After Scare Over Delayed Federal Funding, State Tells Providers Payments are On the Way!
Licensed child care providers were given a real scare this week when they were notified by DCDEE via email around 5 o’clock on Jan. 14, that the state had not yet received federal funds to reimburse programs for December services for subsidized child care and, therefore, payments would be delayed. (The Division gave no indication for how long the delay would last.) Within an hour, NCLCCA had learned from our contacts at DCDEE and within Gov. Josh Stein's office that the governor, who was in Washington, D.C. advocating for additional Hurricane-Helene relief funding, was aware of the issue and its urgency and was planning to press key members of North Carolina’s congressional delegation to try to ensure that the funding came quickly enough to prevent significant harm to working families, children and the child care providers who serve low-income working families.
Fortunately, the state received the subsidy funding from the federal government the very next morning (on Jan. 15). In a follow-up notice emailed to licensed child care providers, DCDEE explained that they have the funding, but it will take several days for the payments to work their way through the system to provider bank accounts. (They said they expect providers to receive the payments the week of Jan. 19-23.)
NCLCCA is grateful for the efforts of Gov. Stein and his administration in the nation’s capital this week on behalf of licensed child care providers and for the part played by members of North Carolina’s congressional delegation to shake the funding loose and get it to the state quickly. We are also grateful for advocacy assistance on subsidy funding from our sister organization that is continuously working hard for child care providers at the federal level – the Early Care and Education Consortium (ECEC). NCLCCA is a member of ECEC and vice versa. NCLCCA is also proud of the relationships we have built within DCDEE leadership and the governor’s office - for both access and information during times like this. These are just some of the connections NCLCCA has fostered over time that make being a member of NCLCCA more valuable.
Why was there a delay & will it happen again?
The delay happened because the federal government has implemented new requirements for states in order to draw down federal subsidy funding. New “Defend the Spend” requirements were implemented on Jan. 5, and require states to complete a new mandatory field in the federal Payment Management System (PMS) when requesting a drawdown of funds, including the following information:
- Attestation that they have reviewed, made any necessary updates, and are implementing strategies and controls to identify fraud and ensure program integrity, including verification of child enrollment and attendance submissions.
- A strong justification for the use of funds that aligns with CCDF program purposes, that at a minimum includes a description or summary of expenses or activities, by CCDF expenditure category (i.e., direct services, quality activities, infant/toddler quality activities, administrative costs).
Because it’s a new requirement, states are not used to it, and with few details from the federal government, are doing their best to submit all of the necessary information in time to prevent disruptions in payments. It is an added administrative burden from the federal government, but without specifics to give states confidence that they know exactly what to send to justify and secure their funds.
We hope that North Carolina will not experience any significant subsidy reimbursement delays after this week, but we cannot be sure – nobody can. The situation this week certainly could have been worse, as it’s been widely reported that Defend the Spend requirements for FEMA funding have slowed federal Hurricane-Helene relief to North Carolina because of the added bureaucratic administrative burdens. That doesn’t necessarily mean that the same will happen with subsidy funding, but it’s a tumultuous, uncertain landscape with the current federal administration, regardless of which government program is in focus.
Origin of “Defend the Spend” & how it’s different from a funding “freeze”
New “Defend the Spend” requirements for child care subsidy funding are the result of a national scandal that erupted over the New-Year holiday after a YouTube personality’s video that alleged significant fraud relating to child care subsidies in one midwestern state went viral. Because the video attracted so much attention, even without substantiating evidence or a completed investigation, President Trump’s administration took action to implement Defend the Spend requirements for all 50 states. The Trump administration went even farther in the state that was the subject of the video by freezing federal subsidy funding there. Soon after, the president and his agency leader in charge of the federal subsidy program widened the funding freeze to four additional states, but not North Carolina.
Subsidy funding for North Carolina was not frozen. And DCDEE let providers know that the only official communications they had received from the federal government with regard to subsidy funding, to date, did not apply to North Carolina because our state reimburses providers based on attendance, rather than enrollment, and only after attendance records have been submitted. New federal Defend the Spend requirements, on the other hand, are in place for all 50 states and have been since Jan. 5.
NCLCCA remains hopeful that child care subsidy rules and processes in our state, along with other fraud detection and prevention measures, will shield providers and families in North Carolina from harmful subsidy funding disruptions, delays or funding freezes in the future. However, as the licensed child care provider community, we must remain vigilant and always prepared to take actions as a community and association to stem any threats that may arise in this terribly uncertain situation at the federal level of our government (not state level). Providers can be assured that NCLCCA will continue to stay in close contact with our federal advocacy partner (ECEC), state leaders and North Carolina members of Congress and do all that we can to protect our members and all licensed child care programs in our state. Stay engaged with us and spread the word because member support and involvement only make us better and stronger!
NCLCCA Heads to the Halls of Congress to Advocate for Timely, Adequate Subsidy Funding!
NCLCCA Executive Director Charles Hodges is heading to Washington, D.C. next week as part of a “fly-in” hosted by our federal advocacy partner, the Early Care and Education Consortium (ECEC) to do our best to protect and defend NC licensed child care providers and federal child care subsidy funding. Recent events related to child care fraud in one midwestern state have sparked significant scrutiny from both Congress and the Trump administration. In response, multiple congressional committees are moving quickly to develop legislation aimed at strengthening oversight and fraud controls in the child care system, including the child care subsidies program (the U.S. House Education & Workforce Committee, U.S. House Oversight Committee, U.S. Senate HELP Committee, and U.S. Senate Judiciary Committee).
Given the stakes for our industry, ECEC has quickly organized the in-person “fly-in” grassroots advocacy event and NCLCCA is grateful and anxious to participate. Without strong industry engagement, there is a real risk of long-term negative impacts on child care subsidy funding and policy direction. We will report on the next week’s trip in a future edition of The Voice. Additionally, we will call on you when opportunities arise where you may be able to use your voice and our tools to influence outcomes. Stay tuned, if/when you see an NCLCCA “Action Alert” be sure to respond in a timely manner, and spread the word! Thank you to our members, who are the reason we can do this important advocacy work.
Child Care Task Force Releases 2025 Year-End Report that Includes Top NCLCCA Priorities
Governor Josh Stein’s Task Force on Child Care and Early Education released its year-end 2025 report this week, which expounds upon six recommendations made by the Task Force in June and includes Work Group action plans to advance those recommendations, along with a tentative work schedule for the next 12 months (2026). The group’s recommendations from the June interim report included two of NCLCCA’s top priorities that have been on the association’s Agenda for more than a year:
- Free or subsidized child care for child care teachers/staff, and
- Higher subsidy reimbursement rates that include a new statewide rate floor
The year-end report includes a summary of the work of three sub-groups from the Task Force, including “opportunities for action” to turn the recommendations into results in the form of funding and/or policies. The three Work Groups are as follows:
- Finance and Funding Work Group;
- Workforce Compensation and Supports Work Group; and
- Child Care and Early Education for Public Sector Workers Work Group
NCLCCA President Dan Rockaway, who is a member of the governor’s Task Force, serves on the Workforce Compensation and Support Work Group. NCLCCA is thrilled to share that the action plan for this work group cites building “support for legislation for the North Carolina General Assembly’s short session [in 2026] that would establish a pilot to provide child care for child care professionals employed at licensed child care programs in North Carolina,” including designing a pilot, securing bill sponsors, and drafting and championing legislation (see page 19)!
You can also see the influence of NCLCCA’s participation on the Task Force in reviewing the group’s work plan for this year (see page 22), which includes examining trends in liability insurance challenges and expenses for child care providers. NCLCCA’s president raised the insurance issue with the Task Force and helped explain the seriousness and real-world impacts of the challenges. Another future topic for the Task Force raised by NCLCCA is mental health and burnout in the child care profession.
You can learn even more about the Task Force’s work and report in the excellent news article from EdNC included below in “Child Care in the News.”
The governor’s Task Force will continue to their work until March 9, 2027, unless otherwise amended by Gov. Stein. Their next report is not due until the end of the year (2026), but NCLCCA will keep our members and advocates updated about their meetings and activities.
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Child Care in the News
Governor Stein’s bipartisan Task Force on child care releases report calling for state subsidy floor, among other recommendations
EdNC, Jan. 15, 2026
“Those recommendations include setting a statewide subsidy reimbursement floor, offering non-salary benefits to child care professionals, and linking existing workforce compensation and support programs into a cohesive set of supports. Task force members are also exploring the possibility of creating a child care endowment fund, providing free or subsidized child care for child care teachers, and partnering with statewide public education systems to increase access to child care for public employees and students…” Read more HERE.
Child care shortage strains New Hanover County families, economy
WECT News, Jan. 15, 2026
“Child care challenges in New Hanover County are affecting families and the local economy as demand far exceeds available spaces…” Read more HERE.