State Legislators Finally Pass New State Budget – Five NCLCCA Agenda Items Included! 

We finally have a new state budget for the fiscal year that starts today and ends on June 30, 2027! NCLCCA is pleased to report to our members and advocates that five of our member-driven objectives on our 2026 Policy Agenda were included in the new budget compromise that will pass the NC General Assembly this week and go to Governor Josh Stein’s desk where he will have 10 days to either sign it into law, allow it to become law with his signature, or veto the whole spending plan.  (We anticipate that the governor will sign the budget bill before the 10 days pass.)  Here’s the timeline this week (how we got here):

Late Sunday night (on June 28) House Speaker Destin Hall (R-Caldwell) and Senate President Pro Temp Phil Berger (R-Rockingham) announced that they had reached agreement on the handful of issues that were remaining to be resolved. (Negotiations had come down to the two of them.)  Then on Tuesday, June 30 (the last day of the state’s fiscal year) over a thousand pages of budget documents were released to the public.  

The budget “conference report” (as the compromise is called) has to be voted on over two separate days by both chambers of the General Assembly (state House and Senate) and cannot be amended (changed) – instead presented for a simple yes-or-no vote.  The first votes took place on Wednesday, July 1, and the second and final votes are expected on Thursday, July 2, allowing legislators to finish their work on the new spending plan and still make it home in time for the July 4 holiday and celebrations of the 250th anniversary of the adoption of our country’s Declaration of Independence.   

It is expected that legislators will return to Raleigh after a Fourth of July holiday break in case a veto override vote on the budget becomes necessary (if Governor Stein were to veto the new spending plan). They may also do some so-called “clean-up work” and amend or pass an adjournment resolution, after which they are not expected to come back to the capital city to resume legislative activity until after the November elections.

Back to Top

Child Care Funding and Policy Provisions Requested by NCLCCA in the State Budget

Five of NCLCCA’s objectives on our 2026 Policy Agenda were included in the new state budget and one of those was recurring state funding for long-awaited and desperately needed subsidy rate increases!  NCLCCA was part of a coalition of advocacy organizations pushing hard for funding for subsidy rate increases and a new statewide rate floor for providers serving subsidy-eligible families, which is also a top recommendation from the Governor’s Task Force on Child Care and Early Education.  (NCLCCA President Dan Rockaway was appointed by Governor Josh Stein to the Task Force.)  Four additional child care provisions in the state budget were initiated by NCLCCA, however – straight from our member-driven agenda developed by volunteers on our Advocacy Committee and approved by our Board of Directors.  Details related to those policy wins for licensed child care, and subsidy rate increases, are included below in this newsletter.  

Child Care Champions! – NCLCCA wants to recognize and thank the following five state legislators in the NC House and Senate – who are state budget leaders and writers – for not only opening their doors to NCLCCA to listen and learn what high-quality licensed child care providers really need, but also for following up with real solutions, most of which require real funding to implement.  These five state lawmakers have been true child care champions throughout the state budget development process this year and last:

• Representative Dean Arp (R-Union)
  
• Representative Larry Potts (R-Davidson)
  
• Representative Donnie Lambeth (R-Forsyth)
  
• Senator Ralph Hise (R-Alleghany, Ashe, Avery, Caldwell, Haywood, Madison, Mitchell, Watauga, Yancey)
  
• Senator Jim Burgin (R-Harnett, Lee, Sampson)
  

Back to Top

Child Care State Budget Details:

The following child care funding and policy provisions in the state budget can be found in the Bill Text for Senate Bill 257 PCS (Budget Bill) on the pages referenced with each provision.

Pg. 255 – Subsidized Child Care:

• $97 million in recurring federal CCDF funding to increase child care subsidy reimbursement rates from 2021 market rates to 2023 market rates and implement a new statewide “rate floor” for all ages of children. (Example: The new rate floor for infants and toddlers should be $1400/month/child for licensed child care centers.)
• After the 2023 market-rate increase, in any county with a reimbursement rate lower than the statewide average market rate in the 2021 Market Rate Study, providers (centers and family child care homes) will see their rates increase by even more to the new statewide rate floor for each age group, which will help narrow rate gaps among counties that are far too wide.

Pg. 260 – Career-Ready Lead Teacher Academy Pilot Program:

• Appropriates $1.5 million in nonrecurring funds to implement the “Career-ready Lead Teacher Academy Pilot Program,” so that the two-to-three week training and credentialing academies are free for participants interested in entering the early childhood education field as a Lead Teacher, and those who go to work in a licensed child care program within three months of completing an academy and stay with the same program for a year will receive a state-funded $500 retention stipend.  
• Modeled after successful training/credentialing academies in Johnston and Wayne counties, the pilot and funding should create 10 additional academies across four regions of the state through collaboration between local Smart Start Partnerships and community colleges.  
  
• A progress report on the pilot program is due to the Joint Legislative Oversight Committee on Health and Human Services and the Fiscal Research Division by March 31, 2027, with any recommendations for program expansion; a final report with certain information requirements is due by December 31, 2027.
  

Pg. 262 – Provisional Early Childhood Credential for 16- and 17-year-olds:

• As a means to assist younger individuals with a career pathway to provide child care services, the budget directs DCDEE to establish a “Provisional Early Childhood Credential” for 16- and 17-year-olds with a requirement that they complete an approved early childhood education course offered through a public high school, Career-and-College Promise course, Intro to School-Age Care course, continuing education pathway (CEU) or Career-Ready Lead Teacher Academy. 
• Directs the Dept. of Public Instruction, Community College System, NC Center for After-School Programs and DCDEE to collaborate so that by March 1, 2027, child care health-and-safety trainings are embedded in the required courses through “micro-credentials” and available through DCDEE’s Moodle training platform.
  
• The Provisional Early Childhood Credential shall enable 16- and 17-year-olds to work in any out-of-school and summer programs, including those located at licensed child care facilities, as group leaders as defined in the child care licensing rules according to the following staff/child ratios and group sizes with a maximum group size of 25:
  
• 1/10 for a school-age group that includes a child 5 years of age
• 1/14 – 1/16 for a school-age group 6 years of age and older
• When a 16- or 17-year-old who has received a provisional credential reaches 18 years of age and has obtained a high school diploma or its equivalent, he/she is eligible to receive the full Early Childhood Credential from DCDEE (without any additional requirements) to enable him/her to be employed as a lead teacher in any licensed child care program.
  

Pg. 263 – Child Care Mental and Behavioral Health Services Funding: 

• Allocates $7.3 million in nonrecurring funds to the NC Partnership for Children (Smart Start) to expand mental and behavioral health services for children, families and staff in child care facilities and out-of-school programs, including on-site services and behavioral health supports.
• New funding has to “supplement,” not supplant existing Smart Start Partnership behavioral health spending.
  
• Any unused funding at the end of the fiscal year (June 30, 2027) will not revert back to the state’s General Fund, but will instead remain available exclusively for this purpose.
  
• A progress report is due on these expanded services to the Joint Legislative Committee on Health and Human Services by March 15, 2027 and a final report by Nov. 15, 2028.
  

Pg. 264 – Child Care Reforms/Expand Career Pathways for Child Care Center Administrators:

• Allows licensed child care centers to use the combined education and work experience of two staff persons to meet the requirements for Level II and/or Level II designation for the NC Early Childhood Administrator Credential for their program and receive the same Quality Rating Improvement System (QRIS) credit toward a star-rated license as the center would receive if the requirements were met by one staff person – as long as the following conditions are met:
• One of the staff persons must complete EDU 261 and 262 (Admin I and II) or the equivalent (as already designated by the Child Care Commission in Rules), or hold an associate degree or higher in business administration or a related field, or have at least two years of verifiable business or administrative work experience
• The other staff person must hold an associate or bachelor’s degree in early childhood education or child development, be responsible for the center's curriculum, program delivery, and compliance practices, and be physically on-site for at least the minimum number of hours required by the child care staffing requirements set out in Child Care Rules.
• Also allows an individual/staff person to earn the NC Early Childhood Administrator Credential without completing coursework in EDU 261 and 262 (Admin I and II) or the equivalent if/when the individual has an associate degree or higher in business administration or a related field, or two years of verifiable business or administrative work experience.

Pg.502 – Study Insurance Program for Child Care Providers:

• Provides $350,000 in nonrecurring funds to the NC Dept. of Insurance to utilize an actuarial, brokerage or consulting firm (or any combination thereof) to study the feasibility of establishing liability insurance coverage, including State-supported captive insurance, risk-pooling, joint underwriting association, join reinsurance, or other organizations for child care providers with a report due to the Joint Legislative Oversight Committee on General Government no later than May 1, 2027.
• This was a recommendation from a Child Care Insurance Workgroup report produced for legislators last year that was created in a 2025 bill (House Bill 412), due to NCLCCA’s request for help with liability insurance challenges being faced by the child care industry.  NCLCCA had a member and staff represented on the Workgroup that produced the report.
  

Other Budget Provisions Indirectly Impacting Licensed Child Care Providers:

• Public-school teacher raises: Average 8% raise (larger for early-career educators) and bonuses based on years of service, with a new base salary set at $48,000, aiming to make NC’s starting pay first in the south.  
• Personal-income tax: Repeals the previously enacted revenue-trigger reduction schedule and locks in a “set-rate glide path,” as follows: 3.99% in 2026; 3.49% in 2027 through 2029; 3.24% in 2030 through 2032, and 2.99% beginning in tax year 2033. A revenue-trigger mechanism can further reduce the rate in quarter-point increments toward a 2.49% floor. 
  
• Corporate-income tax: No legislative change; the tax remains on its existing statutory schedule. 
  
• Medicaid funding: Funds the program with over $1 billion in new net appropriations; the rebase (costs recalculation) adjusts for enrollment, service mix, and cost growth.
  
• Medicaid work requirements and oversight: NC Health Works implements new federal community-engagement (work) requirements and six-month eligibility redeterminations under federal Public Law 119-21 (from President Trump’s administration and Congress).
  

Back to Top