The Council Must Fund Childcare in DC

Chairman Mendelson, members of the committee, thank you for the opportunity to testify. My name is Anne Gunderson, and I am a Senior Policy Analyst at the DC Fiscal Policy Institute (DCFPI) and a member of the Under 3 DC Coalition (U3DC). DCFPI is a non-profit organization that shapes racially-just tax, budget, and policy decisions by centering Black and brown communities in our research and analysis, community partnerships, and advocacy efforts to advance an antiracist, equitable future.

The District’s early childhood programs, including the Pay Equity Fund (PEF) and the child care subsidy program, have shown tremendous success in providing children safe and supportive learning environments so that District parents can work or pursue an education. These programs provide a strong foundation for DC’s economy and require greater investments to meet the needs of District families and educators.

The mayor’s proposed budget fails to meet this need by underfunding the PEF and child care subsidy program in fiscal year (FY) 2026 and eliminating all funding for the PEF in FY’s 2027-2029. Sacrificing critical investments in programs that support workers and families to increase investments in wealthy corporations and sports teams will not facilitate economic growth but rather stall progress towards an inclusive economy for all District residents. DCFPI encourages DC Council to invest in early learning programs that have successfully grown the workforce, increased the quality and availability of child care, and allowed parents to go to work or pursue an education while their children are in safe, supportive learning environments. To build on this progress, the council should:

• Enhance the FY 2026 budget for PEF by $10 million, for a total of $80 million, to keep up with growing costs and restore funding for fiscal years 2027-2029; and,
• Enhance the child care subsidy program by $20 million, for a total of $106 million in FY 2026, to maintain current caseloads and allow new families to access the program.

Maintaining the Vast Success of the Pay Equity Fund Depends on Increased Investments

DCFPI commends the Office of the State Superintendent of Education (OSSE) and DC Health Benefit Exchange (DCHBX) for making bold progress on fair compensation for more than 3,600 early educators, most of whom are Black and brown women, through the implementation of the PEF.^[1] The Council should provide recurring investments in the PEF in each year of the financial plan because the program yields positive results for children, families, educators, and the entire District.

In the past two and a half years of implementation, the PEF has improved the recruitment and retention of educators at early learning facilities.^[2] In fact, the PEF grew the early childhood educator workforce by 7 percent—or 219 workers—which leads to greater availability of child care for District parents.^[3] It has also helped improve the quality of participating programs because when we pay our educators a living wage and provide healthcare, they are better able to focus on the needs of the children in their classrooms and provide high-quality interactions that contribute to their learning and growth.^[4] These positive outcomes are not limited to the classroom—in the first two years of implementation, the PEF yielded a 23 percent return on investment.^[5] This is evidence that investing in our children, families, and workers is an investment in the wellbeing of the entire District.

Flat funding for FY 2026, as currently proposed in the mayor’s budget, would stall the incredible progress DC has made through the PEF. OSSE is projected to spend at least $74 million by the end of FY 2025, assuming that spending remains steady for the remainder of the fiscal year.^[6] The council will need to enhance the PEF budget by at least $4 million just to serve the educators currently enrolled in the program at their current role and credential level, even with the current waitlist in place, or risk having to make additional cuts to the program, like further restricting who can participate or reducing payments to facilities to help them maintain salary minimums for their educators. Superintendent Mitchell confirmed this risk at OSSE’s FY 2026 budget oversight hearing, stating that OSSE has carryover dollars to close this funding gap for FY 2025, but those additional funds will not be available in FY 2026, so $70 million will require additional cuts and cause harm to early educators.

Deeper Investments in PEF will Expand its Impact

Lawmakers should enhance the PEF budget further to allow educators who gain higher credentials and/or who are promoted to receive higher salary awards commensurate with their role and credential level. Total payments for the salary component grew by nearly $500,000 between quarters one and two this fiscal year due to educators gaining higher credentials and being promoted into higher-paying roles.^[7] As of April 2025, over 80 percent of all educators at licensed facilities meet or exceed the credential requirements for their roles, so we should expect continued, but marginal growth in credential attainment among PEF participants.^[8]

OSSE also implemented a waitlist in April for new facilities wishing to join the PEF, so the budget will need to be enhanced above the $4 million increase to absorb facilities from the waitlist into the program and to allow new facilities to join the program. It is challenging to predict the rate at which the educator workforce will grow because OSSE does not publish data on annual workforce growth. However, recent Mathematica research estimated a 7 percent increase to the workforce through their model, representing 219 educators, after FY 2023 implementation of the PEF.^[9] If this growth is consistent across each year of implementation, it would cost about $3.2 million to absorb 219 educators into the PEF, annually, and another $200,000 to account for higher credential and/or role attainment.^[10]

Finally, the purpose of the PEF is to establish pay parity with DC Public Schools, and those educators recently renegotiated their contracts and received long-overdue cost-of-living adjustments. Educators in the PEF also deserve a cost-of-living adjustment, especially as the cost of food, rent, and other necessities continue to get more expensive. The Council should enhance the PEF budget by an additional $1.2 million to provide a two percent cost of living adjustment to participating educators. Together, we are asking for an $8.6 million enhancement to the salary component of the PEF (Table 1).

Table 1.

The HealthCare4ChildCare Budget Needs to Slightly Grow to Meet Increasing Costs

As of January 2025, HealthCare4ChildCare (HC4CC) covers nearly 2,000 people across 220 facilities, which represents for eligible facilities.^[11] However, participation varies by ward, with Wards 7 and 8 having at 59 percent and 68 percent.^[12] Due to funding constraints, the Health Benefits Exchange (HBX) instituted a waitlist for new facilities starting in January 2025, so progress toward covering all eligible facilities will be stalled unless the Council increases the budget for the program. As of May 2025, HBX confirmed that one facility is on the waitlist, and that HBX has enrolled that facility’s workers living in DC into HC4CC, but nonresidents remain on the waitlist, per current policy.^[13]

Healthcare costs also grow annually and at a higher rate than economic inflation.^[14] Last year, HBX estimated an 8 percent annual increase in premium costs for HC4CC. In the absence of updated projections, DCFPI suggests that the budget for this program should at least grow at the same rate to continue to cover those enrolled in the program.^[15] By increasing the budget for HC4CC by $1.4 million, those currently enrolled should be able to maintain their coverage and facilities currently on the waitlist can be absorbed into the program, expanding healthcare coverage to more early educators. Any federal changes to the marketplace, and potentially Medicaid, could impact the cost of HC4CC, which makes this enhancement especially pressing and necessary to keep our educators and their families insured.

The Child Care Subsidy Budget Should Grow as Utilization Grows

DC’s child care subsidy program helps more than 8,100 families with low and moderate incomes pay for quality child care.^[16] The subsidy program is an avenue for predominately Black and brown parents—who have faced centuries of systemic oppression—to give their children a jumpstart on their education and to have a safe and supportive environment for their children while they work or pursue an education.^[17]

The council should enhance the child care subsidy budget by $20 million, for a total of $106 million in local and federal funds, in FY 2026 just to maintain current caseloads and prevent any cuts to this program. OSSE’s actual spending level for child care subsidies in FY 2024 was $105.5 million. This is higher than the $96.3 million in the FY 2025 approved budget, which means OSSE already faced a $9.2 million shortfall to maintain previous caseloads. Based on data from the Council Budget Office, OSSE is on track to spend more in FY 2025 than they spent in FY 2024, and this spending growth is expected to continue as caseloads grow.^[18]

According to Superintendent Mitchell’s responses during OSSE’s budget oversight hearing, they are closing the FY 2025 funding gap with temporary federal funding that will no longer be available in FY 2026. The mayor’s proposed FY 2026 budget of $86 million shows another year-over-year $5.6 million cut in federal funds for subsidy, a cut that may require OSSE to implement a waitlist for new families seeking a child care subsidy.^[19] Superintendent Mitchell stated that “there may need to be adjustments” made to the subsidy program to fit within the budget proposed by the mayor, unless the council can enhance the budget to keep the program whole.

Failing to sufficiently fund the child care subsidy program would mean fewer children having access to high-quality early learning programs and fewer parents having access to affordable child care, which would prevent them from working or pursuing an education. When children do not have access to high-quality child care, they are less likely to show up to kindergarten ready to learn, which puts greater strain on K-12 resources. When parents do not have access to child care, they are less likely to maintain employment, which impacts their incomes and constrains economic activity in the District.

If the mayor and council are committed to growing the economy, they should be investing in the families and workers who allow it to thrive. Thank you for the opportunity to testify. I am happy to take questions.