Trump funding freeze could stretch child care to a breaking point
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Child care providers, already under financial strain, face their greatest test yet as the Trump administration imposes new rules and restrictions on funding.
Why it matters: Federal money underpins the entire industry — vital to millions of parents trying to manage work and family, across all income levels.
Driving the news: A federal judge on Friday temporarily blocked the administration from freezing more than $10 billion for five blue states, claiming widespread fraud.
- The administration, meanwhile, is also asking all states to provide more information to justify and support spending on care, a requirement that some state officials and advocates say is onerous and could delay funding.
The big picture: Even before the freeze, states were scrambling to make up for the loss of pandemic-era child care funding.
- "There hasn't been a full-on collapse, but it's just been a kind of slow-moving deterioration," says Matthew Nestler, an economist at KPMG who tracks the sector.
Zoom out: Child care providers, mainly small businesses on tight margins, are struggling to stay afloat.
- Wait lists for child care are growing in some states, and prices are rising — that often means a parent needs to make a tough choice, and could leave the labor market entirely. Typically, that's mothers.
- So many workers depend on child care that any policies that reduce investment in the sector have big knock-on effects for the entire economy, Nestler says.
Zoom in: Colorado froze new child care enrollments in some counties last year because of state budget constraints, coming on top of the pandemic pullback.
- That's been devastating for Westwood Academy, a preschool and child care center in Denver, where two-thirds of kids, about 20, were on federally subsidized tuition at the start of 2025.
- Now, the program is down to just four of these kids, says RB Fast, who started the center in 2022 when pandemic funds were flowing. Last year, the center lost about $70,000. (Typically, she turns some profit.)
- She's planning to open a second center in a wealthier suburb, where she'll charge $2,200 a month for a full-day toddler care. In her current center in Denver, she charges $1,747.
- The upshot: "High quality child care is increasingly becoming a luxury good," she says.
- In Indiana is facing similar struggles.
Other states have been doing more to fill in the gaps: New Mexico became the first state in the country to offer free care for kids starting at six weeks of age.
- New York Gov. Kathy Hochul and New York City Mayor Zohran Mamdani this week proposed a huge investment in child care, that would put the state on a path toward universal care.
Between the lines: Wealthier parents and states can only do so much. "What undergirds all of this is the federal programs, they hold all this up," says Sarah Rittling, executive director First Five Years Fund, an advocacy group.
The other side: A spokesman for the Department of Health and Human Services referred Axios to a post on X from Deputy Secretary Jim O'Neill:
- "We will comply with the court, but we will fight. We will appeal. We will keep asking questions," he writes. "We will stop the fraud."
Reality check: For now, providers have money to keep the lights on, advocates said, but it's not clear for how long.
- "Our center has three months of reserves," Christina Killion Valdez, a child care center director in Rochester, Minn., said at a press conference last week.
- Before doing layoffs, she said, they'd cut hours, she said.
