State policymakers remain at the forefront in shaping and maintaining child care systems that allow families to access high quality and affordable care and ensuring child care programs are supported. This blog offers a first look at the state legislative landscape in 2026, including the how states are preparing for challenges in upcoming budget years and how Governors are proposing to expand, sustain, or contract child care and early learning funding in their proposed budgets.
States are navigating an unusually complex fiscal environment in 2026. Revenue growth has slowed compared to prior years, employment gains have flattened, and policymakers are weighing the fiscal effects of tariffs and sweeping federal policy changes. States need to consider how H.R. 1 (also referred to as the One Big Beautiful Bill Act or Working Families Tax Cut) implementation will impact their budgets, as the new federal law includes tax code revisions, Medicaid cuts, and cost shifts to states for SNAP. These pressures and uncertainty are forcing difficult trade-offs as legislators balance competing priorities over the next two years.
There are, however, signs of budget stability in parts of the country. According to the National Association of State Budget Officers, general fund revenues for fiscal year 2025 exceeded original estimates in most states, and many increased their rainy day fund reserves, a trend expected to continue into fiscal year 2026. Washington recently projected revenue collections through 2029 would rise modestly compared to earlier forecasts, and Illinois reported an upward revision from its October 2025 forecast, though still below enacted budget levels. Pennsylvania, Washington, and Michigan have considered tapping rainy day funds to close emerging gaps which signal that reserves built during stronger revenue years are now becoming part of the fiscal strategy.
As Governors begin outlining their child care and early learning funding intentions for FY 27 and beyond, they reflect a sharply divided fiscal landscape. Some states are retrenching in response to slower revenue growth and mounting budget pressures, while others are sustaining or even expanding investments as part of broader workforce and economic strategies. The result is a patchwork of approaches that underscores how differently states are prioritizing child care and early learning funding in a tighter fiscal environment.
Using MultiState's state revenue outlook, states have been organized into two groups: states that are facing challenging or conditional short-term fiscal outlooks and states that are facing stable short-term fiscal outlook as of December 2025. This provides some context on the overall budget health and fiscal outlook of the state when considering child care and early learning funding levels included in Governors' Executive Budgets.
Washington State: Governor Bob Ferguson is considering what amounts to one of the most significant ECE pullbacks seen so far. The Department of Children, Youth, and Families’ proposed supplemental budget includes a “soft cap” of 33,000 households on Working Connections Child Care, a change that would reduce funding by $217 million and could result in roughly 14,000 families losing access to subsidies . The proposal also lowers subsidy rates for child care centers from the 85th percentile to the 75th percentile of market rates, cutting an additional $41 million, though licensed family home providers would remain at the 85th percentile under the state’s collective bargaining agreement. Professional development funding for providers would be reduced by 50 percent, a $2.1 million cut. Taken together, Governor Ferguson’s budget signals broad retrenchment for Washington’s child care system that would affect family access, reimbursement rates, and workforce supports and quality.
California: Governor Gavin Newsom’s proposed budget does not include funding for 44,000 previously planned subsidized child care slots in FY 27. Those slots were slated to include 12,000 for General Child Care and Development programs and 32,000 for Alternative Payment Programs. While existing programs are not being cut outright, the absence of these planned expansions effectively delays progress toward expanding access in a state where demand for affordable care continues to outpace supply.
Colorado: Governor Jared Polis requested decreases federal Child Care Development Fund appropriations for certain programs by $0.9 million in FY 26 and $4.5 million in FY 27 and ongoing. However, Gov. Polis increased Universal Preschool funding by $14.3 million for the 2026–27 school year to ensure all enrolled children are served in full-day programs. Notably, $10.5 million of that increase is expected to come from Proposition EE, a voter-approved nicotine and vape tax, with an additional $3.8 million from the General Fund. This approach highlights the importance of alternative, dedicated revenue streams in sustaining ECE investments.
Maryland: Governor Wes Moore has recommended sustaining $414 million for the Child Care Scholarship Program, maintaining a critical support for working families. His proposal also preserves $10 million for the Child Care Capital Support Revolving Loan Fund, which provides no-interest loans to providers for capital expenses. By maintaining both operating subsidies and facilities support, Maryland is prioritizing stability for families and providers amid broader fiscal uncertainty.
Pennsylvania: Governor Josh Shapiro’s proposal adds $10 million for recruitment and retention grants for providers in licensed child care centers that participate in Child Care Works (the state child care subsidy program) , bringing the total proposed to $35 million in the budget year. This additional $10 million is expected to increase bonuses from $450 to $630 per provider. The budget also includes an additional $7.5 million for Pre-K Counts, $2 million for the Head Start State Supplemental program, and slight increases in Child Care Assistance and Child Care Services.
Illinois: Governor Pritzker’s proposed FY 27 budget provides the first full year of operational funding for the new Illinois Department of Early Childhood (IDEC), consolidating many early childhood programs. The budget maintains a $748 million investment in the Early Childhood Block Grant to support access to high-quality preschool for children up to age three. Following recommendations from the Early Childhood Funding Commission, the budget includes $200 million for Early Childhood Workforce Compensation Grants to stabilize child care providers and strengthen quality. Additionally, the budget provides a $55 million increase in additional funding for the Child Care Assistance Program (CCAP) to support services for 155,000 Illinois children and rate increases for home-based child care providers.
Massachusetts: Governor Maura Healey’s proposed Massachusetts FY 27 state budget allocates $1.9 billion to the Department of Early Education and Care, a 10.6 % increase over FY 26 levels. Commonwealth Preschool Partnership Initiative (CPPI) received a recommended $16.5 million increase over the FY 26 amount, totaling to $37 million for FY 27. Gov. Healey funded the Child Care Financial Assistance Program to maintain the current caseload and anticipated increases for some families in prioritized populations, but not all eligible families. The Commonwealth Cares for Children (C3), which provides monthly funding to support child care providers’ day-to-day operational and workforce costs, was level-funded at $475 million.
New York: Governor Kathy Hochul’s Executive Budget proposes a $1.7 billion increase in child care and early learning funding, bringing total FY 27 child care and Pre-K investment to $4.5 billion. The proposal includes $500 million to fully fund the first two years of Universal 2-Care in New York City and $1.3 billion for a statewide early education strategy, alongside a commitment to make Universal Pre-K available to every four-year-old by 2028.
New Mexico: Governor Michelle Lujan Grisham’s FY 27 executive budget recommends $606.4 million in total spending for New Mexico’s first-in-the nation plan to provide no-cost child care for every family in the state regardless of income ($160.6 million directly for Universal Childcare). Additional investments in early childhood education include $7.5 million to expand prekindergarten by 500 additional slots.
Arizona: Gov. Katie Hobbs included $44.8 million ongoing from the General Fund to support the Child Care Assistance program for the FY 27 budget. The budget document notes that this funding is required to ensure that children within the program continue to receive child care and protects the current 40% quality enhancement rate that incentivizes high-quality programs.
Kansas: Gov. Laura Kelly’s budget provides the resources necessary to subsidize child care for an average of 15,632 children each month in FY 26 and 16,620 children each month in FY 27, a level consistent with FY 26. This budget includes the funding and transfer of personnel positions to the new Kansas Office of Early Childhood, created by consolidating child care and early education-related programs from different state agencies.
Kentucky: Gov. Andy Beshear’s biennial budget provides a planning year in FY 27 for school districts and the Department of Education to prepare for the initial phase of Pre-K for All, preschool for four-year olds. The Governor then recommends $40.5 million in FY 28 which is estimated to provide funding for an additional 9,638 four-year olds to attend Pre-K. There is also a $10 million line-item to establish a data system to support implementation of the program. Funding to support the Pre-K for All expansion would come from the state’s sports wagering excise tax. This has been a long-standing priority for the Governor.
South Carolina: Gov. Henry McMaster’s Executive Budget includes $9.9 million in surplus EIA (Education Improvement Act) revenues for the Office of First Steps to expand enrollment to children whose annual family income is under 300% of the federal poverty guidelines. By expanding eligibility, more families would be able to access and use one of the 1,899 underutilized slots available at private centers that participate in the program.
Virginia: Virginia’s Executive Biennial Budget redirects nonparticipation savings from the Virginia Preschool Initiative to the Child Care Subsidy Program. This shift in funding is expected to provide approximately 6,745 additional slots for eligible children. There is also a non-recurring $1 million line item to be used as one-to-one matching funds to incentivize employer contributions to support employee child care costs.
Delaware: The proposed FY 27 Operating Bill suggests allocating over $21 million to implement Child Care and Development Fund federal program changes, noting that if the changes to the CCDF 2024 Final Rule are reversed, the funding will be directed to support adjustments to the income-eligibility thresholds for the state’s Purchase of Care program (child care subsidy).
Michigan: Gov. Gretchen Whitmer’s recommended budget continues support for Child Care Subsidies, with $202.5 million in general funds. The budget includes an additional $40 million in caseload adjustments.
Mississippi: Gov. Tate Reeves proposed appropriating $1 million to establish the ‘Tri-Share Model’ in Mississippi. In the Executive Budget, he highlighted that this model would support working families, ease the transition from public assistance, improve employee retention and performance, and ultimately boost workforce participation and long-term economic growth in the state.
State budgets can be a long and complex process, so some states are taking or considering innovative approaches to ensuring child care and early funding does not regress in their state. Children’s Funding Project highlighted Virginia and Nebraska that are looking to raise general revenue for child care and early learning programs through dedicated funding streams. Virginia legislature proposed a millionaires tax, which would dedicate 30% of the revenue to child care. Nebraska proposed legislation that would increase the tax rate on certain cash-based gaming devices and remit 68.95% to the Nebraska Child Care Aid Fund. Indiana is planning to tap its Financial Responsibility and Opportunity Growth (FROG) Fund to support child care funding, after the state announced it will be unable to provide new vouchers until 2027. The fund currently holds approximately $300 million, although the exact amount that will be used to support child care programs has not yet been determined. Like Virginia, Washington state lawmakers are considering a millionaires tax. This tax would impose a 9.9% income tax on household earnings over $1 million (which is expected to impact less than 1% of residents) but raise roughly $3.7 billion annually to shore up previous and future early learning budget reductions.
States play a critical role in shaping the policies that influence child care access, affordability, quality, and long-term stability. Child Care Aware® of America (CCAoA) urges state policymakers to pursue solutions that ensure every family in the United States can access high-quality, affordable child care.
The start of 2026 legislative sessions emphasizes how deeply intertwined child care and early learning funding is with states’ economic futures, yet approaches vary dramatically depending on fiscal conditions, political leadership, and long-term strategy. In some states, governors are advancing bold investments, new revenue streams, and system-building reforms. Others are moving in the opposite direction, leading to delayed expansions, tightened eligibility, or significant funding reductions. The assortment of responses outlined in this blog underscores a growing patchwork of access and opportunity for families, providers, and children across the country. While many leaders continue to frame child care as essential economic infrastructure that supports workforce participation and business growth, their sustained commitment will be tested as states finalize FY 27 budgets in a challenging fiscal environment and a period of federal uncertainty.
States cannot do this work alone. Addressing the child care crisis will require sustained and robust public investment at both the state and federal level. Public investment coupled with policies that support teachers, strengthen health and safety, and invest in program quality are necessary for the system’s long-term viability to provide affordable, accessible and high-quality programs to all families.
Interested in tracking state policies across the nation? CCAoA has developed a comprehensive, interactive dashboard that allows early care and education (ECE) advocates to learn how states are building accessible and affordable child care systems. Check out our State Policy Dashboard to stay informed all year!