Growing Number of States Turning to Dedicated Funding for Young Children

On November 4, voters in several parts of the country voted to create dedicated streams of public financing to support young children. Cincinnati voters renewed a tax levy for ten years that is expected to provide $15 million in annual funding for Cincinnati Preschool Promise, a non-profit organization which provided tuition assistance to over 1,000 pre-K students last year. Additionally, voters in western Colorado voted to establish a regional special taxing district expected to generate $12 million per year in child care and pre-K funding through a 0.25 percent sales tax. With the possibility of state budgets being squeezed as a result of the Medicaid cuts in the reconciliation bill signed into law in July, establishing dedicated funding for early childhood education can be an effective way to ensure these programs don’t get left out during the budget process.

The voters in Cincinnati and Colorado are not alone in approving specific sources of revenue to fund programs that benefit young children. In fact, creating dedicated funding streams via voter-approved ballot measures or state legislative action is becoming increasingly common, according to a new publication from Children’s Funding Project (CFP). “Since 2017, every single year there’s been at least one dedicated fund created,” says Bruno Showers, CFP’s state policy manager and a co-author of the report.

The first such fund was created in 1984 when South Carolina lawmakers established a one percent sales tax levy that is still in operation, raising more than $1 billion in fiscal year 2026, with about $93 million dedicated to early childhood education. In 1992, Georgia voters approved a constitutional amendment to create a state-run lottery that has provided billions of dollars for public pre-K as well as higher education.

In 2023, Vermont became the first state to use a dedicated payroll tax to fund child care with the passage of Act 76. The payroll tax generated $80 million in fiscal year 2023 to bolster the state’s child care subsidy program. The following year, in 2024, Connecticut established the Early Childhood Education Endowment to improve workforce wages and address affordability issues in the state’s child care system. While the fund was created in 2024, it wasn’t until the next year that legislation was passed to ensure that the fund receives funding via transfers of estimated surplus revenue. According to Showers, there can be advantages in creating a dedicated fund even if money is not immediately allocated to it: “It gives you the time to lay that groundwork so that when funding is available it can actually be utilized. And that’s politically helpful because it’s hard when the taxes are online but the program isn’t.” Earlier this year, Connecticut’s endowment was funded with $300 million from the state’s general fund surplus.

It’s not just traditionally liberal states that have recently created dedicated funding streams focused on young children. Montana lawmakers voted this year to establish the Montana Early Childhood Account with an initial investment of $10 million via a one-time revenue surplus. Half of that money will be reinvested to generate new future revenue and a smaller portion will support initiatives around quality improvement, affordability, and innovation in early education. CFP assisted advocates in both Montana and Connecticut by providing research and revenue options as they explored options for establishing dedicated funding to benefit young children.

Dedicated funding streams for children can come from a variety of revenue sources and offer distinct advantages over relying on annual appropriations. States commonly dedicate portions of sales and excise taxes to early childhood education as well as payroll and capital gains taxes. And with more states legalizing cannabis as well as sports betting, voters and lawmakers are increasingly turning to these new revenue sources to fund children’s initiatives. For example, 89 percent of the revenue in the Louisiana Early Childhood Education Fund came from sports betting in fiscal year 2024.

Relying on these dedicated funding streams can help ensure continued funding by avoiding the time and resources necessary to battle for line-item funding as part of each state’s budget process. “An advantage of dedicated funding versus the year-to-year budget appropriations is that it protects the funding from political, economic, and budgetary pressures.… A year-to-year budget allocation is up to the whims of each individual legislature and the administration that’s in charge to actually appropriate the funding as they’ve been legislatively allowed to do,” says Showers.

The pace of states adopting these sorts of dedicated funding streams has increased in recent years. In 2022, New Mexico voters approved a constitutional amendment to direct an additional 1.25 percent of revenue from the Land Grant Permanent Fund to early education each year. These funds, most of which come from leases and royalties from oil and gas companies operating on public lands, have allowed the state to make significant investments in early childhood education. Recently, these funds enabled New Mexico to become the first state to offer free child care to all residents.

Advocates interested in learning more about establishing dedicated funding for young children in their state can explore CFP’s resource library for more information.