Proposed CCDF Rule Could Further Weaken an Already Fragile Child Care System

Kristi Wilson has been working in the child care industry for 18 years and is currently the owner of Kristie’s Kiddie Korner in Whitehall, Montana, about a thirty minute drive from Butte. Wilson’s child care operation serves a total of 36 children in three classrooms, ranging in age from infants to five-year-olds, and she also provides after school care for older children.

In Montana, enrollment-based payments to child care providers serving subsidy-eligible families have been law since 2023. Since a provider’s fixed costs related to staffing and space don’t decrease if a child is absent, such a change can provide much-needed financial stability and predictability by preventing programs from losing funding due to occasional absences. I recently talked with Wilson about how that change has impacted her child care business.“Being paid by enrollment has definitely improved financial stability. We have a lot of scholarship kids and being paid for their enrollment is how we bill everyone else,” says Wilson.

A 2024 rule issued during the Biden administration made enrollment-based payments to providers participating in the Child Care and Development Fund (CCDF) a requirement for the whole country. The rule also included other policies to improve financial stability for providers and improve affordability for families, such as capping family copayments at seven percent of household income for subsidy-eligible families and providing some services through grants and contracts to increase the supply and quality of child care for children in underserved areas, infants and toddlers, and children with disabilities.

The Biden-era rule has been partly responsible for many of the recent positive changes in child care policy in states across the country that seek to address issues of child care affordability and accessibility. New America’s New Practice Lab recently analyzed how states are transitioning toward paying providers based on enrollment rather than attendance. A review of the 2025-2027 CCDF State Plans, appendices, waivers, and other publicly available documentation revealed that 24 states are already paying providers based on enrollment. In January 2026, however, the Trump administration published a notice of proposed rulemaking (NPRM) for CCDF that seeks to rescind many of these requirements.

Wilson emphasized that paying providers based on children’s attendance fails to account for the financial realities of running a child care operation: “We have to have a certain amount of staff even when the kids don't show up. If the state wasn't paying by enrollment, then I don't know how we would be able to sustain that.” When asked about the possible consequences of a decision to revert back to attendance-based payments, Wilson made it clear that she would have to ask her families using subsidies to make up the financial difference: “In order to retain teachers and stay open, I would have to go back to the families [for payment]. I don't know that the families would pay or could pay.”

Providers across the country have recently expressed similar sentiments to Wilson’s about the proposed changes. A Nebraska provider noted that, due to holidays, vacation time, and children’s absences, she would only be paid for 18 child care days in December under an attendance-based payment versus the 23 days she would have been paid for by private-paying families. Such a system provides financial incentives for providers to enroll more private-paying families at the expense of families with low incomes who rely on child care subsidies to afford care. And a provider in rural West Virginia expressed concern that she might be forced to close her center altogether if the state returns to attendance-based payments, underscoring the financial stability offered by enrollment-based payments.

All states applied for and received two-year waivers from the Department of Health and Human Services to have additional time to implement the requirements of the 2024 rule, a testament to the extensive system changes necessary to make the requirements a reality, especially in light of the absence of additional funding that accompanied the rule. Several states have recently made legislative changes to comply with parts of the 2024 rule. For example, Alaska lawmakers enacted legislation to limit family copayments to no more than seven percent of family monthly income while Maine legislators passed a law to increase child care supply through the use of direct contracts with providers.

Currently, a total of 29 states limit copayments to seven percent or less, a major improvement for families living below the poverty line who spend an average of 36 percent of their annual income on care. As of December 2024, there were already 10 states using grants or contracts for infant and toddler care, nine states using grants or contracts to serve children in underserved areas, and six states using them to provide care for children with disabilities. Changes such as these are often the result of years of work and significant financial expenditures, so it’s unclear what states would decide to do if the proposed rule goes forward and the previous requirements become voluntary.

Regardless of the rule that’s ultimately finalized by the Trump administration, it’s important to remember that the proposed rule repeatedly notes that states will continue to have the option to adopt policies based on their own assessment of what works best for children, families, and providers. States that have enacted a seven percent cap on family copayments or established an enrollment-based payment system, for example, would be free to continue those practices should they choose to do so. Comments on the proposed rule are due by February 4 and can be submitted here.