Testimony delivered on May 7, 2026
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) and the child care subsidy program. Together, these programs ensure that DC is recruiting and retaining dedicated, credentialed educators to work in classrooms that are supported by local funding to help offset the cost of child care for families with young children.
Mayor Bowser’s budget proposal targets these programs for deep cuts, undermining the progress DC has made in expanding affordable, high-quality child care and equitable pay for a majority Black and brown workforce. If the Council fails to restore the funding that supports the salary component of the PEF, educators will face significant salary cuts and many will leave the field, and child care providers will be forced to close classrooms due to staffing shortages or raise tuition to try to fill the gap. The child care subsidy program is also in crisis—due to years of cuts to this program, the Office of the State Superintendent of Education (OSSE) will be implementing an enrollment freeze and waitlist on May 12, 2026. Unless the Council increases funding significantly for the subsidy program, thousands of families will be unable to access this critical support, children will be locked out of supportive learning environments that provide the foundation for growth and development, subsidy providers will be unable to enroll new families, and the supply of affordable seats in the District will shrink.
Taken together, the harmful effects of both attacks on DC’s child care system will snowball and create cumulative harm that could upend the local early education ecosystem. The Council should fully restore funding to support the industry that makes all other work possible, including:
- Enhancing the FY 2027 budget for the PEF by $82.2 million, for a total of $94.2 million, to restore the salary component of the program, reverse the pay cuts that went into place on January 1, 2026, increase pay by 2 percent to re-establish pay parity with DC Public School teachers, and allow for growth in credential attainment and program growth;
- Enhancing the FY 2027 budget for the child care subsidy program by $63.2 million, for a total of $177.1 million, to continue to serve all currently enrolled children, eliminate the need for a waitlist and allow new families to enroll, and maintain current reimbursement rates for providers; and,
- Enhancing the FY 2026 budget for the child care subsidy program by $13.3 million, for a total of $148.5 million, to ensure that there is sufficient funding to continue serving the children enrolled in the program while the enrollment freeze and waitlist is in place for new children without having to make additional policy changes to curb costs.
The Pay Equity Fund Is Critical to Delivering Affordable, High-Quality Care
The PEF currently provides salary supplements to more than 3,300 educators across 337 childcare facilities in DC and health care to nearly 2,500 employees and their dependents across 213 facilities.[1],[2] DC’s investment in the early childhood workforce reflects a commitment to addressing centuries of racist and sexist policies that have led to the undervaluing of child care educators—who are predominantly Black and brown women—by establishing fair compensation and parity with public school teachers.[3] Since its creation in 2022, the PEF has delivered on its promise to attract new educators to the field, encourage them to pursue more advanced degrees, and keep them in their jobs by offering competitive pay and benefits.[4] Under the direct payments model, the PEF yielded a 23 percent return on investment.[5] Under the current model where OSSE makes payments to facilities to be paid out to early educators, the PEF yielded a 21 percent return on invest in 2024. Since the start of the program in 2022, the workforce grew by 11 percent.[6]
Mayor Bowser’s proposal to eliminate the salary component of the PEF is not only a slap in the face to all the educators and the facilities that employ them, but it also threatens to undo the progress gained over the past four years of implementation. Without the PEF wage, early childhood facilities will be forced to either increase tuition to try to keep wages where they are today or lower wages to keep their businesses from going under and risk losing qualified educators to higher paying roles, such as teaching in DC public or charter schools. DC already has the highest costs for child care compared to the rest of the country, with families paying more than $23,000, on average, per year to enroll their children in infant care.[7] If facilities raise tuition to try to maintain current wages and/or lose educators to higher paying jobs and are therefore forced to close classrooms, the cost of child care will be pushed further out of reach for District families as supply goes down and tuition goes up.
As DC enters a local recession, disinvesting in programs like the PEF that have had major returns on investment will only exacerbate challenges for families and shrink the economy. If the Council is focused on an equitable recovery for all District residents, it should be investing in programs that pour resources into the industry and the workers that make all other work possible.
The PEF Requires Deeper Investments to Continue Delivering on its Promise
Re-establishing Pay Parity
At the start of FY 2024, OSSE switched from paying educators directly to sending payments through child care facilities based on a formula that paid educators based on their role and credential and included an enhancement to providers who accept child care subsidy vouchers. DC based the salary minimums on establishing parity between entry-level educators at DC Public Schools (DCPS) who hold bachelor’s degrees and early educators who hold bachelor’s degrees.[8] However, also at the start of FY 2024, the Washington Teachers’ Union renegotiated salaries with DCPS and those educators received a 2 percent cost of living adjustment, but early educators did not.[9]
On October 1, 2024, OSSE instituted a waitlist for any new facilities wanting to join the PEF, though participating facilities could continue to hire more teachers who would be eligible for salary awards under the waitlist.[10] Then, in November 2025, lawmakers passed the Early Childhood Educator Pay Scales Amendment Act that lowered the minimum salaries for early educators by 4 to 5 percent starting on January 1, 2026 in response to budget constraints on the program.[11] As a result, the District pushed the PEF program even further away from pay parity with DCPS educators, as originally envisioned in the Birth-to-Three for All DC Act. To re-establish pay parity, the Council should restore the previous salary minimums and provide a 2 percent cost of living adjustment.
Allow for Growth in Credential Attainment and Workforce Expansion
The PEF continues to attract new educators to the field and encourages those educators to gain higher credentials.[12] Even after OSSE deemed 672 assistant teachers ineligible for the program at the start of FY 2025 because they did not yet have Child Development Associate certificates (CDAs), and after instituting a waitlist for new facilities to join the PEF in October 2024, the total number of educators participating in the program is starting to climb back to FY 2024 levels (Figure 1). The PEF is serving an increasing number of educators despite serving a decreasing number of facilities because participating facilities are expanding and hiring more educators so they can, in turn, serve more families.[13]
FIGURE 1.
At the same time, credential attainment continues to increase among educators who participate in PEF (Figure 2). DC requires assistant teachers and home caregivers to have a minimum of a CDA and requires lead teachers in centers and expanded homes to have a minimum of an associate’s degree (AA).[14] However, because there exists a monetary incentive to attain higher degrees, many educators choose to pursue further degree attainment. As a result, the number of lead teachers with a CDA is decreasing over time while the number of PEF educators meeting or exceeding the credential requirements continues to grow. We expect these trends in credential attainment to continue through the end of FY 2026 and into FY 2027 if the PEF remains in place as currently designed.
FIGURE 2.
Keeping the legal requirement on credential attainment without pairing it with higher pay will likely lead to turnover and lower-quality care for DC’s most vulnerable children over the long-term. To reach full funding, the Council should budget for the increase in program cost as participation and degree attainment grows. Full funding would also require reverting to the higher FY 2025 salaries and adding a 2 percent COLA to re-establish pay parity with DCPS teachers, alongside other components of the PEF awards (Table 1).
TABLE 1.
Child Care Subsidy Funding Needs to Keep Pace With Demand from District Families
Mayor Bowser’s proposed FY 2027 budget for the child care subsidy program reflects waitlist savings and thus falls short of levels needed to keep up with growing demand among District families. To curb spending on the program, OSSE will implement a waitlist for new families seeking a subsidy on May 12, 2026, and they will freeze all new enrollment until enrollment drops to a level that can be supported by the annual funding allocated for the program.[15] OSSE is implementing the waitlist and freeze through emergency rulemaking, so U3DC is unable to advocate for its elimination in FY 2026, but the Council should fund the program sufficiently in FY 2027 to eliminate this harmful policy. The mayor also proposed reducing reimbursement rates for child care providers, bringing all providers down to the lowest rate, to further reduce the overall costs of the program and saving $4.3 million per year.[16]
The mayor proposed funding the program at $114.2 million for FY 2027, which is $21 million less than her proposed FY 2026 revised budget and $34.3 million less than the $148.5 million that DCFPI projects the program will actually need, even with a waitlist and enrollment freeze in place (Table 2).[17]
TABLE 2. 
Instead of finding ways to reduce spending on the child care subsidy program, lawmakers should be finding ways to ensure that every family who qualifies for a child care subsidy has access to one. Helping families pay for child care boosts DC’s economy by removing barriers to women’s participation in the workforce, freeing up family budgets to purchase more necessities from District businesses, and increasing the money child care providers have to overcome tight margins, hire more staff, and improve their facilities.[18]
Demand Continues to Rise for Child Care Subsidies
Enrollment across all eligible ages has been increasing the last couple of years, likely in part due to the changes OSSE made to make it easier for families to enroll.[19] Annual enrollment increased by approximately 1,450 children in FY 2025, which is far higher than the annual enrollment increase of 530 children in FY 2024.[20] This trend has continued in the first five months of FY 2026, with monthly enrollment increasing by an average of 19.3 percent from the same month in FY 2025 (Table 3).
Applying this average growth rate through May 2026 when the waitlist and freeze go into place, and then applying OSSE’s assumed 1 percent monthly attrition rate to enrollment levels in the months that follow, shows that the subsidy program would need $148.5 million in the revised FY 2026 budget for full funding.[21] To reverse the waitlist and freeze policies, DCFPI projects that the subsidy program will need $177.1 million in FY 2027 to keep up with the 19.3 percent growth rate in enrollment and restore the tiered quality ratings.
TABLE 3.
Note: Non-italicized figures reflect actual data and italicized figures reflect DCFPI’s projections. DCFPI assumed continued growth in enrollment through the month of May when the waitlist and enrollment freeze goes into place at a rate of 19.3 percent, the average growth rate for the first five months of FY 2026. Starting in June, OSSE expects a 1 percent monthly attrition rate as children exit the program. Projected monthly spending for June through September are calculated by taking the total enrollment for that month and multiplying it by $1,570.60, the average monthly cost per slot from FY 2025.
The Waitlist for Child Care Subsidies Will Inflict Harm on Families
The waitlist for the subsidy program threatens to undo significant progress OSSE has made towards increasing program utilization among eligible families. Requiring families to wait an indefinite period for a child care subsidy forces families to find alternative and often less stable forms of care, such as leaving their children in the care of family members or friends or opting to stay home with their children instead of pursuing a job or educational opportunity. And, if parents know that they are unlikely to receive a subsidy in a timely manner, they may opt to not apply at all, which results in fewer families entering the program.
A reduction in the number of subsidies available to families also makes it harder to operate a child care facility that accepts subsidies. For example, Indiana lawmakers implemented a waitlist in December 2024 and reduced provider reimbursement rates to try to close a major program funding gap. As a result, providers throughout the state were forced to “lay off staff, close classrooms, reduce wages, or shut down entirely,” which reduced the availability of child care for all families, not just those who depend on subsidies.[22]
DC’s child care costs are so high that it rivals the cost of college tuition, and with financial support to offset those costs waning under the mayor’s proposal, DC’s families will be left with impossible choices. One parent in Ward 7 said that without access to a child care subsidy, “I would be homeless; it’s either rent or day care. I would have terrible mental health,” according to a recent report by DC Action.[23] The same report highlighted other tough choices parents have to make when they cannot afford child care, such as reducing work hours, declining job promotions, turning down educational opportunities, and dropping out of school entirely.[24]
These choices not only harm individual families, but DC’s entire economy. Parents forced to spend more than they can afford on child care end up spending less at other local businesses. When they cannot afford child care at all, they work less or leave the workforce altogether, which means lower income for families, more staff turnover and less productivity for businesses, and less tax revenue for the District.[25]
Reducing Reimbursement Rates Would be the Final Nail in the Coffin for Providers Accepting Subsidies
The mayor has also proposed reducing reimbursement rates for child care providers starting in FY 2027, bringing all providers down to the lowest rate, to further reduce the overall costs of the program.[26] Reimbursement rates—or the monetary value of child care vouchers—vary based on the child’s age, whether they attend a facility part- or full-time, the type of facility (center or home), and the facility’s quality rating.[27] Since the adoption of the Birth-to-Three for All DC Act in 2018, OSSE must model the true cost of care every three years to determine reimbursement rates.[28]
The True Cost of Care model considers the variety of cost drivers in a child care center or home. These include educators’ wages and benefits—the primary cost driver—as well as adult-to-child ratios, the cost of supplies and supplemental services, and other expenses associated with licensing and compliance with local and federal laws. In general, it costs more to operate a center versus a home-based program and, in either setting, to serve infants and toddlers versus older children primarily due to lower adult-to-child ratios.[29]
OSSE has completed five cost modeling studies since 2016 and raised reimbursement rates to reflect increasing costs. However, reimbursement rates still lag the true cost of care except for the rate paid to child care homes serving infants and toddlers. In all other age, setting, and quality rating categories, reimbursement rates are 14 to 45 percent below the true cost of care (Figure 3).[30] Since OSSE raised reimbursement rates in 2023, lawmakers have cut the subsidy budget, so OSSE has kept reimbursement rates flat despite the increasing operational costs to facilities and inflation.
FIGURE 3.
Just over half of CDFs in the District currently participate in the subsidy program, with nearly all serving a mix of subsidy-enrolled and private-pay families. By reducing reimbursement rates, existing subsidy providers will struggle to keep up with the growing operating costs and may need to close classrooms or raise tuition for private-pay families to prevent closures. This may cause some CDFs to stop accepting child care subsidies and further disincentive non-subsidy providers from participating. In recent interviews with U3DC, some subsidy providers warned that reducing reimbursement rates, combined with the elimination of the PEF and a waitlist and enrollment freeze for the subsidy program, would require them to lay off staff, close classrooms, and reduce operating capacity.[31]
Fewer classrooms and CDF closures will shrink supply, which DC cannot afford because demand for child care already outpaces supply.[32] DC has made progress in closing the supply gap for infant-toddler seats. In FY 2024, there were enough infant and toddler seats to serve about 58 percent of families, up from 40 percent in FY 2023.[33],[34] Despite this progress, infant and toddler care remains prohibitively expensive for many DC families. Cutting reimbursement rates will exacerbate this problem because it reduces the funding the government contributes towards care and shifts that cost to CDFs and, ultimately, families, causing tuition to increase.
District lawmakers need to commit to fully funding the child care subsidy program and strive towards reimbursing subsidy providers based on the true cost of care. In her presentation to the Council in February, Mayor Bowser stated that reducing reimbursement rates would yield about $4.3 million in annual savings.[35] This policy change would make it far more difficult for providers to operate and may cause providers to raise tuition rates. These are outcomes that are hardly worth so little in savings. Investing fully in the child care subsidy program will help providers serve more families and make it easier for families to stay and thrive in the District.
It Is Possible to Close the Funding Gaps Left in the Mayor’s Budget Proposal
Taken together, Mayor Bowser has left a nearly $150 million hole in early childhood funding for the Council to fill: $82.2 million for PEF and $63.2 million for the child care subsidy program. The Council should explore a combination of raising new sources of revenue and shifting funding from other areas of the budget to keep these programs whole, keep children in safe and supportive learning environments, and to keep District parents working and thriving.
One option for raising revenue to immediately fill gaps in the FY 2027 budget is creating a wealth proceeds tax (WPT). This tax would promote equity in the tax code by taxing a greater share of wealthy residents’ passive income, such as income generated from cashed-in stocks, dividends, annuities, and similar vehicles.[36] A WPT would raise at least $121 million in a single year, depending on its design, by targeting the uber wealthy who receive preferential tax treatment that allows their wealth to be taxed less often, compared to workers’ income via paychecks, and to be passed to heirs tax-free, costing DC tens of millions a year.[37]
District lawmakers should also consider passing a Business Activity Tax (BAT). DC uniquely exempts certain businesses from taxation because of federal restrictions. These include major law firms, lobbyists, and consulting firms, most of which are white-owned, with most of the business owners reaping the benefits residing outside of the District. A BAT would correct this loophole by broadening the base of business taxation without increasing taxes on businesses already contributing to DC’s collective resources.[38] BAT revenue would be substantial: a 2 percent BAT rate could raise $500 million.[39] The BAT would raise the revenue DC needs, but once enacted, it would take at least a year to collect it.
The Council should also consider shifting funding from parts of the budget that do not have a proven positive impact on the lives of District residents and are not held to the same standard of rigorous evaluation as early childhood programs, such as Office to Anything, the Vitality Fund, corporate fee reductions, and tax abatements for developers.[40] DC voters support full funding for early childhood programs—72 percent support fully funding the subsidy program and 69 percent support funding the PEF—because voters want District leaders to invest in programs that build towards a brighter future for all.[41] A budget is a moral document that should reflect the needs and priorities of District residents, so lawmakers should ensure that there is sufficient funding to support programs that strengthen the social safety net and allow families to thrive.