This bill, titled the Child Care Modernization Act of 2025, aims to reauthorize and significantly update the Child Care and Development Block Grant Act of 1990. Its core purposes are expanded to allow states maximum flexibility in developing diverse child care systems and to promote parental choice in selecting services. The legislation also seeks to encourage consumer education, assist states in delivering high-quality, coordinated child care, and support parents in achieving independence from public assistance.

Key changes include new definitions for "eligible activity," broadening it to encompass job search, training, education, health treatment, and various leave types like FMLA. The definition of an "eligible child" is updated to include a family asset limit of $1,000,000 and new categories such as children experiencing homelessness, those in kinship care, or those needing child protective services. The bill also introduces the concept of a "mixed delivery system" to describe a combination of programs and settings, including faith-based and community-based providers.

The bill reauthorizes appropriations for the main Child Care and Development Block Grant program for fiscal years 2026 through 2030. It mandates that state lead agencies develop their plans in meaningful consultation with parents, eligible child care providers, employers, and local government representatives. State plans must now detail how they will offer a full diversity of child care services through a mixed delivery system, including information on hours, days, and ages served.

A significant provision requires states to implement a statistically valid and reliable cost estimation model for direct payment rates to providers. This model must ensure rates are sufficient to cover fixed and operational costs, staff salaries, and benefits necessary to recruit and retain a qualified workforce. It also needs to reflect variations in costs based on geography, ages of children, special needs, and non-traditional hours, with a deadline for implementation by September 30, 2031.

The legislation emphasizes improving the quality of child care by requiring states to develop and expand initiatives to assist providers in recruiting, training, and retaining a qualified workforce. It also modifies waiver provisions for income requirements, allowing states to request waivers to raise their maximum income standard under specific conditions, provided they continue to prioritize and serve lower-income eligible children.

New state reporting requirements are introduced, including annual reports on the percentage of income families spend on child care and a feasibility study on how to lower these costs and increase access over five years. States must also submit progress reports on benchmarks related to child and family eligibility, affordability, parental choice, payment rates, workforce development, and quality improvement.

A new section, Part II, establishes Child Care Supply and Facilities Grants, authorized for fiscal years 2027 through 2030. These grants aim to expand the supply and capacity of qualified child care providers and staff, and to ensure facilities are designed for health, safety, and child development. States will receive these grants and use funds for state-level activities and subgrants to qualified providers.

Subgrants can be used for startup and supply expansion costs, helping providers meet health, safety, licensing, and quality rating standards, and establishing family child care networks. Facilities subgrants are available for remodeling, renovation, repair, construction, or major improvement of child care buildings. Priority for these subgrants will be given to providers serving priority populations, such as children in underserved areas, those experiencing homelessness, or children with disabilities.

Finally, the bill includes a provision directing the Secretary of Agriculture to revise regulations to exclude licensed, regulated, or registered child care providers from certain loan restrictions, aiming to support child care businesses.