(The Center Square) – As ongoing controversy persists over alleged fraud with Department of Children, Youth & Families Working Connections Childcare Program, Gov. Bob Ferguson’s proposed 2026 supplemental operating budget could increase the reimbursement rates for licensed home-based child care providers by 30%.
Currently, the rates are tied to a 2021 market survey conducted by DCYF, but was supposed to increase after the state Legislature that same year enacted the Fair Start for Kids Act. The law included an eligibility expansion of DCYF’s child care program, which also increased reimbursement rates for childcare providers.
However, last year the Legislature postponed eligibility expansion, as the policies were contingent on appropriations from the Legislature. Additionally, much of the funding originates from the state tax on the income derived from the sale of capital gains, as well as federal funds. The capital gains tax revenue has varied widely by year, with more than $800 million in 2022 but only roughly $400 million the following year.
Overall, the bill intended to spend $1.1 billion in additional funds on DCYF’s childcare subsidy program. The childcare providers are reimbursed through DCYF’s Social Service Payment System.
Nevertheless, the Legislature implemented the reimbursement rate change to achieve the 85th percentile of the private market rates according to the Market Rate Survey conducted by DCYF. Prior to the 2021 law’s passage, providers were typically reimbursed up to the 65th percentile so that was a near 30% increase.
However, a 2024 DCYF report noted that the state is failing to meet that goal in many instances due to private market rate increases since 2021, which the state has yet to adjust in its reimbursement rates.
“Child care providers of all types reported increases in the rates they charge families for their services in nearly every geographic area and child age category,” the report states. “Even with private pay and subsidy rate increases, we know that families cannot afford the true cost of quality care. While subsidized child care rates have increased substantially in recent years, they have in most cases fallen behind the increases providers report in the private market.”
Last legislative session, Sen. Emily Alvarado sponsored Senate Bill 5500, which would have required the state to achieve “at a minimum” the 85th percentile of market based on the most recent market rate survey, while calling on DCYF to review and make recommendations on rate enhancements.
Ferguson’s supplemental budget proposal calls for raising the rate to 75th percentile for child care centers while maintaining 85th percentile rate for licensed family home providers. His budget also would place a soft cap on the number of children allowed into the program at 33,000, which would reduce $217 million in spending on the program over the biennium. The number of children last year was 51,000, but is expected to decrease significantly this year.
The Center Square reached out to DCYF to discuss program spending on historic reimbursement rates and any stances the agency has on ongoing legislation, but did not receive a response by time of publication. The Center Square also requested an interview with Sen. Alvarado to discuss SB 5500, but did not receive a response.
