One Big Beautiful Bill & Other Policies Impacting ECE
While early education owners must look inward to deliver the highest-quality programs for students and staff, they must also look outward and fully understand how shifting federal and state legislation is shaping the landscape in which they operate.
With ongoing buzz about the implications of the One Big Beautiful Bill Act, early education funding, the future of Head Start and more, Early Care and Education Consortium (ECEC) Executive Director Radha Mohan sat down with HINGE Advisors Founder & CEO Kathy Ligon and our HINGE community to discuss some of the most significant policy issues affecting the industry right now.
This webinar drills down to what early education owners need to know and how these changes might provide new opportunities for childcare businesses to thrive and grow.
To start, tell us about the Early Care and Education Consortium and the work you do.
ECEC is a trade association for high-quality, multi-site childcare and service providers nationwide. We’re here to ensure early education providers are represented at every table where there are relevant policy discussions taking place. We care about issues that affect providers, teachers, and the students and families they serve, from childcare funding to the regulatory guidance that determines how you run your programs.
Let’s start with One Big Beautiful Bill. There are several important provisions in this legislation related to childcare. How will these provisions benefit families and early educators?
There are three main tax provisions that improve childcare tax credits. Many of these credits hadn’t been updated for 30 years. And while some of these credits may not be huge dollar amounts on their own, they do add up. They include the:
Child and Dependent Care Tax Credit (CDCTC): This is a direct credit that expands families’ tax deductions for childcare expenses starting in 2026. Lower-income families will be able to claim up to 50% of childcare expenses, up from 35%. Middle-income families will also see significant increases.
Dependent Care Assistance Program (DCAP): Parents who have access to a DCAP account through their employer will be able to set aside up to $7,500 pre-tax for childcare expenses, up from $5,000.
Employer-Provided Child Care Tax Credit: Under prior law, businesses could get a maximum credit of $150,000 for offering on-site childcare to their employees. The cap has now increased to $600,000, and organizations can have 50% of their qualified expenditures reimbursed through the Section 45F tax credit.
Another benefit of One Big Beautiful Bill is that there is no tax on overtime. This specifically affects teachers, center directors, and staff who receive overtime pay. This provision means single filers can deduct up to $12,500 and joint filers can deduct up to $25,000 from their taxable income. The benefit starts phasing out at $150,000 for single filers and $300,000 for joint filers.
Childcare owners can play a big role in educating families, staff, and the businesses they partner with about these changes, which are designed to make childcare more affordable and provide more financial stability.
What are your predictions for Child Care and Development Block Grant (CCDBG) funding this year?
CCBDG is a foundational funding source for childcare subsidies that helps low- and moderate-income families access care. For many years, ECEC has been advocating for many years for the growth of CCBDG funding. The good news is that the Senate has proposed an $8.8 billion increase in CCBDG funding, which is about $85 million higher than last year. It’s a modest increase but would be incredibly helpful, especially when so many other education programs are being slashed.
What new initiatives do you think we can expect from the current administration, particularly from the Department of Health and Human Services (HHS) and the Administration for Children and Families (ACF)?
Toward the end of the Biden administration, they proposed a final rule on the Child Care and Development Fund (CCDF), which made many important updates to regulatory guidance. This rule allowed for subsidy payments based on enrollment versus attendance, simplified applications, limited family co-payments to 7%, and more. It was one of the more comprehensive updates to CCDF that we’ve seen in a while.
The current administration is reviewing that rule, and it is unclear if it will be repealed in its entirety or if they will keep pieces of it. In May, the Department of Health and Human Services (DHHS) issued a request for information about deregulating all areas of the department, which aligns with the administration’s broader goals of reducing regulatory burdens and increasing transparency.
At ECEC, we’re working to highlight that many pieces of the Biden administration’s regulatory guidance have long been bipartisan priorities, resulting in simplification for businesses and greater transparency for families.
Head Start is one of the main funding streams for private early education. What is the latest on the status of Head Start?
Head Start still remains a bipartisan program, and we are hopeful the program will not face significant cuts in the upcoming appropriations process. An early budget from the Office of Management and Budget (OMB) that was leaked earlier this year zeroed out funding for Head Start. However, the Senate Labor HHS Committee has proposed an increase of $85 million for Head Start. The House is not expected to propose as large of an increase, but the House is also not likely to zero out the program either.
Despite OMB’s position on Head Start, the Administration for Children and Families (ACF) recently announced the availability of one-time funding for Head Start grant recipients to invest in nutrition as part of the Make America Healthy Again (MAHA) program.
It’s been two years since federal funding for early education ran out, shifting the focus to the states to support the ECE community. Which funding strategies at the state level do you like best?
States are laboratories of innovation for early education. They often pioneer initiatives before the federal government moves forward and adopts a policy on a broader scale. Several state initiatives stand out.
Under Kentucky’s Child Care Assistance Program (CCAP), childcare staff members working 20+ hours per week are automatically eligible for childcare benefits for their own kids.
Other states, such as Arizona, Georgia, Illinois, Iowa, Massachusetts, and Rhode Island, also have similar support programs for early educators.
Illinois recently lowered its CCAP co-pay to $1 for eligible families.
In Texas, childcare staff families are prioritized for state subsidies, which means teachers don’t have to leave their classrooms due to childcare issues of their own.
We also like and have been pushing for property tax abatements. Florida’s legislature enacted a tax abatement for all nationally accredited childcare centers. This abatement was previously only available to childcare centers that owned their property and is expected to collectively save childcare providers in Florida more than $5 million annually.
On the other hand, do you see any concerning trends or challenges at the state level?
Deregulation is certainly a concern. There is sensible deregulation, and then there is deregulation that’s actually harmful for children and families. For example, Idaho recently proposed eliminating state-mandated childcare staff ratios for licensed programs, which would allow providers to set their own ratio policies. We believe that providers are responsible, but a huge liability stems from a policy like that. This risks encouraging lower quality and giving those programs a competitive advantage over centers that are doing what’s right for children and families, versus just thinking about their bottom line.
We also have concerns about Florida's recent decision to exempt on-site employer-provided childcare from licensure, as we want to ensure all programs maintain proper health and safety measures.
Additionally, funding shortfalls are always a major concern as many states continue to face very tight budget environments. This year, we have seen funding challenges in multiple states, including North Carolina, Arizona, Pennsylvania, and Minnesota.
How can early educators get involved in these important conversations?
If you have a strong early education association in your state, that’s the best place to start. You can also speak to your local Chambers of Commerce and other business groups you’re involved in. It’s so important that lawmakers hear the voices of early educators and understand how their decisions impact the critical work you do.
Watch Kathy and Radha’s full Q&A.
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