A Michigan program that helps low-income families cover the high cost of childcare for nearly 25,000 kids under 5 could face cuts under a state budget proposal after the loss of nearly $20 million in federal COVID-19 funding.
The one-time federal funding supplementing the state’s $400 million childcare assistance program’s expansion over the last few years have dried up for 2027, meaning lawmakers have a choice: use state dollars to make up for the loss or make a cut to the program.
The Republican-controlled Michigan House of Representatives’ budget proposal chooses to trim the program’s — known as the Child Development and Care, or CDC, subsidy — budget by changing the way childcare providers are required to bill the state for the childcare they provide to low-income families.
Childcare providers and policy experts warn the plan would have reverberating negative effects throughout the state’s childcare infrastructure, making the childcare business more financially unstable, deterring providers from accepting the subsidy and pushing costs onto parents who already can’t afford it.
“Those families are likely going to pull their kids out of quality childcare,” said Leanne Ablin, executive director at Huntey’s Clubhouse, a network of childcare centers across rural west and northwestern Michigan, where around half of the 615 children they serve are on state subsidy.
State Rep. Greg Markkanen, R-Hancock, who chairs the committee responsible for the state early childhood agency budget, did not respond to multiple requests for comment from the Free Press.
A news release issued by the Michigan House Republicans on their proposed budget doesn’t mention childcare specifically but highlights a general focus on “cutting wasteful spending” while “fully support[ing] the services people depend on,” including public safety and Medicaid, reads the release.
Budget negotiations are still underway, and it is uncertain whether the House’s proposed policy change will be adopted in the final state budget ahead of the July 1 deadline. The House and Senate will need to agree on a budget and send it to Gov. Gretchen Whitmer for signature by Oct. 1, when the state’s new fiscal year starts.
Beyond instability for families and childcare providers, providers say the House proposal takes a hit at a program that’s already underfunded and hasn’t seen an increase since 2024.
“Really, this is a huge distraction from the conversation we need to be having about [subsidy] rates. And that’s increasing it,” said Tyler Huntey, CEO of Huntey’s Clubhouse and president of the Michigan Child Care Provider Collective’s board, which advocates for providers in the state.
Billing switch at issue
Over the last few years, participation in Michigan’s childcare assistance program has increased since the qualifying income for eligibility went up in 2022 to 200% of the federal poverty line, or around $66,000 in annual income for a family of 4 in 2026 dollars.
To keep all families receiving the subsidy at current levels, both Whitmer’s and the Democratic-controlled Senate’s budget proposals elect to fill the federal funding gap with state general fund dollars.
But the House proposal differs, offsetting the end of federal COVID-19 funds by changing policy to more tightly restrict subsidy dollars, said Mina Hong, policy expert at the Early Childhood Investment Corporation, a Michigan-based early childhood organization.
The proposed policy would make it so that childcare providers must bill the state based on child attendance, as opposed to the current method, which is billing based on child enrollment.
The distinction may sound innocuous, but to a childcare provider’s ear, it sounds like a “billing nightmare,” said Molly Blixt, who owns seven childcare centers across Michigan called The Learning Experience, a national childcare franchise.
Now, parents who apply for state childcare assistance get approved for a block of hours — 60, 80 or 90 hours — for which a childcare provider can bill the state and get reimbursed two weeks after service.
“This provides stability for programs,” said Huntey. “OK, if I’m accepting this child, I know I’m going to be paid X amount of money over two weeks.”
The policy change the House is proposing would make it so childcare providers can only bill and get reimbursed for the exact hours a child was in care.
Michigan House Republicans say this would reduce program fraud. Republicans in Michigan and across the nation have recently sounded the alarm over what they claim is widespread fraud in the childcare subsidy system, worried that childcare providers are billing for kids that they’re not actually serving and collecting taxpayer dollars.
“NEARLY $20 MILLION IN ABUSE OF GOVERNMENT SUBSIDIES,” reads an April 18 Facebook post on the Michigan House Republicans’ Facebook page. “For years, childcare providers have been allowed to request money based on enrollment — no matter how many kids actually show up and attend. That’s a recipe for tax dollar abuse. Our budget instead bases funding on attendance rather than enrollment, which will save Michigan at least $19.5 MILLION.”
But childcare providers say the evidence, like regular state audits, suggest the fear of rampant fraud is unfounded. Instead, they say childcare providers often choose to accept families on the childcare subsidy in spite of the uncertainty it adds to their businesses, given the state’s historically low reimbursement rates and late payments.
This policy change would only add more instability into a provider’s already uniquely squeezed business model and doesn’t account for any of the typical variability inherent in a young family’s life, they say.
If a parent’s car breaks down or they forget to mention they have to drop their kid off late from a doctor’s appointment, Blixt said, those costs will no longer be covered in the block of hours reimbursed by the state, which means they’ll get passed along to families.
“It leaves no room for any sort of uncertainty in your week,” said Blixt. “It’s unreasonable to think your child needs to be in attendance every single day, for all nine hours in order for this to be affordable to you.”
“This will result in us losing families who can’t afford to make up that difference,” she continued. “The vast majority of these people are on budgets and they qualify for subsidy because of income: $50 or $100 dollars more a month matters to them.”
And providers say the financial uncertainty the policy would introduce only makes a bad situation even worse. Those childcare providers willing to accept kids on subsidy (that’s around 7,000 providers across Michigan) get state reimbursement amounting to only a portion of what it actually costs them to provide childcare, so they’re already eating costs, they say. For example, center-based infant and toddler childcare providers get reimbursed at around 65% of what they actually spend on providing childcare for those kids.
Blixt said the issue will be especially nightmarish for rural providers in low-income areas where the majority of kids served are on the subsidy, and unsteady income would make up all of their revenue.
As for childcare providers who have the luxury of living in areas where they can afford to charge families a higher rate? They’d be more likely to just opt out of accepting kids on the subsidy because it would no longer make sense for their business model, said Huntey, further limiting options where low-income families can bring their kids.
Fraud narratives persist in House budget proposal
The proposed House policy change aimed at saving the state money has its origins in a larger national push to root out what President Donald Trump’s administration has claimed is widespread fraud across the U.S. childcare subsidy system, said Huntey.
Huntey said he spoke with Republican lawmakers, including state Rep. Markkanen, to inform them of the impact their proposal would have on providers serving families in greatest need of help affording childcare.
Republican lawmakers Huntey spoke with told him the proposal aligned with the federal government’s prioritization of stopping childcare subsidy fraud. Earlier this month, the Trump administration passed a rule undoing a Biden-era rule that would have eventually required all states to move to an enrollment-based system, so Michigan Republicans are following suit, he says.
“It’s a chasing headlines type of move by House leadership,” said Huntey, who points to lacking evidence that widespread childcare fraud exists in Michigan. “But whether they’re chasing headlines or not doesn’t mean it’s not a dangerous thing for the industry as a whole.”
Huntey added that the very thing Michigan lawmakers say they’re intending to do with the policy change would likely have the exact opposite effect, instead incentivizing fraudulent billing to keep their businesses afloat.
“What they’re trying to prevent, is what they will actually force honest people to do, to have stability within their program,” said Huntey.
Beki San Martin is a fellow at the Detroit Free Press who covers childcare, early childhood education and other issues that affect the lives of children ages 5 and under and their families in metro Detroit and across Michigan. Contact her at rsanmartin@freepress.com.
This fellowship is supported by the Bainum Family Foundation. The Free Press retains editorial control of this work.
This article originally appeared on Detroit Free Press: Funding for low-income parents may be in danger this budget season
Reporting by Beki San Martin, Detroit Free Press / Detroit Free Press
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