For Emily Knox and her wife, Forever Young Child Care Learning Center in Manchester was a dependable cornerstone of their daily routine for more than two years. But on March 5, her wife arrived to pick up their son and found the center’s staff in tears. It would be, they abruptly learned, the cen ter’s final day, as staff members rushed about, packing up children’s art projects and medical paperwork to give to parents. “It was surreal, honestly,” Knox said. She was aware of the pressures that the early childhood education industry faced in Connecticut, from a lack of available spots to an underpaid workforce, but watching her son’s own facility suddenly shutter, seemingly without warning, was “an eye-opening experience.”  The closure of Forever Young hits as vanishing federal aid and runaway Medicaid costs threaten an ambitious new initiative to expand affordable child care. The Early Childhood Education Endowment, hailed last June as a vehicle to create thousands of new affordable child care program slots by the early 2030s, is projected to receive $30 million from the budget surplus after Connecticut’s fiscal year ends June 30 — less than a tenth of what lawmakers pledged last June. Gov. Ned Lamont’s administration said Monday it’s unclear whether the fiscal bleeding has stopped. “It is too early to speculate,” Lamont’s budget spokesman, Chris Collibee, said Monday, adding that while global economic instability is a concern, the administration remains committed to supporting affordable child care. “Gov. Lamont has taken a leading role both locally and nationally to increase investment in early childhood education,” Collibee said. “He’s fully dedicated to making sure that we deliver on that vision and promise.” “I think we are all committed to the vision that we’ve set forth, and we stand ready to take the action that we need to take based upon the funding that is available to us,” added Elena Trueworthy, commissioner of Office of Early Childhood Education. The state already opened 1,000 Early Start program slots in January and has earmarked nearly $33 million from the endowment for various expenditures, including grants for local school districts to expand their preschools, increasing the rate that providers are paid and a planned study that will assess the need for a health insurance subsidy for employees. Eva Bermúdez Zimmerman, executive director of Child Care For CT, said that the Manchester closure reflects broader pressures eroding the existing care infrastructure. “The system is interconnected,” and the network’s financial needs are greater than even the hoped-for deposit in the hundreds of millions, she said. “I really do hope that elected leaders understand that you can’t build up a system and ignore the pressure that’s gotten us to here.”  CT still forecasting big surpluses – but not for child care Lamont responded to the child care crisis with a big step 13 months ago, proposing that Connecticut dedicate a portion of the massive budget surplus it generates annually toward early childhood education. But much of that surplus is already accounted for. Using a series of aggressive caps set in 2017, Connecticut has since left an average of $1.9 billion unspent each year, which represents 8% to 9% of the General Fund. About three-quarters of that, roughly $1.4 billion, involves certain income and business tax receipts lawmakers cannot spend easily. These protected dollars are immediately stripped from the budget and used chiefly to whittle down Connecticut’s pension debt, a $33.5 billion problem that ranks among the largest, per capita, in the nation. The remaining tax and fee receipts, federal grants and other revenues flow into the budget, where additional spending controls typically force hundreds of millions in additional savings each year. And when lawmakers created the endowment last June — with an initial investment of $300 million — they and Lamont stipulated much of this second-tier savings would be dedicated to the child care initiative each year. Nonpartisan analysts estimated that would translate into a $309 million deposit in the summer of 2026 and almost $560 million 12 months after that. Medicaid spending plagues CT finances for 3rd year in a row But while the program that saves funds to reduce pension debt continues to save big dollars, the second-tier savings effort is in jeopardy. And some of the problems that shrank this year’s estimated payment to the child care program could get much worse. One big obstacle is Medicaid, a federal health care program run in partnership with states. Medicaid demand has remained greater than pre-pandemic levels, even though enhanced federal aid ordered in response to COVID expired in 2023. Lamont’s budget staff projects the state Department of Social Services will overspend its $3.7 billion Medicaid line item by $85 million this fiscal year. The department overspent on Medicaid by more than $300 million last year and almost $160 million two fiscal years ago. Congress last July ordered cuts to Medicaid and other programs worth more than $1 trillion by 2034 to help finance big federal tax cuts aimed chiefly at high-earning households. The Lamont administration hasn’t projected yet what Connecticut could lose next fiscal year. But Connecticut Voices for Children, a New Haven-based policy group, estimated in January that federal Medicaid grants and aid sent directly to households — such as health care-related tax credits — would be down about $579 million in the next state budget cycle. That federal tax relief also has softened state tax revenues. Connecticut links its corporate tax system to the federal code, as do several other states. So, when Congress extended federal corporate tax breaks set to expire, Connecticut lost hundreds of millions in expected revenues from big business. CT has options to bolster child care services But this doesn’t mean Connecticut lacks options to bolster funding for child care. Analysts estimate the state program that forces lawmakers to save a portion of income and business tax receipts will have a banner year, grabbing more than $1.8 billion to pay down pension debt. Lamont already has proposed scaling back these savings rules — albeit just once — to return $500 million to 2.2 million Connecticut residents in the form of a $200-per-person state tax rebate. The checks would be sent in late October, just days before the gubernatorial election, and some Republicans have charged the Democratic governor’s proposal is merely a political stunt to help him win reelection to a third term. But many of Lamont’s fellow Democrats in the House and Senate majorities have said those savings rules should be rolled back somewhat to permit greater investments year after year in child care and other core services, including health care, education and municipal aid. Legislators from both parties have advocated big ongoing tax cuts this year, which also would necessitate saving less to reduce the state’s pension debt. House Speaker Matt Ritter, D-Hartford, a proponent of the Early Childhood Education Endowment, has said a modest amount of tax relief could be considered, but said nothing should be allowed to jeopardize a program that could benefit thousands of children from low- and middle-income households. “It’s a reminder we’re going to have to prioritize at some point,” he said. “I personally think that, before we start implementing new tax changes to the tax code, we ought to be very mindful of how important this child care endowment could be in the long term.” But House Minority Leader Vincent J. Candelora, R-North Branford, who also supports greater state investment in affordable child care, said Lamont and the General Assembly aren’t doing enough to trim spending in other areas. Republican lawmakers have said Connecticut should look to tighten raises for state workers, cut Medicaid programs for undocumented residents and seek greater efficiencies at public colleges and universities. “Democrats were more interested [last year] in a press release than creating a sustainable early childhood program,” Candelora said. ...read more read less