NC budget offers rural childcare businesses financial help they’ve sought for years

It’s been a difficult year for Mary Moody, owner of the top-rated Silver Bluff Kids Early Learning Center in Haywood County. She said her business has struggled since federal pandemic funds used to keep childcare centers open ran out in 2025. 

Moody didn’t want to cut staff salaries after the federal money ran out, she said in an email, but avoiding wage cuts and paying higher operational costs meant the center had to end contributions to retirement plans and employee health insurance reimbursements “because the money simply wasn’t there.”

The center also had to cut back on art and craft supplies and some activities. 

The new state budget tosses a financial life preserver to rural businesses like Moody’s that provide subsidized childcare, offering them some hope of stability after a long period of hardship.

The budget commits $97 million in federal funds to raise subsidy rates, and it also sets a minimum rate, called a “rate floor,” that will end up sending more money to rural childcare providers than they otherwise would have received. Subsidies help low-income families cover childcare costs. 

“This is what we have been begging for for years,” said Mandy Mills, executive director of the Southwestern Child Development Commission.

Rural providers collect fewer subsidy dollars per child than urban providers. Payments are based on market rate studies, as well as the quality of the childcare center or home and the age of the child. 

Rural providers have argued for years that the rates they’ve been paid fall far below their actual costs. 

Mills’ commission administers subsidies for 14 western counties and operates the childcare resource and referral service for 37 counties. The rate floor will make a huge difference in rural western countries, she said. 

“It’s going to be a game changer,” she said. “We have had programs closing right and left.”

It’s not just childcare providers who called for a rate floor. Child advocates and businesses did, too. The NC Chamber Foundation called the rate floor a “breakthrough” and “the single most consequential childcare provision in the budget.”

Establishing a rate floor was also a top recommendation from Gov. Josh Stein’s Task Force on Child Care and Early Education. 

Rural centers and home-based childcare operators that had been struggling are in line for significant increases.

A top-rated, five-star center in Randolph County receives a $867 subsidy per month for each infant, said Leanna Martin, director of early childhood education policy and research at NC Child. Starting in October, that same center will see subsidies increase by $500 a month for each infant.

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In another example, reimbursements for five-star home-based care for 3- to 5-year-olds in Alleghany County will increase from $407 per month to $900 a month. 

The hope is that childcare options will expand in rural areas, with the increased payments encouraging centers and homes to accept more children. 

“When reimbursements were so low, they were losing so much money,” Martin said. 

There’s a tremendous need for infant care, but costs for providers are higher for babies because childcare centers need one staff member for every five babies. Staff-to-child ratios are higher for older children. 

Centers throughout western North Carolina closed classrooms because they could not hire or keep enough staff, said Mills. When centers needed to cut back, infant care was the first thing to go. 

Moody at Silver Bluff Kids is anxious to restore employee benefits and hire a new teacher. 

“The subsidy rate floor will, number one, allow us to avoid the big financial burden we have had. It will allow us to reinstate either a health insurance policy or a health insurance reimbursement plan with higher reimbursement rates than we were previously able to contribute to employees’ insurance. We will also contribute again to the staff’s retirement plans,” Moody said. 

The center is fully enrolled with 54 children. Moody couldn’t afford to hire a new teacher, so she and the assistant director have been filling in. Moody said she spends her nights and weekends doing paperwork. 

“The rate floor, in my opinion, will allow centers to thrive,” she said. “ I think it will be a game-changer for retaining highly qualified staff and recruiting additional staff. This investment will allow many centers like ours to continue providing the high-quality care we are known for, without the financial stress of trying to figure out how to fit it all into the budget creatively.”