In January 2025, Missouri Gov. Mike Kehoe made a pledge in his first State of the State address to childcare providers in his state: starting later that year, those who accept subsidies were going to get paid based on how many children they had enrolled in their programs, “just like private pay,” he said. “Together, we will secure a better environment for providers to thrive, and Missouri’s children to be set up for success.”
It was music to Lisa Scheer’s ears. The director of the Baden Christian Child Care Center in St. Louis said her program only serves children whose parents receive subsidies to cover the cost of their children’s care. The state has long paid her based on attendance, rather than enrollment. That means if a child gets sick and is out for a week or two, her reimbursement at the end of the month will be less than she expected. The parents of kids in her program, which is located in an economically depressed neighborhood, can’t afford to pay her back for the loss of state money, she said. But her costs stay the same whether their children are there or not, and there’s very little wiggle room in her program’s budget: After all of the monthly bills are paid, she said she’s typically left with just $1,200 to $1,500 as her “margin of error.” She tries to save what she can each month to create a cushion against the fluctuating reimbursement amounts.
After Kehoe’s speech, Scheer was chosen to be in a pilot program to start getting paid based on enrollment before it went into effect for all providers. It was fantastic, she said. When she got her first reimbursement as part of the pilot, she said, “I’d never seen a check that big.” With the stability of knowing she would get paid for all of the children in her care no matter who was sick or absent, she could invest funds back into her program. She was able to increase pay for each teacher by $1 an hour and could finally afford a $30,000 air conditioning unit to replace one that kept breaking. “It just felt nice to be able to just pay all your bills without worrying about how much is coming in this month,” she said. “I knew what we were going to get paid.”
The state has since broken the promise Kehoe made to providers. The budget he signed in June left room for changes, but the state is sticking to paying them based on attendance and reducing reimbursements if children miss more than five days in a month. The pilot ended and Scheer stopped getting paid based on enrollment in June.
She noted that parents who pay childcare providers out of pocket, rather than getting government subsidies, are required to pay upfront for their child’s spot and don’t get any money back if their child gets sick or they go on vacation. “It’s just really the state saying, ‘Oh we’re not going to adhere to your business plan or your business practices,’” Scheer said. She recently had an infant who was absent for two weeks because he was sick, and she only got paid for five of those 10 days. “But I still have to pay that teacher,” she noted.
Scheer said she expects to run through the surplus she saved up by the end of October. She’s contemplating having to reduce pay for her staff, which she knows will almost certainly mean some will quit. She even has a plan if things get dire enough: She’ll step down as director so the program no longer has to pay her salary, get a different job somewhere else, and have her retired mother step in to run the program as an unpaid volunteer. Scheer isn’t a crier, she said, but she’s been crying at night at the prospect. Through tears, she said, “It’s just hurtful. It’s very stressful.”
Under the Biden administration, the Department of Health and Human Services, which oversees the Child Care Development Fund that provides federal funding for state subsidy programs, issued a rule requiring all states to pay providers based on enrollment, not attendance, so they could count on the money as they do with parents who pay privately. “It was really clear that the childcare sector was in crisis,” said Ruth Friedman, who worked on the rule at HHS under President Joe Biden, “and the federal government was contributing to the instability of providers and contributing to providers having trouble keeping their doors open.” States were given two years to come into compliance, although some received waivers to take longer. Twenty-seven states — from Alabama to Massachusetts — currently pay providers this way, according to an analysis from Friedman.
But then, earlier this year, in the wake of allegations of fraud in Minnesota’s childcare system spread by a conservative YouTuber, the Trump administration reversed course, rescinding the rule and no longer requiring states to comply — although they can still do so voluntarily. The administration claimed the Biden-era rule “increased the risk of waste, fraud and abuse.” Members of Congress went further: In July, Sens. Bill Cassidy and Tommy Tuberville introduced a bill, titled the STOP Child Care Fraud Act, that would ban payment based on enrollment.
“This has nothing to do with fraud,” Friedman contended. “That is a completely made-up narrative by the Trump administration as part of their broader inauthentic attacks on public assistance programs.” In states that pay based on enrollment, providers still have to track and report attendance in accordance with clear rules, she noted. If a family enrolls but a child doesn’t show up, providers have to notify the state. “The state is not paying out endlessly,” she said. The improper payment rate for CCDF in 2023 was less than 4%. That rate includes mistakes, such as accidentally overpaying providers, not only intentional fraud. “There is no evidence of significant or widespread fraud in the federal childcare program,” Friedman said.
Most parents in this country pay for childcare based on enrollment. In “truly the vast majority,” said Daniel Hains, chief policy and professional advancement officer at the National Association for the Education of Young Children, parents who don’t use subsidies pay providers in advance to secure their child’s spot no matter how often their child attends. In NAEYC’s January 2026 survey of childcare program directors, about 80% of respondents said they require families to pay for days when their child is absent. Childcare providers face fixed costs — such as staff pay, rent, insurance and materials — “and those costs don’t go down because a child is absent one day or a family takes a vacation,” Friedman noted.
It’s also how public schools are funded. “If your child is sick for a week, the elementary school does not send money back to the state,” Friedman said. “That would make it impossible for our schools to operate stably.” Teachers wouldn’t stay in their jobs if their pay depended on whether and when students showed up, she said. But in childcare, it’s a permissible policy.
Felicia Cook has run her childcare program, Kids World North, in St. Louis, Missouri for 20 years. About 90% of the children she serves receive subsidies, and they’re often absent in the winter months due to sickness and the summer months when they can be watched by older siblings. The flu “can take out a whole room,” she said. Last year was a rough flu season — the disease swept through the whole school, with some children out for a week, she said. When that happens, she has to cut back where she can — nixing staff development days, for example, or buying fewer supplies. “There’s a kid in that spot,” she pointed out. “I can’t put another kid in that spot.” To offset possible dips in payment, she tries to keep enrollment high, but that has gotten harder since Missouri instituted a subsidy waitlist that leaves new families unable to enroll in programs unless they can pay out of pocket. Her infant classrooms, which are usually completely full this time of year, are only half enrolled.
Cook was excited to start being paid based on enrollment. That would have reduced her stress. She would have been able to put extra money toward teacher salaries, she said. “It would be great to know every month exactly what your payment is going to be and to know that you get paid the same way that your cash paying parents pay,” she said.
When providers know how much money they’ll receive for providing care each month, it stabilizes their businesses, which typically operate on incredibly thin profit margins. That’s important for families who receive subsidies, because it allows providers to participate in the subsidy program without facing a penalty, Friedman noted. In the NAEYC survey, 68% of program directors said being paid based on enrollment would make them more likely to accept or continue accepting subsidies. It also allows providers to serve families with less stability themselves, such as those with variable work schedules or who have to move around a lot, noted Chloe Gibbs, a senior economist at the W.E. Upjohn Institute for Employment Research. Stable finances and pay also mean less staff turnover, which is important for children’s development, said Melissa Boteach, chief policy officer at Zero to Three.
Enrollment-based pay is also good for parents who can afford to pay for care. Families need providers to stay open; the chaos of attendance-based pay threatens to force some providers to close, decreasing supply for families who need care. “This is a system that’s already like a Jenga board, and you don’t know which piece you’re going to pull out of it is going to be what topples it,” Boteach said. Paying based on attendance “is certainly taking us in the opposite direction we want to be going in, in terms of creating a system of care and education where children thrive and parents have stable care.”
“The business model for childcare providers is really precarious,” Gibbs said. Paying based on enrollment “was a way of smoothing some of that volatility.”
Missouri is not the only state that has responded to the Trump administration change by reversing course on progress toward paying based on enrollment. After approving a budget provision last year to pay providers based on enrollment, Ohio lawmakers are now considering legislation that would enshrine attendance-based pay. It passed the House in June and now sits with the Senate. Similarly, after codifying payment based on enrollment last year, this year the Washington State legislature reversed course and reinstated the prior system. “Enrollment-based payment was never a partisan issue until the Trump administration decided to attack it this year,” Friedman said.
Across all three of Marquita McClendon’s childcare programs in Cincinnati, Ohio, about 60% of the children receive subsidies. Her private pay parents pay her in advance for an entire week at a time. But the instability of how much she gets paid by the state based on whether or not all children with subsidies show up is very challenging. “It’s hard to make a profit as a business,” she noted. Children will sometimes skip a day if their families can’t get them to drop-off by 9:00 a.m. In the summer they go on vacation. With the reduction in pay, she said she can’t buy extra toys for her classrooms or take the children on field trips because she can’t afford gas.
McClendon knows what a difference enrollment-based pay would have made. She runs a different program across the river in Covington, Kentucky, a state that pays based on enrollment. She can pay her staff better, besting the wages they might get a McDonald’s or Burger King, she said. “We’ve been consistent and actually growing and opening up more programs because more money is coming in because it’s consistent.” Back in Ohio, things are very different. “The purpose for the enrollment over attendance was to stabilize the economy. So we never got stable.” She’s watched other local programs close their doors because of it.
“I do still feel that the state of Ohio needs to be held accountable,” she said. Of the lawmakers who backtracked on their promises, she said, “We’re going to vote them out.”