Opinion: The New Year’s Child Care Freeze: A Primer

A version of this essay originally appeared on Elliot Haspel’s Substack The Family Frontier. 

By now, you may have seen the news that the Trump administration is ringing in 2026 by freezing all federal child care funding to the states and implementing new administrative hoops for states to jump through in order to draw down any funding. There’s a lot going on here, and it’s complicated, so I thought a primer would be helpful to get everyone on the same page.

How did this all start?

This story exploded over the past week thanks to a viral video by conservative YouTube personality Nick Shirley. Shirley claimed that a handful of child care centers, primarily run by people of Somali heritage, were running fraudulent operations with no kids inside. It may not shock you to hear that these assertions are exceptionally shaky and disputed, but the damage was done: the video has been viewed over 100 million times, and was amplified by powerful figures like Elon Musk and Vice President JD Vance. (Update: Since Shirley’s video went viral, The Minnesota Department of Children, Youth, and Families conducted compliance checks on nine child care centers in the video and confirmed that they were “operating as expected,” and that children were present at all but one, which wasn’t open for families during inspection.)

What Shirley seems to be doing is trying to make new hay out of an old story. There were allegations of substantial child care fraud in Minnesota back in 2019. A report that year from the state’s Office of the Legislative Auditor found that fraud was nowhere near the epidemic levels being claimed, but that there were significant weaknesses in the state’s anti-fraud controls. That mini-scandal helped lead to changes in leadership at state agencies, new legislation to tighten anti-fraud measures around child care subsidies, and increased oversight from the federal Administration for Children and Families including an audit launched in 2023 under the Biden Administration. In short — much like the Feeding Our Families food assistance fraud ring which began to be broken up years ago and has already led to dozens to criminal charges — this is being dredged up and repackaged in service of political aims.

Alas, those facts don’t seem to matter much. I’ll leave it to others to unpack the racism and hypocrisy, because motivations or pretext aside, the Administration is acting the way it’s acting.

What does the funding freeze mean in practice?

I need to get a bit technical for a moment. The main federal child care funding source is the Child Care Development Fund, or CCDF. The way CCDF money actually flows from federal government bank accounts to state government bank accounts (which states then tap to issue monthly payments to providers for each child that is enrolled in the state’s subsidy system) is through the U.S. Department of Health and Human Services’ Payment Management System, or PMS. States essentially submit regular requests to draw down money that has been allocated to them via PMS, the request is approved, and the bank transfer occurs. What HHS is saying they are going to do is put new steps in place between the request and the disbursement.

We have some idea of what this may look like, because earlier in the year HHS did a similar thing for Head Start grantees back when DOGE was busy DOGE-ing. Here is a relevant section of a webinar held for Head Start grantees:

In the announcement, it was shared that the payment management system, which was also known as PMS and used by recipients to request a drawdown of their awarded funds will be implementing a new mandatory field at the sub-account level. This new mandatory field requests a payment justification explaining the purpose of the requested funds. To support this request the Administration for Children and Families has asked that all requests for federal funding specifically outline the purpose and the use of the funds as they will now be made public in an effort to promote transparency and accountability.

To receive an approval of your payment requests, recipients will be required to summarize the use of the funds in alignment with their approved funding requests. If these approved activities or the use of the funds should be related to what has already been awarded through your baseline application, your continuation application, or any amendment request that has been approved, amendment requests may come in the form of a budget revision, a one-time supplement or a carryover.

Recipients are to provide short summaries outlining the purpose of the funds and include details for each cost category as provided on your notice of award. Just as a quick, gentle reminder, your notice of award is released in grant solutions to your assigned point of contact. One thing to note is that any failure to provide proper descriptions with your payment request may result in significant approval delays.

If your eyes haven’t glazed over reading that, here’s the takeaway: it’s a lot more work for state agencies, and a lot more opportunities for the Administration to say “no.” And this was just for Head Start, which is a relatively easy program to get one’s hands around because the money just flows from the federal government to Head Start sponsors, of which there are only about 1,600 nationwide. Child care subsidies flow from the feds to states, and from states through families to a myriad of private for-profit and non-profit child care programs, constituting a network of tens of thousands of end users. And state agencies that oversee child care are already stretched thin meeting existing verification and compliance standards!

What are the potential consequences?

In a word: delays. Delays in drawing down funds are going to lead to delays in states getting payments out the door (something many states already struggle with) which are going to lead to child care programs unable to make payroll or pay rent, which are going to lead to programs limiting or even ending operations. This isn’t hypothetical: During the pandemic, many states struggled to get aid out the door to child care providers, and providers and families suffered as a result. We also saw what can happen when, in 2023, Illinois struggled with major payment delays:

CHICAGO — Some Illinois childcare providers have been forced to close their doors after they did not receive their paychecks from the state.

Childcare workers across the state are still waiting for their monthly paychecks, which they should have received at the beginning of January.

But 19 days later and many are unable to pay bills and are closing their doors until that money comes in.

“I got a license through the state of Illinois to be a childcare provider and take care of children and help families in need,” Kandanise Ramseur said. “And now I’m in need.”

Similarly, the Minnesota Reformer cited remarks from Minnesota center director Amanda Schillinger, “who said that her center will shut down if it loses the 75% of children it cares for whose families receive government help for child care.”

I wrote the following on X to explain in more detail what we could see:

1) Most child care programs operate on shoestring budgets (child care is a necessarily expensive service to provide because child:adult ratios are kept low, so fixed staff costs are very high despite educators barely making above poverty wages). Any extra delay in payments can easily create a fiscal crisis where programs are unable to make payroll, pay rent, etc., and that can lead to service pauses / closures — we saw this happen during the pandemic when states struggled to get PPP and CARES Act funding out the door.

2) Programs that take kids using child care subsidy don’t *only* serve low-income kids. Many serve families across the income spectrum, so a center may have everyone from grocery store stockers to heart surgeons relying on them — which means disrupting service is going to have negative ripple effects up and down the economy, and across all sorts of jobs we were calling essential just a few years ago.

3) Though this all started with a focus on one community, families throughout the country rely on child care subsidies — in red states and blue, urban and rural and suburban areas, farmers and miners and factory workers alike. Weakening America’s already-neglected child care system will hurt America’s families. 1.4 *million* kids receive subsidies.

4) This isn’t even just about the youngest children — federal child care funds also support hundreds of thousands of school-aged kids in affording after-school and summer care, and therefore also impacts the viability of after-school and summer programs.

Happy New Year to America’s families!

What can be done?

In case this post feels too dispassionate, let me be clear: I’m furious. We’re watching one of the most objectively corrupt Administrations in American history use a YouTuber’s crappy excuse for an exposé as part of a larger effort to demonize a particular immigrant group — and now they are going to punish millions of American families across the country who have done nothing wrong but are collateral damage in an attempt to deflect from failed, unpopular policies.

However, I don’t think the way I can best serve you all — and kids and families and child care providers across the country — is by stamping my foot. I am grateful for the foot-stampers out there who are already mounting a vigorous rapid-response campaign. I want you to understand what is happening, why it is happening, and what it means, so that you can spread the word.

Because that’s what we need right now. Swamp the invective with a focus on the real impacts on real families across America. Call your Congresspeople. Talk to your friends and family members. This episode has revealed that there are still rampant misunderstandings about the most basic facts of how child care support works in this country.

Fraud is unacceptable. We should say that, too. In fact, the best way to minimize child care fraud is to have a simple, robustly funded child care system with well-funded state capacity to provide support and oversight to providers, and strong guardrails against profiteering. Instead, we have a byzantine system of welfare and for-profit mechanisms smashed together, combined with hollowed-out state capacity — and then we pretend to be shocked when the broken thing breaks.

But right now, this isn’t really a story about fraud. Right now, this is a story about millions of American households — both those that rely directly on child care aid and those that don’t — that are about to take yet another blow to their well-being. The Administration’s actions here are needless, callous, and destructive: they should be pressured to release all child care funds ASAP.