Providers warn $150 million preschool funding cut could drive up fees

Goodstart, KU and Gowrie NSW say increased family fee relief will not offset the loss of operational support for preschool programs delivered in long day care.

Goodstart Early Learning, KU Children’s Services and Gowrie NSW have warned that removing what they estimate is $150 million in preschool program funding could put pressure on services and family fees in 2027.

In a joint statement issued on 18 October, the not-for-profit providers criticised NSW’s published funding arrangements. They argued that higher family fee relief would not compensate for the loss of operational support for preschool education delivered in long day care.

“Families are under enormous pressure from the cost-of-living crisis, and yet the Minns Government is penalising working families by cutting funding for preschools in long day care,” KU CEO Christine Legg said.

“Today’s announcement hides the fact that most families in NSW with children in preschool will be worse off.”

Program payments end while fee relief continues

The Department of Education confirmed in its August funding reform announcement that long day care program payments would cease in December 2026. The new Fee Relief for Long Day Care program replaces Start Strong for Long Day Care from January.

The department says fee relief will increase, support for eligible three-year-olds will continue and participating services must provide a preschool program. Its published explanation identifies the Australian Government as the primary funder of long day care through Child Care Subsidy. 

Under the 2026 arrangements, separate program payments support quality preschool delivery, including early childhood teacher salaries and educational resources. These payments serve a different purpose from family fee relief, which reduces fees. The $150 million figure is the providers’ estimate of the operational funding being removed. 

Providers question the balance of the reforms

The joint statement acknowledges increased funding for community preschools but argues that the loss affecting long day care programs is greater. The providers say 72 per cent of NSW preschool children attend programs in long day care, making the consequences significant for working families.

Goodstart CEO Dr Ros Baxter said the fee-relief announcement did not offset the operational funding reduction. Gowrie NSW CEO Nicole Jones also warned that reducing preschool investment could affect the foundations children build for learning and transition to school.

The providers predict pressure on program delivery and potentially larger fee increases as services respond. These are warnings about the expected effects of the change, rather than fee increases already established across the sector. Individual consequences will depend on services’ funding allocations, costs and decisions.

Higher subsidies do not resolve the funding debate

The 2027 long day care fee relief arrangements provide maximum annual payments of $2,625 for eligible children aged four and above, and $788 for eligible three-year-olds. Other eligible children can receive up to $1,826 and $434 respectively. Rates are the same for participating for-profit and not-for-profit services. 

Concern also extends beyond the joint statement. In a 6 October advocacy update, Australian Childcare Alliance NSW called for the government to reverse the removal of program payments and sought providers’ feedback on the likely impact. Its survey closes at noon on 28 October, with results expected on 30 October. 

The changes follow The Sector’s earlier coverage of NSW’s $1.8 billion early learning investment, which outlined the proposed community preschool funding model and workforce measures. The latest statement shifts attention to whether increased family subsidies and remaining funding arrangements will adequately support NSW preschool delivery in long day care.