The Idaho Department of Health and Welfare is pausing new enrollments for a mostly federally funded program that helps families pay for child care as the agency anticipates a budget shortfall.
The state health department is also delaying expected benefit hikes for families in the Idaho Child Care Program, as it projects the program will be in a budget deficit caused by rising estimates of child care costs along with expanded eligibility for the program, with families paying a smaller share toward the child care covered.
Idaho Department of Health and Welfare’s new director Alex Adams, the governor’s former budget chief, told legislative budget writers about the issue in an Aug. 14 letter, which the health department shared with reporters Tuesday. The health department, he wrote, “must act now to course correct.”
The health department projects the program — budgeted at $52.7 million — would have a $15.5 million deficit this fiscal year, which started in July and lasts until June 2025.
Enrollment in the program will pause starting Thursday, the health department wrote in a blog post.
“Our goal is to live within our approved appropriation while minimizing the impact on current (program) participants and ensuring there is no impact on prospective new … enrollees who are foster families and other at-risk populations,” Adams wrote in his letter to lawmakers.
The health department’s responses also include:
- reducing the program’s income cutoff for eligibility to 130% of the federal poverty limit, down from the 175% that the department raised it to in recent years. That’s once the program’s enrollment is open for enrollment again;
- adjust provider reimbursement rates; and
- recover administrative costs in contracts related to the grant program.
About 7,800 children are now enrolled in the program, which relies mostly on federal funds through the Child Care and Development Block Grant, Adams wrote in his letter to the co-chairs of the Idaho Legislature’s powerful budget committee, the Joint Finance-Appropriations Committee, or JFAC.
The health department usually changes the program’s benefit rates in October, he said, after it completes its local market rate analysis — as required every three years by the federal grant. But that won’t happen until July 2025, after Adams said the state health department’s new analysis this month showed costs rose by about 25%.
“This year’s study of local market rates revealed what many already knew: child care costs have steeply increased,” the health department’s blog post read. “Funding increases are not keeping pace with the program’s costs.”
Adams outlines additional possible cut for Idaho Legislature to consider
The shortfall projections shared with lawmakers were a “worst case” scenario, the health department’s blog post said. Health officials hope that the shortage is smaller as it refines projections.
“If it is, we will minimize the impact on families by changing eligibility criteria as little as possible,” the post said.
“From the department’s perspective, we think covering more kids at (a) lower rate is preferable to covering fewer kids at a higher rate. But ultimately, that’s a policy decision that I think the Legislature will wrestle with,” Adams told reporters.
Adams wrote the changes would balance the program’s budget to state-appropriated levels, “minimize the impact to existing … participants, protect enrollment for at-risk populations, restore eligibility and enrollment to historical levels, and still result in an increase in reimbursement rates for providers for all age groups.”
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“We recognize that decisions like these are never easy, especially given the importance of access to affordable child care for both the workforce and for early childhood development,” Adams wrote. “In fact, DHW organized a new Division of Early Learning and Development to seek opportunities to promote these very topics. We stand ready, willing, and able to work with the Legislature to explore both regulatory reforms and budgetary solutions to the child care issue.”
Around $50 million in unspent federal funds from the grant program exist, Adams wrote, encouraging lawmakers to consider “the potential of using these ‘foregone’ funds to expand capacity of child care in all markets throughout the state or other investments that will benefit child care without creating an unsustainable cliff.”
What’s next for Idaho lawmakers on the child care program?
The Idaho Legislature wrapped up work for the year in April. But when lawmakers return in January, there’ll be a call for a “full examination of the department actions and decisions that got us into this situation in the first place,” JFAC co-chair Sen. Scott Grow, R-Eagle, told the Idaho Capital Sun.
The immediate actions were needed to align spending with the budget, budget committee co-chair Rep. Wendy Horman, R-Idaho Falls, added in a joint phone interview with Grow on Tuesday.
“This has been a pattern in the past with this agency,” Horman said, referencing an investigation into the health department’s handling of child care grant funds. “And so to see some leadership that is saying, ‘Actually, you need to abide by the law.’ That’s great news for Idaho citizens.”
The program wasn’t in a deficit in fiscal year 2024, Adams told reporters.
Idaho’s health department requires families in the program to pitch in for child care costs, through copayments that are based on people’s income.
Enrollment in the program has mostly grown in the last decade, besides a drop off in the first few years after the pandemic, Adams wrote. But enrollment rose sharply last fiscal year, which ended in July, and continues to rise so far in the current fiscal year of 2025. Adams projected nearly 8,100 would be enrolled in the program by July 2025, and around 9,000 by July 2026.
ICCP Letter to Lawmakers
