The state budget is the most important tool we have to strengthen and protect publicly funded child care in California. Increasing state revenues and fully funding child care means a better, more equitable California for all of us.
On January 9, 2026, Governor Newsom released his proposed state budget for the upcoming fiscal year (beginning July 1, 2026).
In his State of the State Address, Governor Newsom addressed the Federal Administration’s targeted attacks on publicly funded affordable child care in California, acknowledging the vital importance of child care and noting that “child care is economic development.” Yet, his budget proposal fails to make necessary investments in child care and deliver on his own promises to children, families, and child care providers.
We call on Governor Newsom and the California State Legislature to stand in stark contrast to the Federal Administration and lead the nation by fully funding affordable child care.
Here are our top child care takeaways from Governor Newsom’s January Budget Proposal:
Publicly Funded Affordable Child Care for Families
Governor Newsom’s proposal includes NO funding for new affordable child care spaces, breaking his promise in 2021 to add 206,800 new spaces over five years. Despite language in the law that details the State’s intent to add 44,000 new spaces in the 26-27 Budget and 33,000 in the 27-28 Budget, Governor Newsom chooses to deprioritize our youngest children and their families.
When families have affordable child care, they can get ahead and stay ahead. Yet thousands of families are languishing on child care waiting lists, waiting for a call that may never come if policymakers do not fund new publicly funded child care spaces. The California Budget and Policy Center estimates that in 2024, almost 1.8 million children were eligible for publicly funded, affordable child care programs but were not enrolled; thus, at current funding levels, the State only served 16% of eligible children1.
To fulfill the Governor’s commitment to add 206,800 total new spaces, the 2026-27 state budget must include funding to do so, as the expansion plan is subject to an appropriation in the annual Budget Act.
- More Details
- In 2021-22, Governor Newsom committed to adding around 206,800 new publicly funded affordable child care spaces by 2026-27. However, the Governor and the Legislature paused adding new spaces in 2023-24 and 2024-25. The 24-25 State Budget Act codified the child care spaces expansion commitment into law. Statutory language lays out how the State intends to add approximately 206,800 new child care spaces by FY 2027-2028. This plan included 44,000 (12,000 general child care and 32,000 vouchers) new publicly funded child care spaces in the 2026-27 budget year.
State Subsidy Payments to Child Care Providers
Governor Newsom maintains funding for subsidy payments (including cost of care plus) and includes $89.1 million ongoing in General Funds to provide a 2.41% cost-of-living adjustment (COLA) to all child care providers who provide publicly funded child care, including California State Preschool Programs. This modest increase aligns with the COLA provided to TK-12 programs.
The budget proposal also includes $43.8 million to administer subsidy payments prospectively, meaning child care providers will be paid in advance of providing publicly funded child care. California has a temporary federal waiver that allows for additional time to implement prospective pay. The Administration for Children and Families (“ACF”) approved California’s temporary waiver on November 22, 2024, and it expires on August 2, 2026.
Regrettably, the Governor’s proposal makes no reference to California’s transition to paying child care providers more fairly and does not include any additional funding to support the transition. Child care providers have advocated relentlessly for the swift and just transition to being paid based on the true cost of care. The state’s current poverty-level payments are based on what parents can afford, forcing providers to close their programs or increase copayments from families who are also struggling to make ends meet.
It is unacceptable that Governor Newsom continues the racist legacy of underpaying and devaluing the child care workforce by not prioritizing the transition to fair pay.
Funding Child Care Programs
The Governor proposes to maintain current child care funding and make no cuts to programs at this time. However, California Director of Finance Joe Stephenshaw made clear in his state budget presentation that Governor Newsom’s administration is taking a wait-and-see approach to this year’s January budget proposal, which could mean cuts will be proposed in May.
Director Stephenshaw noted they are assessing programs and collecting more information to take action in May, when the Governor will share his May Revision to the State Budget. The Director shared that the “May Revise will really be the framework for what the ultimate 26-27 [State] Budget entails.”
The Federal Administration is putting children, families, and child care providers at risk—destabilizing families, threatening the closure of child care programs, and damaging our broader economy, all while doing nothing to address the ongoing child care crisis. At a time when the Federal Administration is making targeted attacks on affordable child care in California and nationwide, we need our state leaders to counter federal harm by fully funding affordable child care.
The January Budget Proposal provides funding related to child care infrastructure. Specifically, it includes $11.5 million to be invested in “child care infrastructure,” targeted to child care programs in communities affected by recent fires. To appropriate this funding, Governor Newsom proposes a one-time shift of Proposition 64 funding from the California Natural Resources Agency to the California Department of Social Services.
The Governor also proposes $830,000 for an extended contract with the Low Income Investment Fund (“LIIF”) to cover technical assistance, monitoring, and reporting related to New Construction and Major Renovation projects that were approved and are currently in process under the Child Care and Development Infrastructure Grant Program.
Equitable Tax and Revenue Policies
Governor Newsom’s wait-and-see approach to the January Budget Proposal lacks the political courage that Californians need right now. Federal threats and attacks are making it harder and harder for families and child care providers to afford and meet their daily basic needs. Rather than increasing revenues through closing unfair tax loopholes, the Governor chooses to allow inequitable tax policies to run on autopilot.
California’s economic growth and prosperity rely on child care providers having what they need to operate thriving businesses and families having the affordable child care they need to work and go to school. This means our state budget must include funding to pay providers fairly and strengthen life-giving programs, like publicly funded child care, CalFresh, and Medi-Cal.
Governor Newsom and the State Legislature can and must lead California down a different path, rooted in justice and equity. By raising additional ongoing state revenue and closing unfair tax breaks for wealthy corporations, our state policymakers can counter federal harm and create a more affordable, secure, and equitable future for all of us.
What’s Next?
The State Legislature will review and discuss Governor Newsom’s proposed budget at Senate and Assembly budget committee hearings over the next few months. After state taxes are collected in April, the Governor will make revisions and publish a new proposed state budget in May for the Legislature to consider.
At this time, we call on our State Legislature and the Legislative Women’s Caucus to be the child care champions that California’s children, families, and child care providers need more than ever.
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- The California Budget and Policy Center plans to publish these figures later this quarter. This estimate is based on the number of children 0-12 enrolled in California Department of Social Services child care programs (not including “Handicapped” program enrollment) in October 2024 and is based on 2024 American Community Survey data. ↩︎
