The U.S. Department of Health and Human Services currently pays childcare centers based on their total enrollment. A proposed federal rule would change those payments to be attendance-based instead.
Kentucky Youth Advocates policy director Sarah Vanover says childcare centers operate on slim margins and changing their pay based on fluctuating attendance could hurt their bottomline.
“The childcare provider still has to pay the mortgage, and still has to pay the utilities, and still has to pay the teacher, and you don't get to skip on those because two children are absent from the class,” Vanover said. “And you would never, ever see somebody holding back funds from a public school based on the number of children that were absent.”
The rule would also remove a cap on the amount parents pay for their childcare copayments, according to the federal register. A 7% income cap was put in place by the Biden administration in 2024. Vanover said the reversal would put more pressure on families as they grapple with affordability.
There are more than 34,000 children enrolled in the childcare subsidy program, according to Kentucky Youth Advocates.
“They may not have enough from their paycheck to be able to pay for that, and then we lose an adult from the workforce, and that family may need to take out other government subsidies like SNAP and TANF (Temporary Assistance for Needy Families) in order to care for their family,” she said.
The Trump administration says the changes are meant to stop fraud. It’s part of a larger push after right-wing YouTube influencer Nick Shirley claimed he had found evidence of fraud at Minnesota daycare centers run by Somali immigrants, though local reporting suggests his claims are unproven.
Vanover says Kentucky has a low rate of fraud, and has strong systems in place to detect it.
“Kentucky not only has federal audits, but it has state audits,” she said. “So we have different sets of eyes looking at it. We randomly pull attendance records for centers to make sure that children that are getting that subsidy are still in attendance.”
Vanover says they’re still waiting to see if an announced funding freeze would impact childcare programs in Kentucky. The federal government is asking for extra verification before releasing money to states, and has attempted to freeze funds completely in states including California, Colorado, Illinois, Minnesota and New York. A federal judge blocked the funding freeze last week.
“The Division of Child Care in Kentucky is waiting for more information to find out what additional documentation they would need to provide,” she said. “But so far, that information hasn't come down. There's kind of a feeder system that happens.”
Vanover says KYA and other policy groups expect bills to be filed this legislative session that would address their recommendations for childcare in Kentucky. At the state level, it’s still required that providers be paid based on enrollment.
“Now that that's optional, we need state legislators to know that we want to keep it in our regulations,” Vanover said.
The proposed federal rule changes are subject to a 30-day public comment period before they can move forward, set to end Feb. 4.
