Funding Early Childhood Education is Vital to DC’s Future

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.

My testimony focuses on core programs that support the early childhood system and allow every family in DC to have access to high-quality, affordable care for their children, including the Pay Equity Fund (PEF), the child care subsidy program, and the Pre-K Enhancement and Expansion Program (PKEEP). Together, these programs ensure that DC is recruiting and retaining dedicated educators to work in classrooms that are supported by local funding to help offset the cost of child care for families with young children.

While these programs are working well to provide quality, affordable care and delivering great benefits to DC’s economy, recent changes to PEF funding and program design are diminishing some of the progress the District has built. Further cuts to PEF—and to the subsidy program and PKEEP—would harm the broader early education ecosystem and have ripple effects on families, small businesses, and the child care workforce. To continue making progress toward a high-quality, accessible, and affordable early childhood ecosystem in DC, the Office of State Superintendent (OSSE) and lawmakers should:

• Continue monitoring how recent changes in the PEF are affecting children and providers, and protect PEF funding in the fiscal year (FY) 2026 budget to better ensure that facilities can afford to participate in the program;
• Make improvements to the child care subsidy program to make it easier for child care facilities to participate, thus expanding the options and availability of affordable care in the District; and,
• Maintain investments in the PKEEP program so that facilities can continue to serve families who prefer to keep their children in a community-based child care setting and for families who do not have access to a public pre-K slot in their neighborhoods.

DC’s Workforce and Economy Are Stronger Thanks to the Pay Equity Fund

DCFPI commends 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] DCFPI also thanks the Chairman for his support for PEF, including saving it after Mayor Bowser eliminated the program from her FY 2025 budget, and for reconvening the Early Childhood Educator Equitable Compensation Task Force (Task Force) to identify program improvements and cost containment strategies.

The PEF is benefiting early childhood educators, child care facility directors and owners, children, families, and the District’s economy. Early educators participating in the PEF report improved job satisfaction, earn an additional $7.40 per hour, on average, and are pursuing professional development opportunities that can improve the quality of care provided to the children they teach.^[2] Participating child care directors and owners report having an easier time recruiting qualified staff and retaining them, likely freeing up funding that can be re-invested in their small businesses.^[3] The PEF is also bolstering the child care industry: after the first two years of implementation, the PEF grew the early childhood educator workforce by 7 percent—or 219 workers—and yielded a net 23 percent return on investment to the District, Mathematica’s research shows.^[4],[5] More teachers translates into expanded availability of care for families.

OSSE has distributed more than $67 million to 365 child development facilities (CDFs) since October 2023—and these investments are benefitting every ward (Table 1).

Reduced Scope of PEF Means its Reaching Fewer Educators and Causing Harm to Some Facilities

In March 2024, the DC Council reconvened the Task Force to recommend improvements to the PEF funding formula and identify options for scaling back the program due to a tight budget outlook—and public officials adopted most of the changes either administratively or via emergency legislation in the fall.

DCFPI appreciates the transparency of the Task Force’s process, including a virtual town hall where members sought feedback from the community on the changes under consideration. DCFPI supports the adopted changes to the formula that allowed for a more equitable distribution of program funding to facilities that operate on tighter margins and serve communities with the most need, including an increase in awards to facilities that serve families using child care subsidies, to facilities that serve infants and toddlers, and to home-based facilities. OSSE offset these increases with decreased support to part-time programs and facilities that charge in the 90^th percentile of the market rate for tuition. OSSE has not yet adjusted awards for part-time employees due to data limitations, but DCFPI believes this change is justified and would result in further cost savings for the program.^[6]

OSSE is providing all CDFs smaller awards in FY 2025 compared to FY 2024, due to the elimination of the FY 2024 award supplement and the reduction of required minimum salaries for some positions. Center-based facilities experienced deeper reductions than home-based facilities because of the change to the funding formula that increased awards for home-based providers.^[7] DCFPI spoke with CDF directors in January and February 2025, and some centers, especially those serving special populations, have been able to offset the harm of lower funding with private philanthropic funding. For others, directors reported they were forced to rely on savings from previous PEF awards to fill that gap or be left with the difficult choice of reducing educator pay or increasing the cost of private tuition. This is troubling because the purpose of the PEF is to provide competitive wages and benefits to early educators without passing the cost onto families.

The PEF is a successful program because it effectively leverages every penny to increase compensation and expand health care access, which makes our early childhood system stronger. OSSE will be instituting a waitlist on April 1 for new facilities hoping to tap into this benefit.^[8] The DCHBX instituted a waitlist on January 1 of this year for HealthCare4ChildCare and there is already a facility on that list. These waitlists are holding DC back from achieving its goal of equitable compensation for all early educators. Additional cuts to the PEF would put at risk the significant progress the District has built, and DCFPI urges the DC Council and mayor to protect the program in the FY 2026 budget.

OSSE Has Improved Implementation of the Child Care Subsidy Program but Barriers Remain

DC’s child care subsidy program helps more than 8,000 families with low and moderate incomes pay for quality child care.^[9] 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.^[10] The program ensures that no eligible family pays more than 7 percent of its income on child care when using a program voucher, with most parents paying less than $11 per day in co-pays and many paying $0. DC recently expanded access to the subsidy program to families with higher incomes, acknowledging that investing in affordable, high-quality care can facilitate economic gains for Black and brown families, small and large businesses, and the DC economy as a whole.^[11]

While this program provides valuable support, parents and providers face barriers to participation that can limit its effectiveness. In DC, families earning up to 300 percent of the federal poverty rate ($93,600 for a family of four) are eligible to participate if they meet additional requirements, such as being in an eligible education or work program or engaged in a job search. OSSE has been working diligently to improve the subsidy program over the past two years by putting the subsidy application online for families, raising the rate at which participating facilities are reimbursed for the care they provide, and by switching to paying providers based on enrollment rather than attendance. DCFPI commends the Division of Early Learning for taking these vital steps.

Despite these improvements, there are more than 10,000 income-eligible infants and toddlers in DC but less than half of those children were supported by child care subsidies in FY 2023.^[12] Infant and toddler enrollment in the subsidy program continues to trend upward since the height of the pandemic (when enrollment fell sharply), and OSSE does not expect caseloads to increase significantly as a result of the improvements they have made to date.^[13],[14]

The effectiveness of the child care subsidy program in-part depends on the participation of child care providers. All licensed CDFs in the District are eligible to participate in the subsidy program but only half participate due to a variety of barriers and fiscal concerns for operating their facilities.^[15] Because there is a shortage of high-quality child care providers that accept subsidy vouchers, parents find it difficult to find quality and affordable options. To increase the supply of affordable care options in DC, OSSE should make the following improvements to the subsidy program to make it more accessible and efficient:

• Make it easier for directors to apply to participate in the subsidy program by increasing staff support at OSSE for directors who are applying, developing a network of directors who can provide peer support through the process, and encouraging directors to apply for the subsidy program immediately after receiving their license to operate.
• Increase reimbursement rates so that they meet the true cost of care, especially for categories where demand is the highest, such as for infant and toddler care. Also, switch to paying facilities prospectively rather than retrospectively, as is now required by the federal government.
• Streamline data systems and reporting requirements. Currently, child care providers who offer subsidy have to submit paperwork—often the same paperwork—to multiple systems, which can be overwhelming, time consuming, and can cause confusion and errors. If OSSE created a single portal where providers could submit documents once and have visibility into how and when paperwork is processed, it would ease administrative burdens that keep some providers out of the system entirely.
• Increase the number of child care facilities that can determine family eligibility for the child care subsidy program by expanding who can become a Level II provider.
• Improve OSSE communication with child care providers by offering more frequent training sessions on becoming a subsidy provider, hiring more Help Desk staff to answer questions and walk providers through complicated processes, and ensuring that there is bilingual staff available to assist providers in an accessible way.

These changes would incentivize greater participation in the child care subsidy program among child care providers, and in turn, expand the supply of affordable care in the District and make it easier for caregivers to stay attached to the workforce.

DC’s Early Childhood Ecosystem Needs the Pre-K Enhancement and Expansion Program

PKEEP offers families the option of taking their child to a high-quality, community-based pre-K provider as opposed to enrolling in pre-K in a public school or public charter school. In FY 2024, more than 1,000 children were served through PKEEP.^[16] This is a critical support to families who live in wards with limited school-based pre-K options, like those living in Wards 1 and 3, and for families who prefer community-based pre-K because it allows them to remain with a child care provider who has been with them since the earliest years of their child’s life at no cost.

PKEEP is also critical to the 26 community-based child care centers through which it is offered. These high-quality centers, like most child development facilities, survive as small businesses by providing care for infants, toddlers, and pre-K-aged children. True Cost of Care studies show that it is far less expensive to provide care and education for pre-K than it is for infants and toddlers classrooms, which have much larger personnel costs that are driven by lower teacher-child ratios and smaller group sizes.^[17] The cost to provide infant and toddler care often exceed what parents can afford to pay and the rate at which OSSE reimburses subsidy providers for that care.^[18] Therefore, child development facilities balance these higher costs by providing pre-K.

PKEEP is an important pillar of the early childhood system in DC. Without PKEEP, some families will depend more heavily on the child care subsidy program which, as discussed, requires many improvements and increased funding to provide subsidies to more families. The families that utilize public and public charter pre-K options will lose their coverage during summer that PKEEP and subsidy offer—potentially costing them thousands of dollars. PKEEP also requires its lead teachers to have a bachelor’s degree and provides funding to facilities to pay educators for those higher degrees. In the absence of PKEEP, those educators would need to be absorbed by the PEF or risk losing them to DCPS, or the early education field altogether.

Thank you for the opportunity to testify. I look forward to discussing these recommendations with you further.