Budget delivers child care subsidies without defunding school vouchers

North Carolina’s new state budget grants the biggest request from a bipartisan task force on child care: more money for the state’s child care subsidy program, including a first-ever statewide floor on what providers get paid.

The spending plan — passed by lawmakers July 2 in a veto-proof, bipartisan vote and signed into law by Gov. Josh Stein July 7 — directs $97 million in recurring federal funds to boost reimbursement rates for providers who serve children through the subsidy program, which helps low-income working parents afford licensed care.

The new floor means providers in every county will be paid at least a statewide minimum rate for subsidized care, ending a system in which rural providers often earned far less than their urban counterparts for the same work. 

The waitlist for subsidized care ballooned from about 2,100 children in July 2024 to more than 15,500 by the end of 2025. Budget writers say the new money is meant, in part, to shrink that list.

In signing the budget, Stein cited “meaningful investments in… childcare” among the reasons for his approval, calling them “real wins, worthy of celebration and worthy of my signature.”

Expanding subsidized child care topped the list of recommendations from the NC Task Force on Child Care and Early Education, the bipartisan group co-chaired by Sen. Jim Burgin, R-Harnett; and Democratic Lt. Gov. Rachel Hunt.

Lawmakers funded the expansion entirely with federal block grant dollars rather than new state spending, without touching the Opportunity Scholarship program. House Democrats had proposed defunding the voucher program by nearly $400 million to pay for child care subsidies. But the final budget fully funded the school-choice program.

Not everyone sees the subsidy expansion as a fix, however. Brian Balfour, senior vice president of research at the John Locke Foundation, argued the approach treats the symptoms of the child care shortage rather than its causes.

“To make child care more affordable, the task force should be evaluating what is making child care so unaffordable in the first place, and unravel those policies,” Balfour said. “It’s basic Econ 101: Price rises when demand increases and/or supply is restricted. In this case, government subsidies inflate demand for child care while mountains of red tape restrict the supply.”

“Instead of addressing what is causing child care to be so expensive in the first place,” Balfour added, “the task force is looking at band-aids to get more children into the all-too-expensive system, using policies that double down on what is driving up the price in the first place.”

The budget also picks up several pieces of a bipartisan child care bill that Carolina Journal covered this session, sponsored by Rep. Dean Arp, R-Union, among others. It funds mental and behavioral health services in child care settings, fast-track training academies to move new teachers into classrooms in a matter of weeks, and a study of whether the state should help child care providers obtain affordable liability insurance. The insurance report is due to lawmakers by May 2027.

The budget loosens the rules, too. Licensed centers can now meet the state’s administrator credential requirement with two staff members instead of one — pairing someone with business experience alongside an early childhood educator — and earn the same credit toward their star rating. The flexibility will be useful since only programs rated three stars and above qualify for the higher subsidy rates and the new floor.

That’s a change some providers have sought for years. Carolina Journal reported in 2022 on Mary Myers, a 50-year veteran of the industry who petitioned state regulators to let experience stand in for degree requirements.

“I’d rather have a teacher who’s got the experience and know-how than one that’s got all the education in the world,” Myers said at the time. The Child Care Commission denied her request — but four years later, lawmakers have delivered a version of it.

The task force itself grew out of an executive order from Stein in March 2025. Advocates have long argued the state’s child care shortage is an economic problem as much as a family one, costing North Carolina billions annually in lost economic activity.

“Budget delivers child care subsidies without defunding school vouchers” was originally published on www.carolinajournal.com.