Little Angels day care recently closed, sending families scrambling for alternate care for their children. Submitted photo
LEBANON — Holly Maxwell spent the past eight years growing her small, in-home child care business in Lebanon into a top-tier early learning center that served nearly 100 kids — all despite the long hours and low pay.
But by the end of last year, 40 children had dropped from the Little Angels program, leading Maxwell to lose $25,000 a month.
In December, she made the painful decision to shutter the business, which had become a vital child care resource in the community.
“I loved the children and I absolutely loved what I did,” Maxwell said. “That was my heart.”
That same story has played out at early learning centers across Indiana after the state in December 2024 stopped issuing new vouchers to help low-income families pay for child care. The vouchers were backed by the federal Child Care and Development Fund (CCDF).
Lawmakers followed that by cutting the amount the existing vouchers paid to child care providers, meaning that those facilities, to cover their expenses, had to charge low-income families more.
Just last year, those decisions led in part to the closure of more than 620 child care businesses, the Indiana Family and Social Services Administration’s reported in an email.
While 550 new child care businesses opened in the same time frame, according to the FSSA, many of those centers will likely close in the coming months as the full impact of the voucher cuts take effect, explained Hanan Osman, executive director of the Indiana Association for the Education of Young Children.
“The destruction is happening right now because of the CCDF crisis,” she said. “I think it is going to be very hard for the state if we don’t fix this problem immediately.”
THE CHILD CARE CLIFF
The current funding shortfall stems from the COVID-19 pandemic, when Congress approved a staggering $52 billion in relief funding for the CCDF program to ensure facilities remained open despite plummeting enrollment.
Maxwell said that money was vital to keep her Lebanon center operating during the pandemic.
“They did not want to lose child care centers,” she said. “That was their whole goal during the COVID years.”
Those extra federal dollars expired in September 2024. Congress hasn’t approved any additional CCDF funding since.
That led Indiana to freeze its voucher program three months after pandemic aid ended. State officials said new vouchers won’t be issued until at least 2027, resulting in a wait list of nearly 32,500 kids who need a voucher, according to the FSSA Child Care Subsidy Dashboard.
In September, the FSSA also announced it faced a $225 million shortfall caused by the discontinuation of federal aid. In response, the agency said it was lowering reimbursement rates by 10% for infants and toddlers and by 35% for school-age children.
The cut marked the first time the state has ever reduced rates for vouchers, noted Anne Gabbert, program resource manager for Child Care Answers, an Indiana advocacy group.
Combined with the wait list, Indiana is currently facing the most severe setback for child care funding in the state’s history, she explained.
Now, the lost federal funding has led to the mass closure of child care centers around Indiana and the U.S. It’s the exact problem lawmakers wanted to avoid in the first place by issuing federal aid during the pandemic, Maxwell noted.
“We’ve been through huge child care deserts before, and we’re going to hit another huge child care desert again if something doesn’t change,” she said.
‘STOP THE BLEEDING’
Change is unlikely to happen this year as state lawmakers work through a non-budget session in which no new money will be allocated for child care vouchers or other programs.
At least nine bills have been submitted proposing other measures to stabilize Indiana’s child care businesses. Legislation ranges from offering tax credits for families’ child care expenses to providing reimbursement to employers who offer in-house child care to workers.
Other bills take direct aim at the voucher cuts and would require the state to fully fund the CCDF program or take money sitting in other funds and redirect it toward vouchers.
Democrats authored eight of those bills, all of which are likely dead this session after the Republican supermajority at the statehouse didn’t give the proposals a hearing.
One bill was submitted by Republican Rep. Becky Cash (R-Zionsville) and passed out of a House committee. It would expand tax credits to businesses that offer child care for workers.
But none of the proposed legislation would do much this year to slow the rapid closure of child care centers, Osman explained. She argued that bold action is required to avoid more facilities shuttering in the coming months.
“How can ... we stop the bleeding for the places that are still open but working with 30% capacity?” Osman said.
“Those are the people who might be closing next month."
A silver lining appeared last week when the Senate Appropriations Committee approved an amendment that would allow $300 million in the state’s Financial Responsibility and Opportunity Growth Fund to go toward CCDF vouchers.
Lawmakers created the fund last year to provide financial assistance, if needed, for programs operated by the Department of Correction, the Department of Child Services and the FSSA. The amendment to Senate Bill 4 submitted by Republican Sen. Chris Garten (Charlestown) would extend the fund’s use to child care vouchers.
Osman said she’s hopeful the bill will become law and open up the possibility for immediate financial relief to child care centers.
“We’re welcoming and counting this as good news in the middle of everything that’s happening,” she said.
‘I WILL NOT REOPEN’
But Rep. Carey Hamilton, D-Indianapolis, who submitted a child care tax-credit bill this session, said any potential funding gained through Senate Bill 4 would likely be a “drop in the bucket” for CCDF programs.
The 10-year veteran legislator argued that the real issue is Indiana’s lack of investment in affordable, accessible child care for Hoosiers.
Indiana is one of just six states that allocate no funding for child care beyond the required matches to receive federal dollars, according to Child Care Aware of America. That leaves 40% of Hoosiers who need such services without access to programs, according to a 2024 survey by the Indiana Chamber of Commerce.
“This is a crisis across the country, but the difference between Indiana and a majority of other states is that other states are figuring out how to be smart and invest in the system so that it works,” Hamilton said. “Indiana is not. We’re moving backwards.”
Even if more funding were allocated, it would take the state years to recuperate from the mass closure of child care centers, argued Osman.
The facilities that have closed will likely never reopen. Businesses have lost leases on their buildings, employees have left for other jobs, and early learning accreditation that can take years to receive is now void, she noted.
“I think it’s going to be very hard for us to rebuild this infrastructure again,” Osman said.
Maxwell doesn’t plan to reopen her Lebanon child care center. It took her about four years to receive a Level 3 Paths to Quality license from the state, and she was working to reach the highest rank at Level 4.
Now, she would have to start from scratch.
But more than that, Maxwell simply doesn’t trust the system after watching the state and federal voucher cuts decimate her business.
“I will not reopen my center, even if they created funding again that was sustainable,” she said. “I would not reopen it and be dependent upon the government.”
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