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DHS withdraws and reconsiders child care quality rules as subsidy costs surge; agency proposes $240M sustainable target
Summary
DHS informed lawmakers that recent changes to subsidy eligibility and the child care quality rating system, together with the expiration of some federal funds, expanded subsidy enrollment and sharply increased program costs.
Department of Human Services officials told the Appropriations and Budget Committee that recent rule changes to child care quality ratings, expanded subsidy eligibility and the end of some federal funding combined to increase program costs and enrollment.
Cartmell said the state broadened subsidy eligibility in 2019 and later overhauled the quality rating system implemented in early 2023. He told the committee the quality rating changes — including removal of a national accreditation requirement in 2022 and later adjustments — shifted many providers into higher rating tiers and, together with an estimated increase of roughly 10,000 children on subsidy, added nearly $100 million annually in program costs.
Why it matters: Childcare subsidy and provider rates comprise a major recurring expense. Cartmell said DHS withdrew proposed emergency rules in mid‑September to solicit more stakeholder input and to ensure any rule changes would accomplish intended goals.
Key points from testimony and questions
- Quality rating and accreditation: DHS said the rules had required national accreditation for the highest rating; after implementation many providers moved from the middle tier into the top tier. Cartmell said the agency is working with accrediting bodies and will allow providers a 60‑day period to show accreditation or a pending application and thereby retain rating status while securing full accreditation.
- Cost estimates and a sustainable target: Cartmell told the committee DHS estimates a sustainable annual subsidy budget of about $240,000,000; Representative Schreiber clarified the state share (maintenance of effort) in that total is approximately $18,000,000.
- Market rate study and provider rates: DHS said it did not plan immediate changes to the existing market rate or the $5 add‑on directed by the Legislature, pending further data on provider supply and margins; officials said it could take six to ten months to understand the full market effects of recent rule and funding changes.
- Process and program roles: Cartmell emphasized DHS has three distinct responsibilities — administering subsidy eligibility, licensing for health and safety, and driving quality — and the agency must balance those roles when designing rules.
Discussion versus decisions
The committee received the agency’s assessment and asked for follow‑up; no committee vote or rule adoption occurred during the hearing. DHS said it will continue stakeholder outreach and provide updated financial projections.
Ending
Cartmell said the emergency rules were withdrawn to allow a more measured stakeholder process and to avoid unintended budget or market‑supply consequences.
