This blog post is part of NCIOM’s series of updates on recommendations from “Building Resilience and Promoting Well-Being: An Updated Action Plan for North Carolina’s Children and Families,” funded by the Centers for Disease Control Essentials for Childhood program.1 The comprehensive report (referred to herein as ‘the Essentials state plan’) provides 15 recommendations and 43 actionable strategies designed to prevent adverse childhood experiences (ACEs) and ensure safe, stable, and nurturing environments for children across the state.
On July 7, 2026, Governor Josh Stein signed the North Carolina state budget into law.2 The budget funds the state through the end of the two-year budget cycle (June 30, 2027) and includes line items for child care subsidy funding, the early childhood education workforce and child mental and behavioral health. We explore state budget appropriations as they relate to the Essentials state plan recommendations below.
RECOMMENDATION 7: The North Carolina General Assembly should enhance child care subsidies to ensure a larger portion of eligible families receive subsidy payments.
Child care subsidies help North Carolina families pay for child care. Subsidies are funded by a mixture of state (20%) and federal Child Care & Development Fund (CCDF) block grant (80%) dollars.3, 4 In 2025, approximately 13% of eligible children received subsidized care.5
Child care subsidies are paid directly to providers, based off a standard market rate.6 Market rates are determined by the market rate study, a statewide survey of what private facilities charge for services, conducted every two years.7 Rates vary by county, age of the child, type of facility (family child care home vs. child care centers), and the center’s quality rating.7 Because child care providers must account for multiple factors when setting their prices, market rates often reflect an area’s average household income or neighboring facility rates more than the true cost of care.8
The new state budget allocated $97 million in reoccurring funds from the CCDF block grant, alongside additional funds from the Temporary Assistance for Needy Families (TANF) block grant, to address this recommendation in two ways:9
1. Increases the market rate for child care subsidy reimbursements, based on the 2023 North Carolina Child Care Market Rate Study2
Market rates were last changed in October 2023, based on the 2021 North Carolina Child Care Market Rate Study.10 Depending on the location and characteristics of a facility, the amount they receive may increase, decrease, or remain unchanged in the switch to the 2023 study.7
2. Sets a statewide floor for reimbursement rates based on the 2021 NC Child Care Market Rate Study2
Historically, rural child care providers could be reimbursed up to $700 less per infant than urban providers.5 A statewide floor aims to reduce the size of this disparity by mandating that a subsidy amount in any county or category cannot fall below the statewide market rate.2 Both county and statewide market rates represent the 75th percentile of reported charges, meaning the reimbursement rate is higher than what three-fourths of all facilities (ranked from lowest price to highest price) charge within a category.11 This percentile is used so that families receiving subsidies can afford most providers in their area, and North Carolina child care providers have stated that a floor set at this percentile could help them serve more children, increase their quality rating, and stay in business.5
Statewide Rates from the 2021 Market Rate Study
| Age Groups | 3 Star Child Care Centers | 3 Star Family Child Care Homes | 4 Star Child Care Centers | 4 Star Family Child Care Homes | 5 Star Child Care Centers | 5 Star Family Child Care Homes |
|---|---|---|---|---|---|---|
| Infants and Toddlers | $1,018 | $867 | $1,150 | $900 | $1,400 | $884 |
| One-Year-Olds* | -- | $867 | -- | $867 | -- | $867 |
| Two-Year-Olds | $975 | $802 | $1,107 | $845 | $1,290 | $867 |
| Three-to-Five-Year-Olds | $935 | $780 | $1,075 | $802 | $1,213 | $867 |
*Child care centers group one-year olds in with infants and toddlers
Source: 2021 NC Child Care Market Rate Study11
RECOMMENDATION 8: Child care workforce salaries should be increased and prioritized by using targeted investments to attract and retain skilled workers critical to delivering care.
In addition to increased subsidy funding, the budget aims to increase the supply of child care through growing the early childhood educator workforce. It does this directly through:
Other strategies included in the budget to stabilize child care provider finances and diversify types of quality child care available include:
RECOMMENDATION 9, Strategy 3: The Division of Child and Family Well-Being (DCFW) should engage philanthropic partners to provide expanded resources for North Carolina’s Child Care Health Consultants to work within child care centers and early childhood programs to offer screenings that can lead to referrals and interventions.
RECOMMENDATION 11, Strategy 6: The North Carolina General Assembly should provide additional funding to the North Carolina Department of Health and Human Services (NCDHHS) to increase funding for school-based health centers and co-located behavioral health services. This would also initiate funding of the North Carolina School-Based Health Alliance to support the training and technical assistance and support needs for current and developing school-based health centers and programs in NC.
The state budget appropriated $7.3 million dollars to the NCPC/Smart Start to “expand mental and behavioral health services for children, families, and staff in child care facility settings and out-of-school programs,” which shares similar objectives to organizations and activities named in Recommendations 9 and 11.2
Various statewide task forces, coalitions and organizations have issued aligned strategies and reports both before and since the Essentials State Plan recommendations:
This list is not comprehensive but intended to illustrate the breadth of work and the longstanding commitment to expanding access to child care that is reflected in the state budget’s investment.
_______________________________________________
Written by
Sarah Dancausse, MPP
Research Specialist, NCIOM
_______________________________________________
This issue brief uses data from the American Community Survey to describe the uninsured in North Carolina and the changes in the rates of uninsured since 2013. Hundreds of thousands…
One tool to assist in improving the experience of care, reducing the cost of care, and improving population health in North Carolina is an All-Payer Claims Database (APCD). An APCD…
This issue of the NCMJ discusses aspects of the newly proposed system, potential challenges to implementation, and how this new Medicaid system might impact population health.