Wisconsin’s 2025-2027 biennial budget includes several provisions aimed at improving the affordability of childcare in the Badger state, ending the misguided effort to directly support private childcare providers’ operating expenses with taxpayer dollars — and instead focusing on reducing costs for families through regulatory reform and targeted assistance.
It’s a win for Wisconsin families.
The budget phases out the Child Care Counts program, which started as a pandemic-relief program in November 2021 to stabilize Wisconsin’s childcare sector during the pandemic by directly subsidizing provider expenses. The program’s federal funding ended in 2023 and a stopgap measure expired in June 2025.
The budget transfers $110 million in interest on unspent federal COVID-19 relief funds to provide a bridge program over the next 12 months for providers who previously benefitted from the program.
The budget also aims to reduce childcare costs for Wisconsin families by easing regulatory requirements and increasing assistance for low-income families.
Competing visions
Childcare is an essential but often burdensome expense for working families with young children. Policymakers across the political spectrum generally agree on the importance of helping families access safe and developmentally appropriate childcare. However, the question of how best to achieve that goal sparks intense debate — particularly over the appropriate role for government and the extent of taxpayer support.
One perspective prefers a market-driven approach that limits government involvement in the private childcare sector and emphasizes parental autonomy. Proponents argue that excessive regulation and public-sector involvement drive up childcare costs, reduce quality, and constrain flexibility for both families and providers.1 As I argued in a 2023 Badger Institute report titled Overregulated Childcare:
“Some level of government regulation in the childcare market is necessary to ensure that children are in healthy and safe environments. However, research shows that childcare quality regulations — such as staff education requirements or staff-to-child ratios — fail to improve child outcomes and likely drive up costs.”2
Furthermore, many states, including Wisconsin, implement strict regulations on the childcare experience that go well beyond health and safety, with limited evidence that they improve child outcomes. For example, Wisconsin’s Department of Child and Families regulates play space, nap times, and the availability of toys.3
Another perspective supports a government-led model, advocating for tighter regulation of private providers or even direct public provision of care, while providing government assistance to families, directly subsidizing providers, or making childcare universally available, similar to public K-12 education.4 Supporters of this view contend that the childcare sector requires direct government intervention to ensure affordability and quality.
Wisconsin’s 2025-2027 budget leans into a market-driven approach. By June 2026, it phases out the Child Care Counts program — an emergency pandemic-related program that directly subsidizes the private operations of childcare providers. Instead, the budget ensures low- and moderate-income families with young children can receive government assistance to help cover their childcare, and it reduces regulations on child-to-staff ratios and on teacher requirements to help lower their overall costs.
What is Child Care Counts?
The pandemic disrupted the childcare sector like it did much of the economy. Because childcare played an essential role in enabling parents to return to work during the pandemic, the federal government authorized multiple rounds of funding to help stabilize the sector.
The final funding effort came through the American Rescue Plan Act of 2021, or ARPA, which allocated $29 billion in childcare stabilization funds. According to a statement by the federal Office of Child Care, “Funds will support stabilization grants to childcare providers to cover their operating expenses as they face less revenue and higher expenses during the pandemic.”5
The money allowed Wisconsin for the first time to offer direct assistance to childcare providers to cover their operating expenses. The resulting program was called Child Care Counts, and the fate of the program was a major sticking point in debates over Wisconsin’s 2025-2027 budget.
Wisconsin distributed over $479 million in federal childcare stabilization funds to the Child Care Counts program from November 2021 through January 2024.6 The program’s intent was to address temporary disruptions caused by the pandemic to childcare providers, including changes in demand, pandemic-related material and supply costs, and staffing costs.7 An evaluation of the program in early 2023 by the University of Wisconsin-Madison’s Institute for Research on Poverty found that providers generally used funds for these purposes.8 Intended as a temporary funding stream, ARPA funding for childcare stabilization ended in 2023, and Wisconsin’s Child Care Counts program was slated to end as well.
Still, efforts were made to keep the program going. Governor Tony Evers sought to make the program permanent beyond the pandemic, proposing in his 2023-2025 biennial budget to use state general funds to continue subsidizing childcare providers’ expenses.9 After the Legislature removed the governor’s proposal from the final budget, the governor extended the Child Care Counts program through June 2025 by reallocating $170 million in unspent federal funds from the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) program, another part of ARPA.10
With that stopgap set to expire in June 2025, the governor again proposed state funding for Child Care Counts in the 2025-2027 biennium, requesting $440 million. The Legislature did not support continuing the program, agreeing instead to a compromise.
The 2025-2027 biennial budget compromise does not allocate any state general purpose revenue for Child Care Counts. Instead, the Joint Committee on Finance and the governor agreed to use $110 million in interest from unspent ARPA funding to create a bridge program for providers previously receiving Child Care Counts support. This measure will provide funding through June 2026, a “step down” from previous funding.11 This means that, in the absence of another stopgap, the pandemic-era Child Care Counts program is scheduled to end in 2026.
While Wisconsin Democrats favor direct government subsidies to cover privately operated childcare businesses,12 this approach has substantial downsides, including driving up childcare costs for all families. Covering operating costs through public subsidies can distort the market by keeping financially unviable providers afloat. When combined with heavy regulation, such subsidies reduce providers’ incentives to lower costs or improve quality.
This is difficult to quantify without a counterfactual — that is, a childcare system that offers a strong comparison to the current heavily regulated one. However, Diana W. Thomas and Devon Gorry writing for the Mercatus Center in 2015 used variation in child-to-staff regulations across states and found that higher ratios lowered costs.13
These dynamics undermine efficiency and drive up overall costs — creating an unsustainable feedback loop in which government actions increase expenses, prompting even more public spending in response. Given these concerns, phasing out the pandemic-era Child Care Counts program is in the best interests of Wisconsin taxpayers.
Additional childcare reforms in the 2025-2027 biennial budget
While Child Care Counts garnered much attention in the budget debate, two other provisions take meaningful steps to improve childcare affordability and accessibility in Wisconsin.
Direct Childcare Services. Like other states, Wisconsin operates a childcare subsidy program through a federal-state partnership. Funded through the federal Child Care and Development Fund (CCDF), the program utilizes federal and state resources to provide vouchers to eligible low-income families to help cover their childcare costs. This approach maintains some level of competition among providers, given that families — not government — choose where to direct public support.
The 2025-2027 biennial budget continues this program, known as Wisconsin Shares. Families are eligible for a voucher if their household income is below 200 percent of the federal poverty level — that is, $53,300 for a family of three. They remain eligible until their income reaches 85 percent of the state median income — meaning eligibility up to $84,060 for a family of three.14 Families must contribute a “copayment” based on their income.15
To support the voucher program, Wisconsin’s 2025-2027 biennial budget includes an additional $160 million in federal funding to support the voucher program and adjust the voucher amount. Federal funding for childcare is available to the state through the Child Care and Development Fund, and the budget utilized those federal and state matching funds.16 The additional funding covers anticipated increases in Wisconsin Shares participation, it raises the voucher amount to cover three-quarters of the cost of market rate childcare, and it waives any copayment for families with incomes below the official poverty line. It also increases the voucher amount for infants.17 These provisions garnered bipartisan support among Wisconsin lawmakers and the governor.18
Pilot Programs and Regulatory Reform. The 2025-2027 biennial budget also includes provisions aimed at reducing licensing and regulatory burdens:
- Using interest from unspent COVID-19 funding, the budget creates a two-year pilot program to increase the staff-to-child ratio to 1-to-4 for infants and 1-to-7 for toddlers.
- It changes the administrative code to create a new category of licensed large family childcare centers that allows care for 4 to 12 children (previously, family childcare centers allowed four to eight children). The intent is to make it easier for family care providers to serve more children.
- It lowers the age threshold for “assistant childcare teacher” to 16 (from age 18) while maintaining existing training and supervisory requirements.
- It creates a school readiness program within childcare providers to expand options for 4-year-old pre-kindergarten.
Together, these provisions will expand childcare options by reducing costs and easing administrative burdens on providers.
Assessment: A win for families
Wisconsin’s biennial budget is a policy document laying out a vision for state action. This year, the biennial budget favors an approach that makes childcare more affordable and accessible through regulatory reform and direct assistance to low-income families, while phasing out a pandemic-era program that directly subsidized private provider expenses. For the long-term sustainability of the childcare sector in Wisconsin, these are welcome policy choices.
Permanently subsidizing provider expenses with taxpayer support through programs such as Child Care Counts undoubtedly increases inefficiencies and raises childcare costs for everyone, however appropriate it might have been during a public health emergency. Wisconsin’s 2025-2027 biennial budget appropriately phases out the temporary pandemic-era program, with its bridge program offering a reasonable step toward ensuring that only financially viable providers remain in operation.
The budget also continues funding for the state’s childcare subsidy program for low- to moderate-income families. More broadly, the budget supports efforts to reduce the regulatory and licensing burdens on childcare providers with the aim of increasing affordability and accessibility for families.
In the current environment, providers must comply with extensive licensing and regulatory burdens, yet most families cannot absorb the higher costs that result. In response to the higher costs regulations create, governments have traditionally stepped in with public subsidies, setting up a costly feedback loop demanding increased taxpayer support. Over time, this cycle will continue to steadily raise childcare costs, with families stretched thin and government viewed as inadequately addressing the issue.
A good example is regulating child-to-staff ratios. Research shows that requiring more staff per child (that is, a lower child-to-staff ratio) drives up costs and reduces the availability of childcare, while not necessarily improving child outcomes.19
Granted, having more adults available to children in a childcare setting increases the likelihood for better care, but there is no magic formula for determining the exact ratio. Furthermore, the quality of teachers, which often involves unmeasurable factors such as empathy and patience, matter and cannot fit into a one-size-fits-all regulatory approach.
Beyond child-to-staff ratios, evidence shows that many other regulatory requirements such as teacher education and regulating naps and toys, while well-intentioned, fail to achieve meaningful improvements in child outcomes. For example, researchers at the University of Wisconsin-Madison found that Wisconsin’s Childcare Quality Improvement system known as YoungStar reflected what designers determined to be higher quality care, but higher-rated centers had no meaningful impact on child outcomes, such as kindergarten readiness.20
Wisconsin’s biennial 2025-2027 recognizes these realities. Taken together, the phasing out of Child Care Counts and the reduction of regulatory burdens in this year’s budget will reduce costs for all Wisconsin families accessing childcare. This is a win for Wisconsin families.
Angela Rachidi, a Badger Institute visiting fellow, is also a senior fellow at the American Enterprise Institute (AEI), based in Washington, D.C. In her work, Rachidi studies the impact of safety net programs on low-income families and individuals. She researches the effects of government policies and programs on employment, child wellbeing, family income and economic mobility.
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1 Bourne, Ryan “Why is Childcare Expensive”, September 2023, Commentary, Cato Institute, https://www.cato.org/commentary/why-childcare-expensive.
2 Rachidi, Angela “Overregulated Childcare: Wisconsin’s 2023-’25 biennial budget and the path ahead’, September 2023, page 2, https://www.badgerinstitute.org/wp-content/uploads/2023/09/Rachidi-childcare-230913.pdf.
3 Rachidi, Angela “The Problem with Child Care Regulations”, January 2020, https://www.aei.org/opportunity-social-mobility/the-problem-with-child-care-regulations/.
4 https://www.gse.harvard.edu/ideas/edcast/24/10/fixing-childcare-america
5 https://acf.gov/archive/media/press/2021/child-care-funding-released-american-rescue-plan
6 https://dcf.wisconsin.gov/files/publications/pdf/5825.pdf
7 https://dcf.wisconsin.gov/files/publications/pdf/5825.pdf
8 See Shager et al “Study of the Child Care Counts Stabilization Payment Program Final Report,” Institute for Research on Poverty, March 2023, https://www.irp.wisc.edu/wp/wp-content/uploads/2023/06/Child-Care-Counts-Stabilization-Final-Report.pdf.
9 See https://www.wkow.com/news/senate-committee-holds-a-public-hearing-on-governor-evers-child-care-counts-proposal/article_474769f0-6891-11ee-ac29-c318da9637cf.html; https://www.jsonline.com/story/news/politics/2025/06/23/tony-evers-says-he-wont-sign-a-budget-without-child-care-counts/84324271007/, and Wisconsin Legislative Fiscal Bureau “Comparative Summary of Budget Recommendations”, June 2023, page 122-123; Wisconsin Legislative Fiscal Bureau, “Quality Care for Quality Kids — Child Care Quality Improvement Program”, June 2023, Paper 253, https://docs.legis.wisconsin.gov/misc/lfb/budget/2023_25_biennial_budget/302_budget_papers/253_children_and_families_tanf_and_economic_support_quality_care_for_quality_kids_child_care_quality_improvement_program.pdf for specific proposals.
10 Wisconsin Department of Children and Families, “Early Care and Education Programs Funded by DCF’s ARPA CCDBG Awards, Closure Report”, September 2024, https://dcf.wisconsin.gov/files/publications/pdf/5825.pdf.
11 https://dcf.wisconsin.gov/childcare/payments
13 See Ryan Bourne “Childcare” in Empowering the American Worker, December 2022 Cato Institute, https://www.cato.org/publications/childcare, Diana W. Thomas and Devon Gorry, “Regulation and the Cost of Child Care,” Mercatus Center, August 2015, https://www.mercatus.org/students/research/working-papers/regulation-and-cost-child-care and Hotz, V. Joseph, and Mo Xiao. “The impact of regulations on the supply and quality of care in child care markets.” American Economic Review 101, no. 5 (2011): 1775-1805.
14 https://dcf.wisconsin.gov/wishares/apply
15 https://dcf.wisconsin.gov/files/wishares/pdf/wishares-copay-schedule.pdf
17 See page 103 and 104 of the Legislative Fiscal Bureau’s “Comparative Summary of Budget Recommendations,” https://docs.legis.wisconsin.gov/misc/lfb/budget/2025_27_biennial_budget/401_comparative_summary_of_budget_recommendations_governor_and_joint_committee_on_finance_july_2025_entire_document.pdf.
19 See Diana W. Thomas and Devon Gorry, “Regulation and the Cost of Child Care,” Mercatus Center, August 2015, https://www.mercatus.org/students/research/working-papers/regulation-and-cost-child-care.
20 Wisconsin Council on Children and Families, November 2016, “YoungStar: What Does Recent Research Tell Us?” https://files.eric.ed.gov/fulltext/ED588368.pdf.
