Early childhood education services that cater for middle income earners may find themselves scrabbling for money after the Budget scrapped an annual subsidy rise.
The Budget, announced by Finance Minister Bill English on Thursday afternoon (May 24th 2012) revealed that an annual inflationary increase for ECE funding will be scrapped as the Government targets money to other areas.
This move could leave some services without the money needed to cover other costs that generally rise with inflation such as utility bills and food costs.
This could in turn lead to increased fees for parents as services in middle class areas seek other ways to raise the required funds.
Education Minister Hekia Parata said the 20 hours subsidy rates would continue but there would not be an increase as in the past.
In the current economic climate the Government had to weigh up costs and benefits, she said, and targeted funding better helped the Government achieve its goal of supporting those in most need.
Ms Parata said recent research had shown that the current subsidy rates more than met the average cost of providing high quality ECE.
The Budget confirmed plans to increase participation in ECE to 98% by 2016 and to target areas of low participation including Maori and Pasifika communities and low-income families.
The Budget contains $47.9 million over the next four years in equity funding for ECE services that support communities with the lowest participation rates and $19 million for spending on improving access to Maori immersion ECE services.
Ms Parata said vulnerable children needed support to access ECE.
"These children often do not attend ECE for a variety of reasons," she said. "By targeting resources to these learners, we will raise participation to give them a strong platform for their compulsory school years."
A further $43.9 million will be provided to cater for the children of solo parents who will need childcare as a result of welfare reforms.
While the Budget does target some areas, in general, there is little to stimulate the ECE sector. Instead, the financial belts of many centres may have to be tightened while spending is concentrated in other areas.
Services in mainly middle and upper income areas may have to increase fees to keep providing similar levels of service or look at other ways of getting funding such as deals with local businesses.
The targeted funding will need to be used wisely to ensure it achieves the aim of increasing participation among the highlighted groups, and does create better outcomes for the children and their families.
ECE Services that cater for these communities may benefit from this budget; however, the majority of services will have to think hard about how they are going to manage their finances in the coming years.