Colorado officials warn federal CCDF restriction could force program cuts; lawmakers press department on CCAP wait list

Dr. Lisa Roy, executive director of the Colorado Department of Early Childhood, told the Joint Budget Committee on Jan. 13 that the department received a Jan. 6 notice from federal partners indicating funding from the Child Care and Development Fund (CCDF) would be restricted, and that on Jan. 9 a court granted a temporary restraining order preventing the Administration for Children and Families from freezing funds while legal proceedings continue. Roy said the department is "doing all that we can to preserve this important resource to serve children and families."

Chief Financial Officer Jeanne Stefanik told the committee the department's preliminary estimate of the fiscal year shortfall, should federal reimbursements be withheld, would be "approximately $91,000,000 over the remainder of this fiscal year," and that program impacts could appear as soon as Jan. 31. She noted related changes to the federal Payment Management System (PMS) require extra documentation to draw down funds and add uncertainty to cash flows.

Lawmakers pressed officials on how the state will use fund balances and why counties continue to operate CCAP freezes and wait lists while the department is carrying roll‑forward balances. Representative Mike Brown said he was "not convinced based on your responses ... that you have any sort of plan to end the CCAP freeze in my county," and cited roll‑forward balances of approximately $51 million in the current fiscal year and $34 million next year. Stefanik and other department officials responded that federal rules, uncertainty about federal reimbursement and set‑asides in CCDF constrain immediate use of those balances and that the department must model long‑term sustainability across varied programs.

Sarah Dawson, director of the Colorado Child Care Assistance Program (CCAP), provided technical detail on why the department is estimating a drop in caseload: widespread freezes and wait lists cause attrition so that as families roll off the program there are fewer new families entering. Using recent utilization modeling the department projects serving roughly 21,200 children in 25‑26 down from about 27,600 in 24‑25 if current freezes remain in place. Dawson also explained that CCAP eligibility thresholds vary by county (examples cited: 185%, 225% and 265% of federal poverty level depending on local self‑sufficiency parameters), and that continuous eligibility rules and provider rate increases driven by a federal equal‑access compliance finding have materially raised program costs.

Committee members pressed for numbers about what it would take to eliminate wait lists. Stefanik said allowing everyone on the current wait list back into CCAP with current rates would be a substantial cost — the department estimated roughly $105 million to enroll those currently waitlisted — and that increases required by the alternative rate methodology would raise per‑child costs further. Several legislators said the true cost to open CCAP to all eligible families could be materially higher and asked for more precise scenarios showing the fiscal effect of 10% versus 7% family co‑payments and the cost of eliminating local wait lists.

Dawson said some federal unfunded rules from 2024 were mirrored in House Bill 24‑1223 and that the Administration for Children and Families had proposed a 2026 rule package that may rescind those 2024 requirements. The department asked the General Assembly to consider legislative language that would let Colorado align state statute with any final federal rollback so the state would have flexibility depending on federal action. The department said it is requesting statutory changes and technical clean‑up so it will not be automatically required to implement costly provider‑payment policies if the federal government rescinds the corresponding rules.

What happens next: the committee requested more granular cost scenarios from the department showing (a) the amount of general fund required to return CCAP to serving 9–11% of the eligible population, (b) the cost to eliminate the wait list under the 10% co‑pay and under a 7% co‑pay, and (c) clearer tables reconciling caseload forecasts with fund balances. The committee also continued its review of supplemental budget requests and staff analysis of statewide fiscal pressures.

Evidence and context: the department cited the Jan. 6 federal letter and the Jan. 9 temporary restraining order; Stefanik gave the $91 million shortfall estimate and described changes to federal PMS drawdown rules. Committee votes on related budget items continued later in the day during JBC supplemental review.