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Day care providers talk possibly illegal

The letters arrived in late August.

A new association for Hernando County day care providers had scheduled a meeting in September.

Topic No. 1?

Rate increases.

The association says improvement in the quality of day care provided throughout the county is one of its goals. But those attending the meeting may have been violating federal and state price-fixing laws through their discussions, legal experts say.

At the meeting, attended by about 20 of the 80 state-licensed day care providers in Hernando, owners asked each other about their prices, several people who were present told the Times. They discussed raising rates and the need to keep prices above a certain level.

"We want to try to eliminate competition and be more community organized," Lisa Toohey of Mrs. B's Day Care in Spring Hill said in an interview. "We have to keep up with the norm of society, and some day cares are higher and some are lower. We want to be at the same rate."

There is no evidence that local day cares have raised prices, and the Florida Attorney General's Office says it has received no complaints about possible price fixing among Hernando County day cares.

The agency defines price fixing as a conspiracy of two or more individuals or businesses that have formed for the purpose of raising or stabilizing the price of a commodity, said agency spokeswoman JoAnn Carrin.

Discussions about rates are not uncommon throughout the day care industry, which works on tight margins. Day care rates are tied directly to the quality of care that kids get, because they determine such factors as how much teachers are paid and how many teachers a day care hires per child, said Jim Garrett, executive director of the Pasco County School Readiness Coalition.

"Quality costs; it's that simple," Garrett said.

Rate issues are often a topic at the Pasco Association of Child Care Management, although members do not discuss setting rates uniformly, president Gigi Durr said.

One reason for rate discussions is that most day cares plan their budgets around government subsidies received for serving children of lower-income families, including those participating in the state welfare-to-work program and those under the care of the Department of Children and Families.

Day cares are reimbursed with federal and state dollars that often fall short of day care prices. Either the day care accepts the coalition's lower rates, or it doesn't, and then parents can choose to shell out the difference or take their kids elsewhere.

Reimbursement rates are set by local school readiness coalitions and are tied to an annual market survey, which samples rates throughout a county and then calculates the area's market rate at the 75th percentile. Reimbursements are supposed to cover roughly 75 percent of the market rate in a given area.

Day care owners reason that if all day cares in a county raise rates, then the market rate survey would reflect that, and the government reimbursements would also increase.

"We're trying to get more funding in our county, because our state funding for our county is very low, so it's for a good cause," explained Tara Grizzel of Koala Kuties Preschool in Spring Hill, who has no intention of raising rates because hers are already at the minimum level discussed at the meeting. "If we all work together in all this, maybe we can make a difference so we can benefit the kids."

A nonprofit agency that would also indirectly benefit from an increase in public funds has been pointing out the numbers to Hernando day cares.

"If they could uniformly agree to raise their rates, it would benefit all of them," said Linda Foy, chief executive of Childhood Development Services Inc. of Ocala, which contracts with the Hernando County School Readiness Coalition to run the subsidy program. The nonprofit agency cuts the reimbursement checks to day cares.

Childhood Development Services sent Hernando County representative Vicky Gates to the September meeting of the day care association. Gates said she never encouraged anyone to raise rates. She just answered questions about the benefits of such a rate increase.

"I can lose my job if I tell a provider to raise their rates," Gates said. "But the true facts are if they never increase their rates, every time the state pulls a market rate survey and it's low, that's what they're going to be reimbursed at."

Childhood Development Services also stands to benefit if the coalition allocates more dollars to cover higher rates, because some of the agency's operations budget is derived from School Readiness Coalition dollars, Foy said.

However, the Florida Partnership for School Readiness, the state agency that distributes funds to the local coalitions, warns that rate increases do not guarantee more government funding. The agency has a set amount of money that hasn't increased much over the years. So if a local school readiness coalition decides to increase reimbursements to day cares to cover rate increases, the program will actually end up serving fewer children.

"There's a misunderstanding there, if they think that they would get more money just by raising their rates," said Pat Shuler, associate director of the Florida Partnership for School Readiness Coalition. "When you have a fixed pot of money, there's only so many ways you can split it."

Indeed, the reimbursement rate doesn't always even meet the 75 percent of the market rate it aims for. For example, the 75th percentile market rate in Hernando County for an infant staying at a child care center was $100 a week in 2001 and rose to $110 a week in 2003. The reimbursement for infants at a center is currently $95 a week. In Pasco County, the difference between reimbursement and market rate is much wider.

As of July, 154 Hernando County children were on the waiting list to enter the government-subsidized program. That number is about to rise, said Jo-Ann Kay Fuller, executive director of the Hernando County School Readiness Coalition.

Regardless of whether increasing rates would get Hernando County day cares more government funding, just talking about increasing rates in a group forum may be illegal, said Jeffrey Harrison, a law professor at the Unversity of Florida who specializes in antitrust and economics.

"Price fixing is an easy one: you can't do it," Harrison said.

Both federal and state statutes have language that prohibit people or businesses from conspiring to raise prices.

How prosecutable the action is depends on how successful day cares are in raising rates.

"If they talk about it, and nothing happens and everything falls apart, then that's probably not a problem," Harrison said. "But if they talk about it and prices start going up, that could be a big problem."

_ Staff writer Jennifer Liberto can be reached at 848-1434 or