Equity Funding at 1 March 2002 by combinations of components:

Components Number of Services

Low SES+Special Needs + Isolation + Language 130

Low SES+Special Needs + Isolation 46

Low SES+Special Needs + Language 283

Low SES+Special Needs 252

Isolation + Language 33

Isolation 199

Language 177

Total number of Services Funded in March 2002 1120

The figures above were valid as at Feb 15 2002

Q: How much will services get?

A: For low socio-economic status

Larger services will generate more funding than smaller services because payment is based on a scale of Funded Child Hour (FCH) rates. The scale of rates slides according to EQI, which means that a service with an EQI of 1 receives a higher FCH rate than a service with an EQI of 4. A service with an EQI of 1 is more socio-economically disadvantaged than a service with an EQI of 4.

The amount which an individual service generates will be determined by its EQI and the actual FCHs provided to the Ministry of Education on its funding claim form (RS7). As with the bulk funding subsidy, payment of Equity Funding may not exceed 30 hours per child place over seven days.

The rate per funded child hour of enrolment is:

Proxy EQI 1 $0.22

Proxy EQI 2 $0.17

Proxy EQI 3 $0.11

EQI 4 (not paid out until November 2002) $0.06

The average amount that a service will receive for this component is likely to be around $3,900 ($4,000,000/1016 services)

The largest services could receive up to $19,000 in extra funding for the low income component of the funding.

For special needs and non English speaking backgrounds

This component of Equity Funding is also determined by the Equity Funding index (or EQI) and linked to service size, with services having more children attending for more hours receiving more funding.

The rate per funded child hour of enrolment is:

Proxy EQI 1 $0.11

Proxy EQI 2 $0.07

Proxy EQI 3 $0.06

EQI 4 (not paid out until November 2002) $0.04

The average amount that a service will receive for this component is likely to be around $1,900 ($2,000,000/1016 services)

The largest services could receive up to $9,000 in extra funding for the special needs/non English speaking background component of the funding.

For isolation

Payment under this component is not tied to a service's FCHs. Payment is calculated as a monthly grant which slides to reflect degrees of isolation within the eligibility threshold. This means that more isolated services will receive a higher rate of funding. There are three payment bands:

Isolation Index Bands Annual Amount Monthly Amount

2.54 and greater $2,900 $241.67

1.84 - 2.53 $1,500 $125.00

1.65 - 1.83 $1,000 $83.34

For providing a service in a language and culture other than English

Payment under this component is not tied to the size of a service. Services will receive $1,740 per annum or $145 per month for 2002.

Q: When will services get the funding?

A: Payments will be made three times each year in March, July and November. As Equity Funding begins from 1 January 2002 the first payment will be made in March 2002. This payment will be relatively small because it applies only to the months of January and February and many services are closed for parts of January.

The July payment will apply to the months of March, April and May.

In November, when the accurate socio-economic indicator has been calculated, eligible services will receive backdated payments to bring them up to date with their entitlement for 2002.

Q: How do we work out the socio-economic indicator?

A: The 40% of services that draw their children from communities with the lowest socio-economic status are the target group most of the equity funding pool. The index is based on Census data for the families in the area from which each service draws its children along with service’s ethnicity data. The Census data used includes equivalent household income, parents’ occupation and educational qualifications, household crowding, and income support payments received. After combining the data, all services are ranked into 10% groupings. The 10% with EQI 1 have the highest proportions of children from low socio-economic backgrounds. For the early childhood sector , only services with EQI 1, 2, 3 and 4 will be identified.

In the school sector the same methods are use to rank all schools on a 1-10 decile index.

Q: How does the EQI compare with school decile funding?

A: It is not possible to make a useful direct comparison between of the Equity Fund and decile based resourcing for schools. Funding for early childhood centres is a subsidy toward the cost of their services, while resourcing for schools is intended to cover full cost of education provision.

The Equity Fund is $8 million per year and, when fully implemented, is likely to be accessed to some degree by around 1,357 of the 2,536 community based early childhood services. School decile based operational funding (TFEA, SEG and CIG) totals approximately $135.6 million per year and is targeted, at varying levels, to all 2718 state and state integrated schools.

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