Indiana Child Care Providers Struggle to Stay Open After State Slashes Rates
By Bryce Covert - November 18, 2025
Dionne Miller, who runs Room to Bloom Learning Academy, a child care program in Indianapolis, has been faced with some impossible choices over the past year.
In December, Indiana’s Family and Social Services Administration announced that, due to the end of pandemic-era federal relief funding, it would stop enrolling new children in its main child care subsidy program, the Child Care and Development Fund (CCDF), and institute a waiting list. The number of child care vouchers available per month dropped by more than 17,000 from last December to September, according to the state agency. The waitlist now has over 30,400 children and the state has said it won’t issue any new vouchers until 2027.
Miller’s program is one of many that’s feeling the strain. All of the families with infants at Room to Bloom rely on subsidies to afford care, but those infants have aged out and moved into toddler classrooms. Because families can’t enroll new babies, she’s had to completely shutter her infant classroom. That took a big toll on her financially. “Your highest rates of pay comes from your infants,” she said. “We no longer have that stream of income coming in.”
Then, on Sept. 4, Miller received an email from Indiana’s Family and Social Services Administration’s Office of Early Childhood and Out-of-School Learning (OECOSL) with even worse news. The department was drastically cutting CCDF voucher reimbursement rates. “These adjustments address a $225 million funding gap through 2026 created by the prior administration’s unsustainable use of temporary COVID relief funds and ensure continued compliance with federal requirements,” the email stated.
According to the email, providers would see a 10% decrease in the vouchers that pay for infants and toddlers from birth through 3 years old, 15% less for children ages 3 to 5, and a 35% drop for school-aged children cared for after school and during the summer. To arrive at these cuts, OECOSL said it had surveyed 25% of licensed providers and calculated reimbursement levels “that reflect current operating realities.”
“We did not have any warning whatsoever” that the reductions were coming, Miller said. “We were blindsided.” Since Miller’s program serves children from birth through age 5 during the day and provides after-school care for older children, she knew she’d be impacted by cuts across all the age bands, so she reworked her budget to be able to absorb the cuts without having to ask her families to pay any extra. She eliminated field trips and programming like baby sign language and STEM.
But about three weeks later when she went into the system to view her reimbursements, she discovered that the state had cut deeper than the email suggested. She found that her original rate of $155 a week for a school-aged child was not in fact being reduced to $100.75, which would have been a 35% cut. Instead, she received $49 per school-aged child, which is about a 68% drop. At first she thought it was a mistake, but then she made some calls and eventually was told that the percentage cuts were taken from a new, lower base rate.
That $49 a week is supposed to cover everything Room to Bloom offers school-aged children: transportation from school, a teacher who offers homework help, an established curriculum. She said her reimbursement rate for children ages 3 through 5, meanwhile, has also been reduced by $68 dollars a week, while the rate for the youngest kids decreased by $14. Miller can’t afford to absorb that kind of cost on her own. She’s reduced staff hours, dropping some to part-time status, which may make it harder to retain quality employees.
Even that is not enough. “Unfortunately now we have to ask our families to pay a CCDF shortage just so we can stay afloat,” she said. She’s not asking any parents to pay the full amount that she’s losing, but she’s asked most to kick in something. Those with school-aged children have been asked to pay $51 a week. “I will tell you, that’s hard,” she said, adding that before the cuts, parents didn’t pay at all. Some families simply don’t have that kind of money. For them, she’s just eating the cost. “We have to take care of them,” she said. “I cannot allow these students to be left hanging. I cannot do it.”
Miller is far from alone in her experience. The cuts Indiana has implemented in its child care program since the end of last year are wreaking havoc on providers across the state. The state did not respond to a request for comment on the number of child care programs that have closed this year. According to Hanan Osman — executive director of the Indiana Association for the Education of Young Children (AEYC), which is gathering data on closures — more than 100 child care programs closed in September and October following the steep reimbursement rate cuts. Of those closures, 49 were due to economic hardship, while 16 were because of low enrollment. “Those programs are done forever,” Osman said.
The decrease in vouchers means that collectively, providers are losing an estimated $1.9 million a week in revenue, while the reduced reimbursement rates have led to an estimated $1.8 million weekly loss, according to Early Learning Indiana, a state-level nonprofit that’s tracking data on the impact of the CCDF cuts on revenue.
More child care closures are expected to come. In an August survey of 443 providers conducted by Early Learning Indiana, nearly 80% said they were receiving decreased funding from CCDF vouchers. Just 16% said they were fully enrolled, about 19% had closed at least one classroom, and 11% said they believe they will have to close entirely over the next year.
Indiana is not expected to be the only state to experience this crisis. All states have been grappling with a severe decline in federal funding. In 2022, the American Rescue Plan sent states $39 billion to prop up the struggling child care sector, but the grants stopped flowing at the end of 2023. The Biden administration’s “Build Back Better” legislative package, which included $100 billion for child care, was meant to ensure continued funding, but when it failed to pass it left an enormous, unfilled hole. “All of that is coming down,” said Jennifer Wells, director of care at Community Change, which organizes child care providers to advocate for policy change.
The events unfolding in Indiana illustrate “an example of what happens when this funding gets cut,” Wells said. “But it’s not going to be isolated to Indiana. We know it’s going to spread.” Already Arkansas has followed suit; on Sept. 19, the state announced that it was cutting reimbursement rates for providers and instituting new copays for parents, although after opposition erupted the reimbursement change was paused for 30 days. Its voucher waiting list is currently frozen. “We know it’s going to snowball across the country,” Wells said.
“Indiana is in crisis,” said Martha Rae, a former Indiana child care provider and current advocate. “Dumpster fire in a flood zone — that’s how we feel right now.”
Indiana has now potentially poured gasoline on the fire. On Oct. 10, OECOSL sent an email, shared with The 74, to families who receive vouchers that said, “We understand that some families may be noticing higher out-of-pocket costs since the recent provider subsidy rate adjustments.” After noting that providers set their own rates, in bold it told parents that they “have the right to choose a provider that best fits their family’s needs and budget.” It added, “Your child care voucher belongs to you, and you may use it at any eligible CCDF provider.” Advocates and providers fear this message will prompt parents to move to programs that are charging less or aren’t charging any extra at all. It will “create competition amongst providers,” Rae said.
Alyssia Thompson, who runs the Agape Learning Academy, a child care center in Merrillville, Indiana, is already watching this happen. It’s become “survival of the fittest — shark tank,” she said. Thompson said she knows of providers who are charging “the bare minimum” to try to siphon children from other programs. “Parents are going wherever they can afford,” she said, even places that “might not even have a license.” The only reason she hasn’t lost families, she said, is because so many of them have been with her for so long.
As with Miller, Thompson has experienced a far larger reduction in her reimbursement rates than the OECOSL email indicated. Typically, she would be reimbursed $160 a week for a school-aged child, but that’s dropped to $48, a 70% reduction. The rate for her preschool-aged children was reduced by 24%. “We were given false information,” she said.
Thompson had to make cuts to try to make the math work, such as getting rid of her cleaning service. “Anything I was paying to outsource to do, we have now just picked it up,” she said. “Now we have to do everything.” She’s asked parents to bring in snacks to reduce the cost of food. Even so, she’s had to ask each family to pay an extra $25 a week.
Even with those changes, she may not be able to keep the doors open. The possibility of having to close her program “has definitely been a discussion,” she said. She’s confident she has enough money to operate for the next six months. But, she said that over the next four months, if she doesn’t see any signs that the state is changing course and she hasn’t been able to make up enrollment with parents who don’t use vouchers, she will notify her parents about closure.
Early educators and advocates are mobilizing to push back on the cuts. “As soon as these providers got word of these cuts happening, they were immediately set on fire,” Wells said. The Indiana AEYC organized “INAEYC Calling Day” on Nov. 5 and the association asked providers and families to call state legislators to make the case for investing in child care. With a budget surplus of $337 million this year, they hope to convince lawmakers to dedicate money to the sector.
If they don’t, Miller is consumed with fear about what will happen to the school-aged children in her program. “Those are the most vulnerable students,” she said. She worries that if they can’t afford what she now has to charge them parents will decide to leave children home with an older sibling or even by themselves. That, she frets, will put them in danger; they’re not old enough to be cared for by anyone but an adult, she said.
To the state, Miller has a message: “Fix this crisis that you have put families and child care providers in.” She added, “Some way, somehow, it needs to be fixed.”
To read this article on The 74 website, click here.