Indiana is reducing the reimbursement amount for child care providers who serve low-income families through a voucher program to address a $225 million funding gap.
Indiana’s Office of Early Childhood and Out-of-School Learning, which administers the vouchers, said that the rate cuts were to focus their help on families.
“We made this decision to protect the children and families that depend on CCDF vouchers,” said Adam Alson, Director of the office, in a news release on Sept. 4, 2025. “There is only one pot of money – we could either protect providers or kids, and we chose kids.”
The money saved from the change, however, won’t get families off the extensive waitlist anytime soon, state leader said.
The vouchers are through the federal Child Care and Development Fund (CCDF) program, which provides funds to low-income families to help access child care or out-of-school care for any eligible child under the age of 13. To be eligible for a voucher, a family’s gross monthly income before taxes must be at or below 150% of the federal poverty line, or $3,751 a month for a family of four.
This rate change announcement is the latest in a series of bad news for low-income families and child care providers after the state announced in December 2024 that waitlists for two child care voucher programs would restart due to the nearly $1 billion Medicaid budget shortfall found in 2023.
Alson’s office also points blame at Gov. Eric Holcomb’s administration, which over-enrolled families and increased reimbursement rates with COVID-19 relief money, which did not provide sustainable funding.
Due to this financial shortfall, the Office of Early Childhood and Out-of-School Learning said they do not foresee new families receiving vouchers through the end of 2025. The legislature appropriated $147 million this past session to protect current families using the vouchers.
“The action that we’re taking today is a major step in getting our financial house in order,” Alson said.
As of the end of June, around 55,800 children were relying on either the CCDF or Indiana’s On My Way Pre-K vouchers, which help low-income families pay for preschool for 4-year-olds.
There were approximately 25,000 children on the waitlist for CCDF or On My Way Pre-K vouchers at the end of June, according to the office’s latest quarterly finance meeting.
Here are the rate changes announced for providers:
Infants (0–12 months): 10% decrease
Toddlers (13–36 months): 10% decrease
Preschoolers (3–5 years): 15% decrease
School-Age Children (K–12): 35% decrease
Alson’s office said they established these new rates by surveying 25% of licensed child care providers and analyzing their cost data, “arriving at reimbursement levels that reflect current operating realities.”
Critics, including House Democrats, say this move was preventable if state Republican leaders hadn’t decided to dedicate more money to Indiana’s private school voucher program and cut taxes during this latest budget session.
“(Republicans) have now put working Hoosier families in the impossible situation of deciding whether to have a job or stay at home and take care of the kids,” said House Democratic Caucus Chair Carey Hamilton, D-Indianapolis, in a news release.
Hamilton says she’s worried about child care providers closing and how this will impact working families who cannot afford to stay at home or pay for more expensive options.
Contact IndyStar K-12 education reporter Caroline Beck at 317-618-5807 or CBeck@gannett.com. Follow her on Twitter (X): @CarolineB_Indy.
This article originally appeared on Indianapolis Star: Indiana slashes child care voucher rates, halts new enrollments in 2025