In New Mexico, State Funding Reshapes Child Care Industry and Attracts Investors

In New Mexico, public funding for child care is reshaping how centers operate and how much workers earn. The state's mix of American Rescue Plan dollars, higher subsidies and a universal program has begun to alter a sector long known for slim margins. Crystal Romero, who runs Early Learning Academy in Albuquerque, says she is living in a different reality than she did 25 years ago. "Twenty years ago, I had to furnish classrooms by shopping at thrift stores and yard sales, sanding things myself and repainting them," she said.

Today, Romero's four Albuquerque centers employ about 165 staff and serve roughly 700 children. She and her husband plan to add two more locations in 2026. In October, she announced a $5-an-hour raise for every staff member. The state subsidies cover full-time care even if a child attends only three or four days a week. By studying average daily attendance, she can enroll more students while keeping staffing levels and teacher-to-child ratios. She keeps floaters on hand to cover breaks, so she can adjust if more children show up. As part of its community program, ELA hosts an annual event where every child gets a brand new pair of shoes. "Nike and Air Jordans," she explained. "We gave away 500 at this location." This year, they sponsored a Make-A-Wish request for a child with a brain tumor and paid $8,500 to send the family to Disney World. Her staff lounges include free snacks and leather recliners, and photos line the walls where she and her husband appear at local university games and community events on behalf of their organization.

Child care has long been known for slim margins, but government funding can shift the economics. The state program is not without flaws: subsidies do not reach every family that qualifies, and providers sometimes struggle to meet demand. Still, Romero argues the evolution in New Mexico reflects a broader reordering of how child care is funded and valued.

Across the country, increased public money has begun to attract more players to the child care sector. Vermont’s Act 76 broadened the pool of families eligible for subsidies and raised provider subsidy rates. Massachusetts has set aside $475 million per year for grants to providers. Connecticut created an Early Childhood Education Endowment to expand access, funded by up to $300 million annually from the state budget’s surplus with room to add funds each year. "As more public money becomes available in child care, that is going to be what attracts different players," said Elliot Haspel, a senior fellow at Capita and a fellow at the Better Life Lab at New America. "It does pose a policy challenge — how does [providing child care] square with profit-seeking?"

When public funding grows, so does private investment. Private equity groups have long played a role in child care and, after 2022, have become more prominent as government dollars circulated through the sector. Today, investor-backed chains control between 10 and 12 percent of the licensed market and typically target higher-income populations to charge higher fees. Profitability is not inherently incompatible with quality care, but watchdogs and researchers warn that rapid growth can be accompanied by higher enrollments, reduced staff hours and periods of instability if cost-cutting takes precedence over classroom quality. The Open Markets Institute has highlighted concerns about why investors push for scale and consolidation in child care when the public funds aim to expand access and improve wages.

EdTech firms have also moved into the space as centers gain more discretionary spending. Elizabeth Leiwant, vice president of public policy and research at Neighborhood Villages, notes that stronger budgets for providers make technology more attractive. Some EdTech offerings, like bookkeeping software, can help operators manage finances more easily, especially for workers who entered the field from non-business backgrounds. Venture capital funds increasingly inquire about curriculum platforms and targeted advertising to connect parents with available slots, a shift unseen before substantial public funding created a new market. "It led EdTech firms to pay attention to this space in a new way," Leiwant said. "There were far fewer EdTech products — and certainly less venture capital interest — before substantial government funds created a new market."

If child care can be profitable, can it still be quality care? Across the country, most providers report slim profits, with workers earning an average around $15 an hour and states pouring only a modest share of public funds into the system. Romero’s approach—expansion, competitive wages, robust benefits and a focus on staff well-being—represents a newer, more ambitious model that some view as desirable while others see as a risk to affordability and equity. She has faced criticism from some who say she is using state money to get rich, but she argues that the critique ignores a larger context: child care is a vital service historically funded or subsidized by public money, and the field is disproportionately staffed by women of color who have faced low wages and precarious benefits. "I don’t see any other industry that receives state money that feels like they can’t do well," Romero said. "But as child care gets more attention and becomes more profitable, advocates hope to create guardrails to prevent profit-seeking at the expense of stability and quality."

Massachusetts offers a template for these guardrails. Its approach makes permanent a large stream of grants while imposing limits on how much can go to large for-profit firms. Large providers can receive no more than 1 percent of total grant funds, and a portion of the money must be devoted to staff salaries and benefits. Programs are required to enroll children who receive subsidies at every site, and the YMCA, a nonprofit, is cited as an example of a different governance model. The overarching goal, Leiwant says, is to ensure providers can still make a living while maintaining strong educational quality. "But first you should be paying attention to the quality of the program you are providing and having quality education. If you make money on top of that, that is great - but that is the last rung," she said. In New Mexico and elsewhere, Romero’s continued growth will be measured not only by the number of centers and staff but by the stability and quality of the classrooms that serve the state’s children.

Romero remains proud of what she and her team have built. For her, paying staff well and ensuring their well-being comes before attracting families, because when staff are happy and secure, they provide a better experience for children and families. If not, burnout follows and the families pay the price. With New Mexico’s universal child care program providing a platform for growth, Romero and other providers say the industry is at a turning point: care can be a public good, a business, or both—so long as guardrails guard quality and workers’ futures. This evolving dynamic, shaped by policy choices across states, will continue to test how far profit can safely ride alongside accessible, high-quality early learning.