Establishing a Right to Early Education: Part Three of a Four-Part Series

On a late April afternoon in 2022, New Mexico Governor Michelle Lujan Grisham gave an important speech at East Gate Kids Learning Center in Albuquerque. Speaking before a crowd that included a large group of preschoolers sitting restlessly at the foot of the stage, Lujan Grisham announced the expansion of free child care for families earning up to 400 percent of the federal poverty level (FPL) starting in May. The policy change, originally intended to last for just over a year, made New Mexico the first state in the nation to offer no-cost child care over such a broad income range. “It’s free, no more co-pays, no more waiting,” said Lujan Grisham. “This is the road to a universal child-care system.”

That April announcement was the culmination of years of work on the part of the state’s early learning advocates and marked the furthest step any state has taken toward embracing universal access to early education. During a 2018 election campaign that focused on extending access to early education, Lujan Grisham vowed to tap the Land Grant Permanent Fund, a state land endowment estimated to be worth $17 billion, to put over $285 million into early education over five years.

After her inauguration in January 2019, Lujan Grisham moved quickly to turn her campaign promises around early education into reality. In February 2020, she signed a bill to launch the Early Childhood Trust Fund with $320 million in initial funding, calling it her “top priority” for the legislative session. A few months later, she celebrated the opening of the Early Childhood Education and Care Department (ECECD), making New Mexico one of the first states to consolidate all early childhood programs and services under a single cabinet-level agency and making early education an equal partner with K-12 education and higher education in that respect.

After the pandemic hit, the state received a total of $320 million in ARPA funds for child care and decided to put that money toward laying the groundwork for a universal early education system. In July 2021, ECECD raised the income threshold for receiving free child care assistance from 200 percent FPL to 350 percent with a phase-out at 400 percent FPL. The department also announced updated subsidy rates to be paid to providers based on a new cost estimation model, making New Mexico the first state to adopt this approach. Rather than relying on a market survey to set rates, the model takes into account the actual cost of providing care. A finance plan released four months later set plans in motion to increase rates to allow for a minimum wage of $18/hour for all employees and almost $25/hour for lead teachers in FY26.

The governor’s announcement in April 2022 of free child care for families earning up to 400 percent FPL meant that a family of four earning up to $110,000 now qualified for no-cost care. In a relatively poor state with a median household income of about $51,200 at the time, this meant that a majority of state residents now qualified for free child care. As the state put it in its official press release, the new policy “effectively means that the majority of New Mexicans have access to a free, cradle-to-career education.”

The money to fund such a dramatic expansion of no-cost care past the expiration of federal relief funds was guaranteed after the November 2022 election when 70 percent of 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. The amendment’s passage meant that about $127 million in additional funds per year would be directed to early education. Its passage was an important factor in enabling the state to build on the progress it had recently made using federal relief funds.

In May 2023, the 400 percent FPL eligibility threshold was made permanent along with another increase in child care subsidy rates expected to make higher staff compensation possible by increasing the average per-child rate by 20 to 30 percent. “There was a concerted effort on behalf of advocates to make sure that all this additional funding that was coming from state sources would seamlessly continue the policies that the federal funds had initially paid for. So we've continued the eligibility up to 400 percent of the federal poverty level for subsidized child care, effectively making it universal access here,” said Jacob Vigil, deputy policy director of New Mexico Voices for Children, a nonpartisan, statewide advocacy organization.

As far as next steps go, Vigil highlighted a few priorities, including a focus on establishing wage and career ladders for the early education workforce, building child care supply to meet demand, and protecting the existing funding sources. “We know that it's something we're going to have to continue to defend and that the legislature has the right to appropriate those funds as they see fit year after year. And so we are doing defense all the time, making sure they don't touch the 400 percent eligibility, the no copays. We don't take it for granted that those things could be under threat, but thus far we've been successful,” said Vigil. Merline Gallegos, a Las Cruces-based family child care provider and leader of the non-profit organization OLÉ, also pointed to the importance of focusing on educator compensation: “We're fighting to get that wage and career ladder. We don't want to leave out teachers who are teaching infants, because they are the ones that are the most left behind,” Gallegos said in Spanish.

While California is a much wealthier state than New Mexico, what the two states have in common is their progress in moving toward a system that guarantees universal access to early education. Transformational legislative wins over the last summer have brought California closer to realizing such a system. Those recent policy wins consist of many different parts, but revolve around two key issues: family fees or co-pays, meaning the dollar amount paid by families to access subsidized child care, and the rates paid by the state to providers of subsidized child care.

Federal law requires states to charge families on a sliding scale for subsidized care, but it’s up to the states to decide which families to charge and how much to charge them. California used COVID-19 funds to waive these family fees during the pandemic, but they were set to return in June 2023.

These fees are no minor expense for many of the state’s families. In fact, families had to pay 10 percent of their monthly income, resulting in fees over $600 per month for some. With just a few exceptions, families unable to pay the fee lose access to care. That all changed thanks to a commitment of $56 million from the state’s general fund. Starting October 2023, families earning less than 75 percent of state median income don’t owe any fees at all and any outstanding fees are waived. The deal also makes clear that no family qualifying for subsidized care will have to pay more than one percent of their income in fees, with a maximum fee of about $61 per month.

The promises secured over the summer related to the rates paid to providers of subsidized care are no less significant. As part of a two-year contract reached between the state and Child Care Providers United, a statewide union that represents over 40,000 family child care providers, the state pledged $600 million over two years for one-time rate increases.

Even more important than this one-time funding increase, the state committed to a timeline for reforming how the state pays for subsidized care. In the past, providers have been paid based on outdated market rates from at least five years ago, meaning the rates neither reflect the true cost of care or rising rates of inflation. The new agreement calls for a new and improved reimbursement model to be negotiated and then submitted for federal approval by July 1, likely resulting in a significant pay raise for providers who have been struggling to break even.

“The shift to a cost-based rate setting methodology is significant because it has the potential to address decades upon decades of system failure,” said Brandy Jones Lawrence, senior analyst at the Center for the Study of Child Care Employment, via email. “Switching to a cost-driven model for assessing child care reimbursement from a market-based rate structure that is predicated on what parents can afford represents a whole new way of funding our early care and education system,” continued Lawrence.

The stories of New Mexico and California offer encouraging signs of progress in ensuring access to early education, but, as Elliot Haspel has pointed out, they also beg the question of where to draw the line between who gets free care and who has to pay. The Build Back Better Act would have followed California’s lead in making care free for families with incomes below 75 percent of state median income. At the same time, New Mexico uses an income of 400 percent FPL and Vermont has settled on 175 percent FPL as its threshold for qualifying for no-cost child care. What eligibility threshold makes the most sense? And should the ultimate policy goal be treating early education as a public good and offering free care for all or is simply offering affordable care an ambitious enough goal? The next and final blog post in this series will explore these questions and more.