Federal child care funding now tied to improper payment threshold
H.R. 7721 — CRACKDOWN Act of 2026 · Filed by Glenn Grothman (R-WI) · Introduced Feb 26, 2026 · Reported out
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What it does
This bill amends the Child Care and Development Block Grant Act to impose a 5% improper payment threshold on states. If a state's improper payment rate exceeds 5% in any fiscal year, it must submit a corrective action plan to the federal government. If a state exceeds the 5% threshold for two consecutive years, it becomes ineligible for federal child care funding unless it demonstrates it will reduce improper payments or make significant progress on its corrective plan.
Why we flagged it
The bill establishes a federal improper payment threshold and enforcement mechanism for state-administered child care programs, designed to reduce waste and ensure compliance with federal funding requirements.
What the text implies
- States with high administrative complexity or serving high-poverty populations may struggle to meet the 5% threshold, potentially creating disparate impact on the most vulnerable child care populations.
- Loss of federal funding eligibility could force states to reduce child care subsidies or services, shifting costs to families or reducing access entirely.
The full analysis lists 4 implications of this text.
Who it affects
The bill creates accountability for improper payments in child care programs, which protects federal funds and potentially improves program integrity. However, the 5% threshold and two-year penalty mechanism may cause states to lose federal child care funding, which could reduce child care access and affordability for low-income families if states cannot quickly reduce improper payments or if the threshold is set too low relative to administrative complexity.