A Michigan House budget proposal would change how the state pays childcare providers for low-income families. The shift could force parents in Muskegon and across the state to pull their children from subsidized care, according to providers and policy experts.

The Republican-controlled House budget proposes switching from enrollment-based billing to attendance-based billing for the state's Child Development and Care (CDC) subsidy program. The change would save the state an estimated $19.5 million but could destabilize a system that serves nearly 25,000 children under 5.

The billing change explained

Under the current system, parents approved for childcare assistance receive a block of hours each month. Providers can bill the state for those hours regardless of whether a child attends every single day. The state reimburses providers two weeks after service.

The House proposal would require providers to bill only for the exact hours a child is present in care. Michigan House Republicans say the change would reduce fraud by preventing providers from collecting money for children who do not show up.

"For years, childcare providers have been allowed to request money based on enrollment, no matter how many kids actually show up and attend. That's a recipe for tax dollar abuse. Our budget instead bases funding on attendance rather than enrollment, which will save Michigan at least $19.5 MILLION," the House Republicans wrote in an April 18 Facebook post.

Why providers say it will hurt families

Childcare providers say the change ignores the reality of low-income family life and would push costs onto parents who already struggle to afford care.

Molly Blixt, who owns seven The Learning Experience centers across Michigan, called the proposal a "billing nightmare." She said the current block-hour system provides financial stability for providers.

"It leaves no room for any sort of uncertainty in your week. It's unreasonable to think your child needs to be in attendance every single day, for all nine hours in order for this to be affordable to you," Blixt said.

Blixt said families would face additional out-of-pocket costs when a child misses a day due to illness, a car breakdown, or a late drop-off from a doctor's appointment.

"This will result in us losing families who can't afford to make up that difference. The vast majority of these people are on budgets and they qualify for subsidy because of income. $50 or $100 dollars more a month matters to them," Blixt said.

The funding gap behind the proposal

The House proposal responds to the expiration of nearly $20 million in federal COVID-19 funds that had supplemented the state's $400 million childcare assistance program. The one-time federal money helped expand the program over the last few years.

Both Gov. Gretchen Whitmer and the Democratic-controlled state Senate have proposed filling the federal funding gap with state general fund dollars. The House chose a different path.

Mina Hong, a policy expert at the Early Childhood Investment Corporation, said the House proposal offsets the loss of federal funds by tightening subsidy rules rather than spending state money.

Impact on Muskegon and rural providers

Providers say the change would hit rural areas hardest. In communities where most children served are on the subsidy, unsteady income from attendance-based billing would make up all of their revenue.

Leanne Ablin, executive director at Huntey's Clubhouse, operates a network of childcare centers across rural west and northwestern Michigan. Around half of the 615 children the organization serves are on state subsidy.

"Those families are likely going to pull their kids out of quality childcare," Ablin said.

Tyler Huntey, CEO of Huntey's Clubhouse and president of the Michigan Child Care Provider Collective, said the proposal distracts from a more pressing issue. He said subsidy rates have not increased since 2024.

"Really, this is a huge distraction from the conversation we need to be having about subsidy rates. And that's increasing it," Huntey said.

Center-based infant and toddler providers currently receive reimbursement at roughly 65 percent of what it actually costs to provide care, according to the Free Press.

What happens next

Budget negotiations are still underway. The House and Senate must agree on a budget and send it to Gov. Whitmer for signature by October 1, when the state's new fiscal year begins.

State Rep. Greg Markkanen, R-Hancock, chairs the committee responsible for the state early childhood agency budget. He did not respond to multiple requests for comment from the Detroit Free Press.

A news release from Michigan House Republicans did not mention childcare specifically. The release highlighted a general focus on "cutting wasteful spending" while supporting services including public safety and Medicaid.

Muskegon families who rely on the CDC subsidy will have to wait to see which version of the budget survives the negotiation process.