Parents in New South Wales may face significant fee increases and reduced supervision at community preschools following the introduction of a new state government funding model set to commence in 2027. The Minns Labor government unveiled the Universal Preschool Funding Program earlier this month, aiming to expand access and improve wages for early childhood educators. However, some industry leaders have raised concerns that the reform could cause severe financial strain for many not-for-profit preschools.

The new funding scheme replaces the previous Start Strong model and includes provisions to support three-year-old enrolments for the first time. The government has pledged up to $2,625 in fee relief for families enrolled in long day care and committed to guaranteeing wages for early childhood staff that exceed award rates.

Despite these intentions, early childhood sector representatives have expressed alarm over the program’s potential impact. Many community preschools currently operate under enterprise agreements that pay qualified teachers salaries comparable to those in Department of Education schools, which often exceed government award rates by around 30 percent. Yet, the new model’s funding formula appears to be based on minimum staffing ratios of one educator per 10 children, which may not adequately support centres that maintain higher staffing levels to ensure better child safety and quality care.

Preschool operators warn that this funding approach could result in daily fees increasing up to fourfold, with some centers potentially having to raise out-of-pocket costs for families from around $5 to the new government-set maximum of $20 per day. Such hikes could place significant financial pressure on families and jeopardize affordability.

Jo Barton, secretary of the NSW Community Managed Preschools Association, stated that the policy risks undermining the viability of many preschools across the state. Similarly, the Independent Education Union of Australia’s NSW/ACT branch described the funding changes as “deeply concerning,” citing potential negative effects on both educators and families.

While the government emphasizes that the reform will create an additional 10,000 preschool places and deliver wage improvements for educators, critics argue that without adequate adjustments, the new funding structure may inadvertently force community preschools to reduce service quality or even cease operations. Discussions between the government and sector stakeholders are ongoing as the implementation date approaches.