Governor Includes Funding for Provider Rate Increase in ‘Critical Needs Budget’ Requests
On Monday, March 9, Governor Josh Stein called on state legislators to appropriate $20 million in funding to increase subsidy reimbursement rates for licensed child care providers during the last quarter of the state’s fiscal year. During a press conference, the governor said his recommendations are intended to “fill the gap” until legislators pass a new comprehensive state budget. He explained that there are certain urgent needs that cannot wait for lawmakers to work through all of their differences on a full budget compromise.
The governor’s stopgap budget recommendations were reportedly poorly received by state House and Senate leaders, although they didn’t rebuff child care funding, specifically. Senator Jim Burgin, a longtime child care champion in the state Senate, said that additional child care funding is among the priorities he’d like to see addressed during the upcoming legislative session even if a comprehensive budget is beyond reach.
The $20 million in the governor’s “critical-needs” budget proposal for child care subsidy rate increases would bring rates up to those in the most current (2023) Market Rate Survey for the last quarter of the state’s fiscal year, which ends June 30. (It would cost $80 million to fully fund the rate increase for a full year.) The goal – for both the governor and NCLCCA – is to secure enough recurring funding during the next legislative session, which begins in late April, to secure a permanent rate increase, plus additional funding to set a new statewide rate floor.
Legislators Hear about Child Care Crisis – Data on Closures & Subsidies Underscore Urgency
“When we look at access and affordability, our current funding model wrongly assumes that parents can pay what it costs to provide quality early education to our youngest citizens.”
That’s what DCDEE Director Candace Witherspoon told members of an important state legislative committee this week in Raleigh and there’s no statement that sums it up better. Operating costs have risen at rates that tuition increases cannot match without undermining enrollment by pricing more families out of care. And government reimbursements for serving families who qualify for child care subsidies have never matched costs and lag years behind market rates.
Director Witherspoon reported to state legislators on the Joint Legislative Oversight Committee on Health and Human Services that North Carolina has lost 13% of its licensed child care programs since 2019. She said the division projects that overall number to fall below 5,000 in 2027, which she emphasized would be a historic low for the state. She explained that while every county has inadequate supply of affordable, quality care, rural communities have experienced the largest net declines in facilities since July 2024.
Chairing the joint House-Senate oversight committee meeting was Representative Larry Potts, a Republican from Davidson County, who launched the presentations about child care by saying, “There’s probably over half the people in this room who wouldn’t be here today if it wasn’t for someone who had child care at home that you could leave your children with. When less and less people show up to work because there’s less and less slots available, I’m sure it’ll start becoming more important then.”
Funding for Provider Rate Increases for Subsidized Child Care Highlighted as One Solution:
DCDEE’s director told state legislators that one way the state could help increase child care stability and affordability is by providing more funding for the child care subsidies program for low-income working families to increase provider reimbursement rates. She reported that the number of children served through the program has declined by 15% since 2019, and the waitlist for subsidies has grown to 15,512 as of the end of last year (increasing from 2,164 in July of 2024). She explained that the subsidy reimbursement rates licensed child care providers receive for serving these children cover less than half of the actual cost of that care – and that families cannot afford to make up the difference. Consider the following data from the presentation:
- $1,061 is the current average monthly reimbursement rate for infant care in a 5-star center.
- $2,177 is the true monthly cost of 5-star infant care, according to DCDEE.
- $1,116 is the gap between the cost of 5-star infant care and what the state pays centers, on average, for providing it.
- Child care facilities that receive subsidy payments have declined 9% since 2019.
- Subsidy enrollment has declined 15% since 2019.
A rate increase that aligns with the most current market rate survey (2023) and a new rate floor based on the average statewide market rate are both priorities on NCLCCA’s legislative agenda. A new statewide rate floor is also a recommendation from Governor Josh Stein’s child care task force and is supported by a broad coalition of stakeholders and advocates. Because state legislators never passed a new state budget last year, no new funding has been appropriated for either a rate increase or rate floor. Lawmakers will be coming back to Raleigh on April 21 for the legislative “short session” where they will try again to reach compromises on taxes and spending and produce a new budget plan for the next fiscal year.
Legislators Hear about Impact of NCLCCA-backed Regulatory Reforms:
Last year, North Carolina passed legislation that included several child care regulatory reforms requested by NCLCCA to increase access to care and help licensed child care providers with staffing challenges. As a result, providers gained the option (not a mandate) of increasing maximum group sizes for infants, toddlers and two-year-olds as long as space and ratio requirements continue to be met. Additionally, legislators changed the rules so that one Lead Teacher can now have oversight for two groups of children, instead of only one. Another change made means that five years of experience in a licensed child care program is will now earn an NC Early Childhood Credential.
DCDEE reported to legislators the results of an anonymous survey they administered to see how providers were utilizing the new flexibilities from the regulatory reforms that were made. Out of more than 1,000 respondents, the survey found that 21% of programs were using the Lead Teacher flexibilities and increased group sizes, and 66% reported employing lead teachers with five years or more of experience.
Slides from DCDEE Director Candance Witherspoon’s presentation to state legislators on March 10, can be accessed HERE.
Child Care Commission Meeting Recap Coming Soon…
This week the NC Child Care Commission met to discuss a long list of topics important to licensed child care providers, including newly approved curricula, new group-size rules resulting from legislation passed by lawmakers, proposed new rules for school-age care, and more. NCLCCA monitored the day-long meeting on behalf of our members and will include a recap with details in the next edition of The Voice newsletter. Look for it in your email Inbox in the next week or two!
Early childhood director updates legislators on child care loss, waitlist growth for subsidies
EdNC, March 11, 2026
This is an excellent article that covers a broad swath of topics and data related to North Carolina’s ongoing child care access-and-affordability crisis. It covers DCDEE Director Candance Witherspoon’s presentation to state legislators wherein she touched on the loss of child care programs, the growing wait list for child care subsidies, providers’ inability to hire and keep staff, and the impact of inadequate child care supply on North Carolina’s economy. The article also covers a separate presentation by a local community college president about their on-site child care program for students with young children – where students studying early childhood education gain hands-on learning experiences. Notably, the community college stressed that her program struggles to pay competitive wages to recruit and retain staff just like community-based private child care programs. Read More...
NC families face growing child care shortage as closures outpace openings
NC Health News, March 10, 2026
“Annette, a North Carolina woman raising her granddaughter, recounted crying herself to sleep every night before she was able to find child care in her rural Jackson County community. Finding any kind of child care can be difficult in rural areas. At one point Annette was driving two hours each day to get her granddaughter to child care, said Rachel Shelton, program coordinator for the Western North Carolina Early Childhood Coalition. Shelton shared Annette’s story at a recent meeting of the North Carolina Child Fatality Task Force. She said it is just one example of how families are struggling with accessing child care in western North Carolina. While 13 child care centers opened in the region in 2025, 26 other centers and family child care homes closed that same year, she said. Overall, western North Carolina lost 221 child care slots in 2025, she said.” Read More...
NC lawmakers turn critical eye toward spending on autism therapies, child care
WRAL News, March 10, 2026
“The legislature has previously debated some potential solutions for the state’s child care shortage, although action has been limited… There are competing forces driving problems in child care, [DCDEE Director Candace Witherspoon] told lawmakers. Costs have risen substantially: It now costs families more than $11,000 a year to enroll a child in child care in North Carolina. But at the same time, child care companies aren’t able to easily raise wages for workers. And therein lies the riddle: Pay bumps would likely require operators to raise rates for parents. But rate increases might cause more parents to stay at home with their kids. But if operators don’t raise rates, they risk losing workers to other employers who pay more. And if they lose employees, they’ll have empty classrooms due to lack of staff, and may need to shut down entirely.” Read More...
NC leaders discuss growing child care challenges during legislative oversight meeting
WCNC Charlotte, March 10, 2026
“For many parents, the challenge begins with simply finding an available spot. Local parent Darius Smith says the search has been difficult. ‘A lot of the daycares we've been touring and trying to get into have wait lists of six to seven months,’ Smith said… Providers say demand for care continues to outpace availability. Heather Efird with Matthews Presbyterian Church Child Development Center says she regularly hears from parents searching for child care options… Efird says the situation has worsened since the pandemic and notes the cost of operating child care centers remains a major hurdle. ‘We have to cover classroom consumables, improvements, insurance and pay staff,’ she said. ‘There’s a lot that goes into the price of childcare not just paying for your teachers.’” Read the full article HERE...
NC lawmakers talk doula coverage, child care shortage
WUNC News, March 10, 2026
“Childcare center closures are hitting the state's rural counties particularly hard, with the number of facilities dropping by more than 20% in counties like Camden, Perquimans and Warren. The state's childcare subsidy program is also able to serve fewer kids as it awaits additional funding from the legislature, leading to long waiting lists of eligible families.” Read More...