Opinion: Promise of Dedicated Funds Amid Child Care Budget Cuts

Early childhood care and education in the United States is facing turbulent times. With pandemic-era funding expiring and widespread reductions in state and federal budgets, many programs have shut down or scaled back the support they provide to families. Yet, amidst these challenges, a promising development has emerged: some states and local governments are establishing dedicated funding streams for child care. These funds, reserved exclusively for early childhood services, offer greater stability for both providers and families.

According to a report from the Childrens Funding Project (CFP), a nonprofit that assists states and localities in securing financing for childrens needs, dedicated funds have helped jurisdictions better manage financial uncertainty. Traditionally, advocates for early care must compete annually for state general funds, which are influenced by economic conditions, political shifts, and federal decisions. Because states are required to balance their budgets, even those supportive of early childhood initiatives often face cuts when funds are tight.

Dedicated funding avoids the uncertainty of general budget allocations. The CFP describes these funds as distinct streams of public revenue set aside for specific purposes, typically through legislative action, voter approval, or a combination of both. Their dedicated nature makes them less vulnerable to the fluctuations of state politics and budgeting cycles.

There is no single blueprint for creating dedicated funds. States and localities differ in which taxes can be used, how revenues can be allocated, and the political avenues available for implementation. Recent trends show an increase in such funds, with 22 states having established some form of dedicated revenue for children and youth. Funding sources vary widely, including taxes on tobacco, marijuana, gambling, payroll, sales, and capital gains, as well as oil and gas in New Mexico. Some jurisdictions establish trust funds to manage revenues like endowments, distributing a fixed portion annually to early childhood programs.

Election results have demonstrated the value of dedicated funding. In Colorado, several counties approved measures for dedicated revenue from lodging or sales taxes, which will help maintain child care subsidies despite statewide budget pressures. Other states, like California, have long relied on dedicated funds; Proposition 10, passed in 1998, imposed a tobacco tax to support early childhood programs under the First 5 Initiative.

However, simply creating a dedicated fund does not guarantee success. Funding must be sufficient to meaningfully support programs, as seen in Kentucky, where a fund from the Tobacco Master Settlement provides about $26 million annuallyhelpful but not transformative. The structure of funding allocation and decision-making authority also plays a critical role. Additionally, revenue sources like sin taxes can decline over time, creating instability, as illustrated by Californias falling tobacco tax revenues impacting First 5 programs.

As many states confront ongoing budget challenges, establishing reliable, substantial dedicated funding for early care and education should be a priority. Experiences across the country suggest that stable, significant revenue sourcessuch as payroll or high-income taxescan reduce dependence on general budgets, providing consistent support for children and families.

Author: Gavin Porter