Experts warn 2026 may deepen challenges for early care and education as states brace for federal funding cuts that shift costs to state budgets. That fiscal squeeze could force revenue increases or program cuts, widening the gap between states that can sustain investments and those that cannot. Immigration enforcement is reducing the foreign-born child care workforce and disrupting access and quality. Still, New Mexico’s universal child-care rollout, ongoing Head Start funding, and rising political support for child care offer important counterpoints.
4 Early Care and Education Risks to Watch in 2026 — Funding, Workforce and Policy Battles
If 2025 delivered mixed progress for early care and education, experts warn that 2026 could deepen those challenges as states prepare for difficult budget decisions ahead of looming federal funding reductions.
Four Issues to Watch
1. A Looming Fiscal Squeeze
The One Big Beautiful Bill Act, signed in July 2025, includes substantial cuts to Medicaid and SNAP that shift costs from the federal government to states. Although many of the largest reductions take effect after the 2026 midterms, state leaders are already planning. Unlike the federal government, states must balance their budgets, so they face a binary choice: raise revenue (for example, through taxes) or reduce services.
"It's less painful to do it slowly than all at once," said Melissa Boteach, chief policy officer at ZERO TO THREE, explaining why states are preparing now.
Experts expect this squeeze to reduce the dollars available for early care and education, making ambitious new initiatives less likely and putting existing programs at risk of scaling back or elimination.
2. A Growing Divide Between States
Policy choices will likely produce divergent outcomes across the country. Some states with protected revenue streams or recent investments — such as New Mexico, Vermont, Connecticut and Montana — may continue to expand supports. Others, strained by shifts in federal funding and depleted pandemic relief dollars, may retrench.
"We’re going to be looking at two very different countries," said Daniel Hains of NAEYC, describing a split between states that can sustain investment and those that cannot.
That divide could affect provider reimbursement, subsidy eligibility, and family copays — ultimately influencing access and quality for children and early educators.
3. Immigration Enforcement and the Workforce
Immigration enforcement emerged in 2025 as a major disruptor for the early childhood workforce. An estimated one in five early childhood educators nationwide are immigrants; in major cities, immigrants comprise nearly half the workforce. New America's December 2025 analysis found 39,000 fewer foreign-born child care workers between February and July 2025 compared with the same period in 2024, a drop tied to increased ICE activity.
"Immigration enforcement ... is the number one disruptor both to parent behavior and provider behavior," said Natalie Renew, executive director at Home Grown.
With increased funding for enforcement in the federal bill and the removal of some "sensitive locations" protections, experts say fear and workforce exits may continue to reduce availability and erode program quality.
4. Bright Spots and Political Momentum
Despite risks, there are notable positives going into 2026. New Mexico rolled out free universal child care for all families on Nov. 1, 2025, providing an early test case of a statewide universal system funded largely by oil and gas revenues. Head Start remains a funded federal program after facing multiple political threats in 2025, and several states — including New York, Texas and Washington — have signaled increased investment. Child care also proved to be a winning political issue in recent elections, with candidates who emphasized family supports performing well.
"As a whole ... it's exciting that child care feels like something that elected officials can deliver on," said Hains, reflecting on the shift from debating whether government should be involved in child care to discussing how and how much.
What To Expect
Watch for state budget proposals and legislative actions that reveal where cuts will fall — or where leaders double down on investments. Key indicators to monitor include provider reimbursement rates, subsidy rules, program closures or expansions, and workforce retention trends among immigrant educators. The next year will test whether states can protect and advance early care and education amid federal retrenchment and political volatility.
Notable names and examples: New Mexico (free universal child care effective Nov. 1, 2025), Head Start program disruptions in 2025, Indiana’s reductions in provider support, and increased ICE activity linked to workforce declines.
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