DCF says childcare special fund is supporting far more families; $92.6M projected spending and a new quality incentive program

Gianna McLaughlin, deputy commissioner in charge of the Child Development Division at the Department for Children and Families, told the Ways & Means Committee that DCF is using childcare special fund dollars for two statutorily authorized purposes: childcare financial assistance and a quality and capacity incentive program.

"The really simple answer to how do we use the special fund is in the ways that we are supposed to act '76: 1 is childcare financial assistance and the second is on a quality and capacity incentive program," McLaughlin said.

McLaughlin said DCF projects about $92.6 million in childcare-related spending for the fiscal year; she also said DCF did not have access to roughly $60 million of the money in state fiscal year '25 while the departments worked out allocation and transfer procedures.

She described significant expansions in service: comparing December 2025 to December 2022, DCF reported a 76% increase in the number of children receiving childcare financial assistance and more than a 50% increase in the number of families receiving subsidized childcare.

McLaughlin outlined the quality and capacity incentive program, rolled out beginning in October 2024, which uses three components: achievement bonuses (including payments for improving or renewing STARS quality ratings and for earning specialized child care status), credential-based payments to staff, and additional supports for providers who serve children with higher needs. The program is designed to raise provider compensation and program sustainability.

Committee members pressed for more detail on cost-of-care trends and the program's impact on families who pay the payroll tax but do not qualify for subsidy. DCF said it has an upcoming round of family and provider surveys and is working with Child Trends on modeling and focus groups to study impacts; DCF acknowledged additional analysis on market rates and family shares is forthcoming.

McLaughlin and DCF staff also described the state's funding mix: special fund receipts from the childcare contribution, general fund appropriations, federal CCDF and other federal grants, an EITC swap used to manage work-participation rates, and a small amount of Medicaid Global Commitment dollars targeted to children with special health-care needs.

On budgeting priorities, DCF said it draws federal funds first and uses the special fund and general fund as part of a hierarchy to meet demand; staff said the FY27 governor's recommended budget reduces the special fund estimate and increases general fund support to avoid service disruption while estimates are refined.