House Bill 1158 would raise North Carolina child care subsidy reimbursement rates to the 75th percentile of the 2023 Child Care Market Rate Study for licensed child care centers and homes rated three, four, or five stars, beginning July 1, 2026. It also requires the Division of Child Development and Early Education to automatically adjust subsidy rates to the 75th percentile of future market rate studies, so that rates keep pace with updated market data in later fiscal years.
The bill further creates a statewide rate floor for counties whose local county rate is below the state rate for center-based and home-based care. In most counties, payment rates would be set at the statewide 75th percentile market rate for children birth through age 5, but a county may continue using its county market rate if the statewide floor would be lower and would reduce the county’s ability to purchase care for low-income children in very small age cohorts. The bill appropriates recurring funds to support these changes: $60 million from the General Fund and $20 million from the Child Care and Development Fund Block Grant for the market-rate increase, plus $160 million from the General Fund to implement the statewide rate floor, all beginning in fiscal year 2026-2027.
If enacted, the bill would amend state child care subsidy policy by directing the Department of Health and Human Services, Division of Child Development and Early Education, to pay higher reimbursement rates and by establishing a statewide minimum rate structure for subsidized child care. It would increase recurring state spending and use both state and federal block grant funds to finance the higher subsidy payments, affecting child care providers, counties, and families receiving low-income child care assistance. The bill would take effect July 1, 2026.
The available record shows no committee transcript or vote history, so there is no documented floor debate or recorded vote to indicate broad support or opposition. Based on the bill’s substance, it appears designed to address child care affordability and provider reimbursement, which typically draws support from child care advocates and families seeking greater access to care. However, the significant recurring appropriations suggest fiscal scrutiny would likely be a central issue in later consideration.
The main likely point of contention is cost: the bill requires substantial recurring appropriations from the General Fund and federal block grant funds, which may raise budget concerns. Another possible issue is the automatic future increase mechanism, which ties subsidy rates to subsequent market studies and could limit legislative discretion over future funding levels. The county-rate-floor provision may also draw attention from counties with small child populations, since the bill preserves an exception only when the statewide rate would undercut local purchasing power for low-income children.