North Carolina would fund child care and protect home providers

North Carolina would fund child care payments, worker compensation grants, facility grants, and a two-year tuition assistance pilot. The proposal sets aside $110 million each year for subsidy rates, plus one-time amounts of $50 million for compensation grants, $50 million for facilities, and $60 million for worker tuition help. Home providers receiving tuition help for their own children would need to serve an equal number of additional children. Payments for three-, four-, and five-star programs would use the 2023 study's 75th percentile: a rate at or above about three-quarters of surveyed rates. For children from birth through age five, counties below the statewide rate would use the statewide 75th-percentile rate. A county with fewer than 50 children in each age group could use its higher county rate if the statewide rate would hinder care purchases for low-income children. Facility grants would require a documented 25% match. Recipients could spend up to 9% of the state award on administration. Tuition help would cover direct-care workers at licensed programs who work at least 32 hours weekly and earn no more than 85% of the state median income. After approval, the state would pay 75% of published tuition for up to two children; employers would pay at least 25%. Payments would depend on continued full-time employment and available space without displacing enrolled children. Funding is designated for fiscal year 2026–2027, with payment rates starting October 1, 2026. Compensation-grant provisions would take effect upon becoming law; the other provisions generally name July 1, 2026.

State agencies would arrange child care pilots, fund community college care, and study other public buildings and campuses. The pilots would serve state employees and first responders working overnight. Studies would examine underused state buildings and publicly available care at community college and UNC campuses, with priority enrollment for employees' and students' children. First-responder grants would favor underused county buildings. State construction or renovation projects costing more than $5 million, with more than 250 people working in the building, would need a child care or adult day care center. An exception would apply if either type of center would add at least six months of delay or at least 10% to project costs. The three state-employee centers would use unused or underused state property. The state would cover space improvements and charge no rent. Operators would run college-linked apprenticeships while the centers remain there and the college partner remains willing; leases would need the required approval. Community college grants would be competitive and limited to colleges offering early childhood education degrees. Each grant could reach $3 million to establish at least 50 spaces or bring an existing program to 50 spaces. Awards would consider program quality, student and faculty need, and regional care availability. State funding would include $5 million yearly for state-employee centers, $6 million once for overnight first-responder care, and $30 million once for community college care. Campus studies would receive $100,000 each, and community college outreach would receive $50,000. State-center asbestos or lead cleanup could receive up to $500,000 in reimbursement under the cleanup fund's rules. Funding is designated for fiscal year 2026–2027. The building rule includes current projects not started by July 1, 2026. Studies are due March 31, 2027, and pilot reports April 1, 2028. State-center funding and cleanup provisions name July 1, 2026; other state-center provisions begin upon becoming law.

The North Carolina Child Care Finance Agency would provide facility financing and could issue bonds, which are loans from investors. A 12-member board would govern the agency. Facility financing would exclude residential dwellings used for child care. Funding would include $20 million once from the General Fund and an investment of 3.5% of the North Carolina Innovation Fund's principal. The agency could also support grants, employer partnerships, and apprenticeships. The agency could lend to licensed providers only when private lenders do not offer all or part of the financing on reasonably equivalent terms. When feasible, it would prioritize providers with fewer than 10 facilities, areas with the greatest need, and high-quality care. Loans would be fully forgivable after 15 years if a provider serves at least 25% more children than when it received the loan and at least 50% of its children receive child care subsidies. Outstanding bonds and notes could total up to $12 billion, excluding temporary notes already covered by issued bonds. Repayment would come from agency revenues or assets, without pledging the state's taxing power. Mortgage insurance would require agency approval of a sound financing plan. Covered loans could not exceed 90% of estimated facility cost; annual premiums could not exceed 0.5% of outstanding principal. Insured debt could not exceed 10 times the insurance fund's average balance for the preceding calendar year. The proposal generally names July 1, 2026, as its effective date. Initial board terms would begin October 1, 2026, and the $20 million is designated for fiscal year 2026–2027.

North Carolina would use a two-tier income-tax schedule and exclude pay from specified public-service and child care jobs from taxable income. The tax schedule would apply to individual taxpayers. The job-income deduction has no stated income or weekly-hours limit. A separate $165 million yearly allocation would fund child care subsidies for families with eligible workers; its income and work-hour limits apply to those subsidies. For 2026, the schedule lists 4.25% up to the filing-status threshold and 5.05% above it. Thresholds are $1 million for joint filers and surviving spouses, $800,000 for heads of household, $600,000 for other unmarried filers, and $500,000 for married separate filers. For years after 2026, the wording calls for a 0.26-percentage-point reduction from the listed rates. The section also retains revenue-based rate-reduction rules; it does not clearly explain how those rules would apply to both tiers. The job-income deduction covers pay earned as child care workers, public school employees, and specified public-safety workers. Public-safety jobs include emergency response and management, 911 work, sworn law enforcement with arrest powers, probation or parole work, and corrections. Caregiver child care subsidies would require annual household income of no more than $125,000 and at least 30 hours of weekly employment in North Carolina in one of the listed jobs. Child care workers would receive priority. The tax provisions would apply to taxable years beginning on or after January 1, 2026. Caregiver subsidy funding begins with fiscal year 2026–2027, under the proposal's general July 1, 2026, effective date.

State agencies would support informal providers' access to meal funding, protect licensed home providers, and administer civil fines for specified willful violations. Licensed home operators could sue for court orders, actual losses, and legal fees if they win; the Attorney General could enforce their rights. Meal-access work would receive $150,000 once and $500,000 yearly. One-time implementation funding totals $175,000 for home-provider protections, $75,000 for penalty administration, and $30,000 for the informal-provider definition. The Department of Health and Human Services would take feasible steps to help legally operating family, friend, and neighbor providers access the federal Child and Adult Care Food Program. Participation would remain voluntary, and federal rules and any necessary approvals would govern access. Homeowners associations and landlords could not block or penalize licensed home child care solely because of that activity. General neighborhood rules could still apply equally. Tenants would need liability insurance and compliance with other lease terms; landlords could require notice and a license copy. Local governments would treat licensed home care as a permitted residential use wherever housing is allowed, without special child care zoning approvals or commercial standards. Residential building, fire, and health rules and state child care safety standards would still apply. Specified willful violations could draw civil fines of up to $5,000 per violation per day. The text covers willful violations of G.S. 110-99(a), or willful violations of the child care article while serving at least three children for more than four hours daily on two consecutive days. Penalty decisions would consider severity, intent, history, danger to children, and corrective action. These provisions would begin upon becoming law. Conflicting existing leases and association rules would then be unenforceable. Penalty provisions apply to violations on or after that date, preserving earlier prosecutions. Fiscal year 2025–2026 meal-access funds remain available until spent or June 30 of the second following fiscal year, whichever comes first.