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Last year, childcare providers in Ohio secured a huge victory: After years of advocacy, state lawmakers included a provision in the budget that put the state on a path to pay providers who accept government vouchers based on how many children are enrolled in their programs, not how many manage to show up each day, giving them more consistent revenue despite children’s unpredictable absences. It was a hard-fought win; providers lobbied lawmakers of both parties and held a rally with hundreds of providers at the state capitol last year to demand the change.
But now, in the wake of a new focus among Ohio lawmakers on supposed fraud in the state’s childcare system, they are on the verge of ditching the idea altogether. A bill under consideration would require providers to be paid based on attendance rather than enrollment as they are by parents who pay out of pocket.
In December, conservative YouTuber Nick Shirley posted a video claiming to uncover widespread fraud in Minnesota’s childcare program, particularly among daycare centers run by Somali American residents. The video went viral and reached federal officials, and the Trump administration cited it as motivation to pursue an ICE surge in Minnesota and various efforts to restrict federal childcare funding. Despite the video offering no verified evidence of fraud — and the fact that the state was already investigating several cases of fraud in its childcare system — some states have responded by intensifying their focus on supposed fraud. Texas Gov. Greg Abbott directed agencies to launch investigations into childcare fraud, while Idaho’s Department of Health and Welfare conducted heightened reviews of funding. (The reviews found less than 4% of providers guilty of any wrongdoing.)
Shirley’s video sparked an immediate reaction in Ohio, according to Tamara Lunan, a childcare organizer with the Ohio Organizing Collaborative. The state has the second largest Somali American population, just behind Minnesota. Similar videos in Columbus, Ohio claimed centers were receiving public funding for nonexistent children even though evidence refutes at least two of those claims. According to Ohio University’s Crane Center for Early Childhood Research and Policy, just 0.43% of all the providers who accept vouchers through the state’s publicly funded childcare program were found to be misusing funds in 2025. In a recent review of 124 complaints sent to the state’s Department of Children and Youth last year, the agency found no evidence of fraud in 100 of them.
In January, Ohio lawmakers put forward two proposals — House Bills 647 and 649 — they said were aimed at combatting fraud in the state’s publicly funded childcare system.
Marquita McClendon, who has operated a childcare program in Cincinnati since 2023, acknowledged that fraud exists. “But I feel like the systems that we already have in place already do the job necessary,” she said. “We’re changing laws over an unsubstantiated claim. It’s just beyond me.”
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The state made some changes ahead of implementing the new enrollment-based payment system that have led to sacrifices for providers. It dropped a requirement for counties to use presumptive eligibility, which allows families to receive childcare vouchers if they already qualify for another program like food stamps, and allows parents to enroll immediately once they get a new job, rather than waiting weeks for their paperwork to be approved. Some providers accept children into their programs during that interim period anyway, Lunan said, but often aren’t paid for all of that time. The state also reduced reimbursement rates for some types of in-home providers and increased the threshold for children to qualify as full time, which allows providers to be reimbursed at a higher rate.
“There were things taken away from us,” McClendon pointed out. With those reductions, she’s making $10,000 less each month, she said. “We’re in the red.” The loss of revenue has meant she can’t buy new equipment for the children in her care or do field trips this summer as she normally would. “I can’t run an effective program,” she said.
If providers were paid based on enrollment, it would help them weather children’s absences for illness or snowstorms, “things that providers can’t possibly be able to plan for when they’re making their budgets,” Lunan said. It “would help to stabilize the programs.” Instead, “Providers are hemorrhaging income based on these changes,” she said. “It’s killing their bottom line.”
Reversing the decision to pay based on enrollment is just one of the changes included in the legislative proposals Ohio lawmakers have put forward in the name of fighting fraud this year. Some others have since been toned down or removed. House Bill 647 initially included language that would have given the state’s Department of Children and Youth the power to cut off funding or suspend a license for any provider merely suspected of fraud, waste or misuse of dollars without a hearing. That language has since been struck from the bill; now those actions can be taken if “evidence demonstrates” that a provider knowingly engaged in fraud or misuse of funds. But providers remain concerned about lawmakers giving the attorney general more power to prosecute perceived fraud, which remains in the bill.
“We don’t want to see childcare providers get penalized because the state made an overpayment to them,” Lunan said. Both overpayments and underpayments are included when states calculate their payment error rates, and those can be due to the state government’s error, not providers acting with ill intent. Her organization is pushing for the state to create a committee made up of childcare providers that could distinguish between clerical errors and actual, intentional fraud.
The original proposal for House Bill 649, introduced by Republican lawmaker Josh Williams, would have mandated the installation of cameras in all childcare programs that receive government funding to “allow visual inspections in real time,” in Williams’s words. It would have given the Department of Children and Youth the ability to view the footage at any time. McClendon pointed out that she has diaper changing stations in her classrooms. “There’s no way to protect my children’s privacy,” she said, calling the idea “a bit extreme.”
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While that idea has since been abandoned, lawmakers have adjusted the bill to propose facial recognition for children who attend programs that receive public funding. Such technology won’t work on young children, particularly infants, given how rapidly their faces are developing and changing, McClendon and Lunan pointed out. McClendon also noted the challenge of keeping kids still long enough to take a photograph. Lunan pointed out that there is already an existing mandate for programs to have an attendance system in place that takes pictures of parents when they sign children in.
An amendment made to that bill prohibits the storing of photos of the children. But many parents are still opposed, Lunan said: a petition against mandating facial recognition has been signed by nearly 900 people.
Lawmakers are also considering reducing the time given for allowing a child to be checked in retroactively, if their attendance was originally missed, from 30 days to seven. “That would be a tremendous hardship,” Lunan said, on both providers and the parents who are the ones who have to go into the system and fix the problem.
The legislation calls for spending up to $5 million over two years on data analytics to detect patterns of fraud or abuse. The facial recognition proposal alone would be “expensive for the state and providers, diverting scarce public dollars and provider time away from care itself and toward unnecessary surveillance infrastructure,” said Ali Smith, senior project coordinator at Policy Matters Ohio, in a recent statement. Lunan agreed. “We don’t need funds to come out of childcare,” she said. What Ohio childcare providers need instead, she said, is more funding, not less. “Providers are not defrauding the system. They are barely breaking even — most providers are in the red,” she said. “The conversation really needs to shift from fraud to funding.”
The anti-fraud bills “would just destabilize childcare, or destabilize it further, because it’s already unstable,” Lunan said.
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