Budget shortfall will reduce North Dakota child care assistance for some families

BISMARCK, N.D. (North Dakota Monitor) — The North Dakota Department of Health and Human Services is reducing some of its child care subsidies for working families as the program faces an unexpected $35.5 million funding deficit.

The state set aside $124.7 million for the program for the 2025-2027 budget cycle. Due to increased enrollment, however, the department now anticipates needing $160.2 million to carry it through June 2027.

The program serves working families with kids up to age 13 and some children with special needs up to age 19. Families with parents in school or training, or those seeking employment or education may also be eligible.

To cover the shortfall, the state plans to lower the maximum amount of assistance it provides to households enrolled in the program seeking child care for children older than age 3. These changes can be viewed on the Department of Health and Services’ website.

Donna Aukland, chief financial officer for the Department of Health and Human Services, told lawmakers during a Wednesday committee meeting the estimated maximum impact to families is $100 more a month in child care costs.

The average child care benefit for those enrolled in the program is $730 per month.

The rise in enrollment is primarily driven by the state’s new Child Care Workforce Benefit program, which was implemented in summer 2024, said Michele Gee, the agency’s economic assistance director.

The program — which subsidizes child care costs for people who themselves work in child care — is more popular than the Department of Health and Human Services expected, she said.

“When we were actually building our budget for the 25-27 biennium, we were anticipating about 6,400 children per month,” Gee said. “We’re right now serving about 7,600 children per month.”

Aukland said she wants the agency to have up-to-date child care data when making budgeting decisions going forward.

On Dec. 1, the Department of Health and Human Services closed the Child Care Assistance Program to new enrollees and implemented a waitlist for families who wish to participate. Low-income families are given the highest priority for open spots.

As of Thursday, seven families were wait-listed, the agency said.

The Department of Health and Human Services is also reducing incentive bonuses for high-performing participants in Bright & Early ND, a state program that assesses the quality of early childhood services.

The program has four levels of certification. To incentivize participants to improve their rating, providers ranked in the three highest tiers currently receive bonuses. The program will start limiting bonuses to the top two tiers starting Jan. 1.

The Department of Health and Human Services said the changes will save it $13.2 million for the 2025-2027 biennium.

The department will use $22.3 million of the state’s federal Temporary Assistance for Needy Families grant to cover the rest of the funding deficit, Aukland said. The state receives $26.4 million per year from the program, and can set aside 30% of that annual funding to support child care subsidies.

The state will be using money from its 2025, 2026 and 2027 Temporary Assistance for Needy Families grants to cover the shortfall.

Sen. Kyle Davison, R-Fargo, during Wednesday’s meeting asked for more details about how the state has used Temporary Assistance for Needy Families grant money over the past few years.

“The reality is there’s $22 million dollars that isn’t going to somewhere else,” Davison said.

Aukland said some of the grant dollars had been budgeted but not needed. It’s also tapping into money it had previously left on the table, since the program has specific rules about how the money can be used, she said.

Sen. Jeff Magrum, R- Hazelton, asked Aukland why the Department of Health and Human Services didn’t seek more funding from the North Dakota Emergency Commission. He questioned whether this could have allowed the agency to sustain the program without needing to reduce benefits.

“Some people are losing their bonuses now, and some families will have to ante up more,” he said.

Aukland said she’s not sure the Emergency Commission would have had enough contingency funding to cover the program’s deficit.

During a meeting last week, Senate Minority Leader Sen. Kathy Hogan, D-Fargo, said she appreciated the department’s honesty about the budget shortfall.

“We’re going to see major child care cuts,” Hogan said. “It’s all concerning because we’re already in a child care crisis and this is going to create more.”

North Dakota’s Legislature has invested in supporting child care as a way to combat a severe workforce shortage.

Hogan said the program’s budget shortfall could be addressed during the Legislature’s planned special session in January.

“I think we should’ve been monitoring that budget situation more closely,” she said.

North Dakota Monitor reporter Mary Steurer can be reached at msteurer@northdakotamonitor.com.

North Dakota Monitor reporter Michael Achterling can be reached at machterling@northdakotamonitor.com.