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The Trump administration announced changes this week to regulations governing the Child Care Development Fund — the key source of federal funding for child care subsidies — that policy experts say could lead to more financial instability for early care and education providers and, in turn, reduce access and affordability for families.
Effective July 13, the Administration for Children and Families will roll back several Biden-era rules that sought to create more predictable, reliable payments to childcare providers. These include paying providers based on a child’s enrollment, rather than their attendance, which protects them against financial losses from unplanned events such as illness and family travel, as well as making subsidy payments in advance, rather than reimbursing providers the following month.
Both practices help to stabilize the industry by giving programs consistent revenue that allow them to plan and budget month over month, providers and experts said.
Although the requirements will be rescinded, states will still have the option to pay based on enrollment and in advance of services — just as families who pay privately for child care have long done. There is nothing in the new rules to prevent states from continuing or starting those payment practices, noted Helene Stebbins, executive director of the Alliance for Early Success, a nonprofit that supports early childhood advocates across the 50 states.
“It doesn’t require it, but it doesn’t prevent it from happening,” she said. “You can 100% still do it.”
But without the requirement, it’s likely that some states will reverse course. Already, three states — Missouri, Ohio and Washington — have paused efforts to implement or extend enrollment-based pay, noted Daniel Hains, chief policy and professional advancement officer at the National Association for the Education of Young Children.
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“It’s one of those things that, absent that requirement, and given the fiscal situation states are in, states are not going to prioritize these changes if they’re not required to,” said Hains, “and that’s going to have a negative impact on providers and, ultimately, families.”
Currently, about half of states and territories now pay providers based on enrollment, according to an analysis from the First Five Years Fund that was published in March, while the other half still pay based on attendance. At least 10 states are paying providers up front for childcare subsidies, rather than in arrears, according to policy tracking from NAEYC.
The particulars of how and when a provider gets paid can seem like a technicality, but to an early care and education program operator, that may be the difference between financial solvency and ruin.
The administration first announced these proposed rule changes in early January, before opening up the issue to public comments. NAEYC included more than a dozen provider voices in its comments to the U.S. Department of Health and Human Services, which oversees ACF.
A program director in Louisiana explained why the Biden-era policies help to keep her in business.
“During cold and flu season, if childcare providers were only paid based on attendance rather than enrollment, many of us simply would not survive the winter,” the director wrote. “Most of our families have multiple children, and when one child gets sick, it often spreads through the entire household. Enrollment-based pay is the only model that reflects the real cost of maintaining stable staffing, ratios, and operations.”
A program director in Kansas wrote, “Childcare is a tough job. Providers don’t need any additional obstacles. … Having to wait for reimbursement for a month or more can have a significant impact on a provider’s financial well-being in their program.”
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And a director in Maine pointed out that a child whose spot is funded by subsidies should not be treated any differently than one from a family who is paying private tuition. “We cannot predict attendance,” she wrote.
The Maine director’s point is one that motivated the Biden administration’s 2024 rules, Hains said. The law passed by Congress in 1990 establishing the Child Care and Development Block Grant, which authorizes the CCDF, sought to have states’ subsidy payment practices “reflect generally accepted payment practices of childcare providers” who receive payments privately from families, to maximize choices among low-income families seeking care, Hains explained. The Biden rules sought to get states back in compliance with that original intent.
Stebbins, of the Alliance for Early Success, said she couldn’t think of a single other industry that operates in the way that early care and education does.
“It’s Business 101,” she said. “I paid for two kids in childcare. I always paid in advance. I paid if they were sick or we went on vacation. Why is this such a big leap?”
Now that this issue is being returned to the states, she said, it’s on policy advocates and the early childhood community to help make the case to state leaders why enrollment-based pay and prospective pay are so essential.
“It’s good for the field … because it creates a stable, predictable source of income, and it is aligned with how private pay works in the industry,” Stebbins explained, laying out the argument. “It treats kids who are on subsidy — low-income children — just like everybody else.”
Those outcomes, she added, have ripple effects across communities and entire states.
“A stable industry is good for the kids and the programs. There’s less turnover and uncertainty about income,” she said. “It’s good for the state economy because it allows parents to work.”
On the other hand, attendance-based payments may disincentivize programs from accepting families who pay with subsidies altogether, said Casey Peeks, senior director for early childhood policy at the Center for American Progress, a left-leaning think tank.
The enrollment-based pay and prospective pay are only two of the “four critical levers to improving the sector” that the Trump administration is rolling back, Peeks said. The third is the use of grants and contracts to provide direct childcare services, which allow states to enter into agreements with providers to reserve slots for certain populations of children. The reversal of that practice may mean that some families, particularly those with infants and children with disabilities, could have more trouble finding slots for their child. And the final lever is capping the maximum amount a family can pay out-of-pocket for childcare, which the Biden-era rule set to 7% of household income, based on federal affordability standards.
The co-pay limit isn’t perfect, Peeks acknowledged, but “it gives this peace of mind to know how much you’re going to pay,” she said.
In Ohio, one of the 10 states that has not yet capped co-pays at 7%, the limit is 27% of income, which can be crushing for some families.
“I think knowing how much of a burden this [childcare] expense is — it rivals mortgage payments and rent payments — to take away a lever that exists for affordability and offer no alternatives puts families who are already struggling in a really difficult spot,” Peeks said.
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