Vermont and New Mexico Expand Childcare as Federal Funds Dry Up

New Mexico became the first state in the nation to offer universal childcare in November 2025, expanding a program that previously served only low-income families to cover all working parents regardless of income. The state aims to double the number of children covered from 32,000 to 64,000 by 2028. Officials estimate the program will save participating families an average of $12,000 per year.

The move comes as federal funding for childcare, which surged during the pandemic, has largely run out. In 2021, pandemic relief legislation directed nearly $40 billion to the sector, a fourfold increase over previous levels. That money supported wages for staff and helped stabilize 220,000 providers who served 9.6 million children. As those funds began drying up in September 2023, several states started filling the gap with their own strategies.

Vermont took a different approach in 2023 by becoming the first state to pass a law establishing a childcare entitlement. The legislation, which passed with bipartisan support after more than a decade of advocacy, created a near-universal public system funded partly by a 0.44% payroll tax split between employers and employees. Since July 2022, the number of families covered under expanded income tiers has risen by 55%. About 12,000 children are currently covered by this program.

In April 2026, the Kentucky legislature passed a measure with strong bipartisan backing to invest in state infrastructure. The bill includes free childcare for children of childcare center employees and increased reimbursement rates for providers. It also loosened regulations allowing employers to share costs for care, such as facility rentals. The measure includes a pilot program for one-room microcenters in areas with limited options. Gov. Andy Beshear launched a separate Pre-K for All pilot in several counties.

New York City is also expanding its offerings. Mayor Zohran Mamdani announced a plan to build a universal early childcare system, starting with free slots for toddlers as young as two in all five boroughs. This builds on existing free programs for three-year-olds and preschoolers. The rollout in September faced some operational bumps, but the city has increased available slots.

The pressure for these state-level moves is driven by rising costs. The national average price for childcare in 2024 was $13,128 annually, more than doubling out-of-pocket expenses for center-based care since 2019. A 2023 government survey found that over 70% of families who sought care found it difficult to secure a spot, with 11% failing to find any at all.

Supply issues compound the cost problem. Three-quarters of providers say they must turn families away or place them on waiting lists. In 32 states, the cost of center-based infant care exceeds in-state tuition at a public university. Yet childcare workers, who are predominantly women of color, earn wages comparable to parking lot attendants and dog walkers.

Researchers from a sociology and childcare policy study interviewed 75 parents in St. Louis, Missouri, over several years. They reported that many families rely on informal care from relatives or unlicensed providers because formal options are too expensive or scarce. One parent described paying for a week of care with breast milk to feed the provider's grandchildren. Another shared that she works at a gym that offers free childcare for members, using the space as an office while her toddler plays.

The economic impact of this gap is substantial. The consultancy BCG estimates the U.S. could lose up to $290 billion per year by 2030 in forgone economic activity because women work less or not at all due to childcare pressures. In September 2026, Vice President JD Vance proposed a plan to repurpose existing subsidy funds as a cash transfer for married parents where one spouse stays home. Currently, only 16% of eligible children are reached under the existing subsidy program Vance cited.