Childcare Crisis Deepens As Costs Soar And Federal Funds Freeze

On a brisk January morning in Nashville, the Tennessee state capitol buzzed with an unusual energy. Dozens of families, bundled against the cold, gathered for the inaugural “Rock the Hill” rally, their sights set on a single, pressing goal: more support for early childhood education. As children darted between games and parents clutched hand-painted signs, the message was clear—childcare costs have reached a breaking point, and families are demanding action.

The urgency behind their pleas is hard to overstate. According to a recent LendingTree analysis, parents in the United States would need to earn a staggering $400,000 a year for childcare for two children to be considered “affordable” under the federal definition—meaning it would not exceed 7% of their household income. For most American families, that figure is not just out of reach; it’s almost unimaginable. The LendingTree study, published January 20, 2026, underscores the scale of the crisis, painting a sobering picture of the financial strain facing working parents nationwide.

That strain is especially acute in Tennessee, where, as families at the Nashville rally pointed out, the cost of childcare now exceeds in-state college tuition rates. “I think opening up tuition certificates for people would really be great,” Jennifer Andrews, a mother from Chattanooga, told WTVF. “And I think generally just overall investments in the childcare system and supporting childcare teachers.” Her words echoed across the crowd, resonating with parents who have found themselves caught between punishing costs and a lack of viable alternatives.

Access, not just affordability, remains a persistent challenge. As one father at the rally explained, “You need access, and in order to have access, you need people who are willing to work.” The sentiment captures a dilemma seen across the country: even when parents can scrape together the funds, a shortage of childcare workers and facilities often leaves them with nowhere to turn.

This legislative session, Tennessee lawmakers are considering a suite of bills aimed at easing the burden. Proposals on the table include creating childcare scholarships, expanding paid parental leave, supporting maternal and infant health programs, and addressing the chronic shortage of childcare workers. Blair Taylor, Founder and CEO of Tennessee Quality Early Education (TQEE), summed up the advocates’ position: “Just like K-12 and higher education, it’s time for Tennessee to invest in early childhood care and education.”

But while state-level advocacy ramps up, a separate crisis is brewing at the federal level—one with the potential to upend childcare for millions. On January 23, 2026, a federal judge’s temporary restraining order preventing the Trump administration from freezing over $10 billion in family assistance funding across five states is set to expire. The looming deadline has left officials from California, Colorado, Illinois, Minnesota, and New York scrambling to prepare for the fallout.

The funding in question supports three critical programs: the Child Care and Development Fund (CCDF), which provides nearly $2.4 billion to help states support child care for low-income working families; Temporary Assistance for Needy Families (TANF), a $7.35 billion program that funds a range of services for low-income households, including childcare; and the Social Services Block Grant, which allocates $869 million for child welfare, education, and job training. The U.S. Department of Health and Human Services announced the freeze earlier this month, citing “serious concerns about widespread fraud and misuse of taxpayer dollars in state-administered programs.”

State officials have pushed back forcefully. California Attorney General Rob Bonta argued that HHS had provided “no factual or legal basis for blocking access to these critical funds and target the five Democratic-led states based solely on unsupported and unfounded allegations of ‘fraud.’” The legal wrangling began with a lawsuit filed January 8 by the affected states, triggering the temporary restraining order that now hangs by a thread.

The repercussions of a funding freeze could be immediate and severe. In Minnesota, where the fraud allegations are centered, the state has launched a flurry of investigations, including unannounced compliance checks at child care centers. Clare Sanford, vice president of government relations for the Minnesota Child Care Association, acknowledged the anxiety rippling through the sector: “Profit margins for our child care providers are already so small. For smaller providers, they can be as low as 1% or even nonexistent. Labor alone makes up 60 to 70% of child care provider budgets because of state-mandated ratios.”

For now, Minnesota’s state funds are sufficient to keep its Child Care Assistance Program (CCAP) afloat for several months while officials respond to federal demands. But Sanford warned that local providers are worried about what happens next. “State funds are sufficient to support CCAP services for several months while DCYF works to respond to federal requests,” the Department of Children, Youth and Families announced in early January. Still, the uncertainty is palpable.

Other states are bracing for impact. Colorado Attorney General Phil Weiser noted that the state received $140 million from CCDF and $135 million from TANF in 2025. Losing that funding, he said, would be “devastating.” In his words: “Families would lose access to reliable childcare, forcing parents and caregivers into an impossible choice of either missing work or leaving children in a potentially unsafe environment. Childcare providers would lose essential funding, and even children who do not receive ACF-funded care could lose access if facilities are forced to reduce staff or shut down. Employers would lose valuable workers, hurting states’ economies, and families would lose critical cash assistance to help them afford essentials like gas, groceries and rent.”

Denver’s Child Care Assistance Program has already frozen enrollment for new applicants, citing increased expenses that exceed available funding. “This freeze is being enacted as a result of increased program expenses that exceed available funding for the program,” the program stated. Meanwhile, California’s share of the threatened funds is about $5 billion. Los Angeles Mayor Karen Bass said the city is working closely with government partners to help families affected by the cuts, connecting them with FamilySource Centers for food distribution, utility and rent assistance, and with WorkSource Centers for job support.

Illinois and New York are also preparing for the worst. The Illinois Child Care Assistance Program serves more than 150,000 children, and while state dollars are keeping payments flowing for now, Ireta Gasner of the nonprofit Start Early admitted, “Uncertainty and fear are on our organization’s mind and the minds of families throughout the state. There is no local or state substitute for these federal dollars.”

New York’s situation is similarly precarious. Last year, its Child Care Assistance Program received over $1.1 billion in TANF and CCDF funding, supporting more than 95,000 children in New York City alone. Philip Church, president of the New York State Association of Counties, warned, “This funding freeze could lead to devastating consequences for innocent children and families who rely on childcare subsidies, local taxpayers and the counties that administer these programs. While we all support rigorous oversight and fraud prevention, and work hard to ensure taxpayer dollars are used appropriately, a blanket withholding is the wrong approach and will create collateral damage that far exceeds any fraud concerns.”

As the clock ticks down to the expiration of the restraining order, families, providers, and policymakers find themselves at a crossroads. The stakes are enormous: for parents struggling to afford care, for children whose futures depend on early education, and for communities grappling with the ripple effects of a system under strain. Whether through statehouse rallies or courtroom battles, the fight for accessible, affordable childcare is shaping up to be one of the defining issues of 2026.