Wisconsin child care providers await federal funding freeze that could cause closures

Days after the Trump administration said it would pause federal child care funds nationwide in response to allegations of fraud at Minnesota daycares, Wisconsin providers have more questions than answers about what comes next.

The Wisconsin Department of Child and Family Services, which administers millions of dollars in federal subsidies to both child care providers and families that use vouchers to cover costs, said in an email that it has received no federal guidance since news reports Wednesday that the U.S. Department of Health and Human Services would freeze funding until states could prove they use them “legitimately.”

In Wisconsin, a significant amount of that money goes into the Child Care and Development Fund, a block grant program. That amounted to $183.3 million in the 2023-24 fiscal year, according to the nonpartisan Legislative Fiscal Bureau.

An average of just over 20,000 families received vouchers in 2025, according to DCF data. Those subsidies are distributed through a program called Wisconsin Shares. As of December, 4,065 programs across the state accepted Shares payments.

In November, the New York Times published a high-profile investigation into social safety net fraud in Minnesota that has led to charges against dozens of members of that state’s Somali community. Law enforcement officials claim a number of Somali residents created fraudulent companies that billed Minnesota agencies for services that weren’t provided.

Weeks later, a right-wing YouTuber said he had found evidence that many more Minneapolis daycare centers run by Somali people were committing fraud, though those claims have not been verified. The Trump administration’s move to freeze funding appears to respond to the YouTuber’s allegations.

Wisconsin has extensive reporting requirements for day cares

While the funding threats create uncertainty, families who rely on subsidies — and the providers who accept them — likely don’t have to worry right away, as the potential freeze unfolds, said Ruth Schmidt, the executive director of the Wisconsin Early Childhood Association.

Other federal funding pathways, and some state funds, can cover a disruption, she said.

“We are really confident that the state is set up to continue making payments to families to cover their child care through the Wisconsin shares child care subsidy program,” said Schmidt.

And Wisconsin is particularly well-suited to comply with any new reporting requirements that come through, she added.

That’s because Wisconsin went through its own child care fraud scandal. In 2010, a bombshell report in the Milwaukee Journal Sentinel found widespread fraud within the Wisconsin Shares system. That series won a Pulitzer Prize, and sparked a series of reforms, including new laws expanding background checks on providers, a new fraud unit within DCF and an expansive auditing system.

“Wisconsin is positioned really well to be able to handle the additional reporting requirements because of how our systems have evolved in our state,” especially after that report, said Schmidt. “We are well ahead of what you might see in other states that are going to need to respond in different types of immediate ways.”

Nevertheless, she added, the situation reveals how fragile Wisconsin’s ecosystem is. Already, parents and providers have been sounding the alarm for years over a shortage of qualified workers, high costs for families, and an overall system without enough seats for every kid who needs one.

“When you impact one element of the system, like our subsidy program, the impact that has on child care programs across the entire state — rural child care programs, urban, metro, you name it — programs will be impacted by this,” she said. “You’re going to see programs needing to close their doors.”

That would affect both low-income families and families who pay full-freight, as many child care facilities serve both kinds of students together.

Losing those federal dollars, in other words, could lead to fatal revenue shortages for many centers.

And that would especially hurt rural areas, which may not have ready or nearby replacements available, she said.

Many subsidies go to programs for school-aged children

Nationwide, about 1.4 million children receive subsidized care, according to Cindy Lehnhoff of the National Child Care Association.

“Accountability is essential. But it … has to come with a clear, workable federal plan that does not punish legitimate providers for failures of the federal and state governments to provide the oversight that is needed,” Lehnhoff told NPR. “And withholding funds from compliant providers will not fix fraud. It will destabilize an already fragile system.”

And child care doesn’t just mean day care for kids too young to attend school, according to Schmidt. Almost half of federal child care subsidies cover children over the age of 5. That supports participation in before- and after-school programs.

“We need to be careful that we do not go down a slippery slope of demonizing child care,” she said. “Child care is absolutely critical to our economy. This is understood. Businesses know it, chambers (of commerce) know it. … The concern about flexing one lever in child care is that it impacts so many families across our state.”

Trump administration officials have said they’ll expect all states that receive federal child care payments to “defend the spend.” HHS Deputy Secretary Jim O’Neill said on social media Tuesday that all federal payments would require “a justification, receipt or photo evidence.”

Schmidt said that Wisconsin providers are awaiting more information about how to comply with those requirements.