Early Child Care – Part 2: What the New SRA Rules Actually Mean for Children, Families, and Providers

Published on October 22, 2025

What the New SRA Rules Actually Mean for Children, Families, and Providers

What is the SRA program?

In Part 1 of this blog series, we explained what Arkansas’s School Readiness Assistance (SRA) program is and how funding works for it.

As a recap, the SRA program directly helps working families afford child care so parents can stay employed or in school. It’s administered by the Arkansas Department of Education’s Office of Early Childhood (OEC) and funded mostly through the federal Child Care and Development Fund (CCDF), the major federal funding source for child care subsidies available to every state.

Families qualify if they have children under age 13, are working or enrolled in education or training programs, and earn below 85% of the State Median Income (SMI), about $6400 per month. The program also prioritizes children with special needs, those experiencing homelessness, and families receiving Temporary Assistance for Needy Families (TANF).

It’s important to note that SRA is not the same as:

Arkansas Better Chance (ABC) – a state-funded preschool program focused on preparing children with risk factors who are three- and four-year-olds for kindergarten, or
Head Start – a federally funded early learning and family support program serving children living in poverty.

While all three programs serve vulnerable children, SRA operates as a child care subsidy. It primarily helps families pay for care in private or community-based child care centers and homes while parents work or attend school.

What changed this fall?

Arkansas updated the SRA program in two steps this fall. New copay rules for families began October 1, 2025, and updated reimbursement rates for providers take effect November 1, 2025. In plain terms, many families started paying more out of pocket at the beginning of this month, and providers will begin receiving lower state payments at the start of November. These changes were announced in mid-September with a short runway, though the state allowed for a later start date for reimbursement rates in a follow-up notice. In announcing the updates, OEC said the changes were intended to “prioritize family access, affordability of care, and sustainability of the system.”

The updates also simplify how the program works. The state reverted to 2024 reimbursement rates, which are set near the 75th percentile of market rates, the federal benchmark for aligning payments with typical tuition costs. These rates are lower than what providers were receiving earlier in 2025. Rates are now streamlined into one statewide schedule (with a higher rate for Benton and Washington counties) instead of varying by Better Beginnings quality level. Families pay income-based copays that rise with household earnings and child age. Finally, OEC shifted to weekly reimbursements instead of daily payments to make the process more consistent and predictable for providers.

This blog post summarizes our new report detailing our estimates of the effects of these policy changes on how much families will pay and how much providers will receive for care. For a sense of how we calculate this, see the below examples for individual providers and family. We repeat these kinds of analyses across all families and all sites in the report to estimate aggregate impacts.

Our bottom line

The fall 2025 SRA policy changes reflect the state’s effort to balance fiscal responsibility with maintaining access to child care. According to the state, Arkansas has had to make difficult choices to keep the program sustainable within its available budget. These updates bring spending in line with available funding by reducing the state’s total contribution. This occurs in two ways: first, overall reimbursement rates have been reduced; and second, parents are now responsible for a larger share of the reimbursement amount via copays to the provider.

Families: 9,763 children will pay more. That includes 9,156 who are newly paying and 607 who were already paying and now owe more.
Not affected: 10,374 children see no change.
Among affected children, the average increase is $211 per month (about $2,535 per year).
Total added family responsibility: $24.8 million per year.

Providers are also affected by reduced reimbursement rates and the removal of quality-based rate differentials.

738 of 805 providers enroll children affected by the copay change.
Median reimbursement loss: -$720 per month (-$8,640 per year).
Mean reimbursement loss: -$3,334 per month (-$40,011 per year).
Total annual provider reimbursement loss: -$32.3 million.

System-wide, the changes represent roughly $57 million in shifted costs across the SRA program each year, with families paying more and providers receiving less from the state. (All figures come from OEP analysis of July 2025 SRA data and the official copay and reimbursement schedules.)

Who feels the biggest change?

Families

Figure 1. Previous county-level average copay amount as a percent of household income for families with SRA copayments.

Figure 2. New county-level average copay amounts as a percent of household income for families with copayments.

Figures 1 and 2 show how copayments vary across Arkansas counties. Before the policy change, most families paid very little—typically less than 2 percent of their monthly income (Figure 1). After the change, copayments increased in every part of the state (Figure 2).

Table 1. Monthly Average Family Copay Increases by Income Tier


Income Tier	% of SMI	Monthly Income Range	Mean Monthly Copay Increase	Increase as % of Monthly Income
Tier 0	≤ 40%	≤ $3,009	$126.69	4%
Tier 1	> 40–60%	$3,010–$4,514	$221.11	5%
Tier 2	> 60–75%	$4,515–$5,643	$306.87	5%
Tier 3	> 75–85%	$5,644–$6,395	$292.99	5%

Note: The percentage in the final column represents the copay increase as a share of monthly household income. Copays in Tier 0 apply only to school-aged children and are calculated at a full-time rate, even though many families may use part-time before- or after-school care.

The biggest impact falls on families in the middle tiers, or those earning between 60 and 85% of SMI. These families now face the largest increases in both dollars and in the share of their income going toward child care. Under the new policy, most families will spend roughly 4–5% more of their monthly income on child care for one child than they did previously. For lower-income families (those at or below 40% of SMI), the new copays mainly apply to school-aged children. Even the lowest average copayment increase of about $127 a month represents at least 4 percent of a household’s income.

Family Copay Takeaways:

The steepest dollar increases fall on households between 60 and 85% of State Median Income (SMI).
Very low-income families with school-aged children now have a 20% copay resulting in copays at the lowest tier for these children.
Families in Benton and Washington counties face higher dollar copays because regional reimbursement rates are higher there. Other counties also show large impacts even though they use the lower reimbursement rates for calculating copays.

Providers

Table 2. Estimated Provider Reimbursement Loss by Geographic Region

Region	Mean Monthly Loss	Median Monthly Loss	Mean Annual Loss	Median Annual Loss
Statewide	-$3,730	-$780	-$44,766	-$9,360
Benton/Washington Counties	-$1,075	-$260	-$12,895	-$3,120

As shown in Table 2, reimbursement losses vary widely across providers. On average, providers lose about $3,700 per month statewide, though the typical (median) provider loses far less, around $780. This gap means a smaller group of providers, often those serving more low-income families, are taking on the largest cuts.

Location also matters. Providers outside Benton and Washington Counties face steeper average monthly declines, roughly $3,700 compared to $1,100 for those within the region. The difference reflects higher reimbursement rates in Northwest Arkansas, which help offset some of the loss. Still, those same providers also operate in higher-cost areas, leaving their margins just as tight.

Provider Reimbursement Takeaways:

Most providers are affected, though the size of the loss varies. The higher mean compared to the median indicates that some providers face particularly large reductions.
Average losses are larger outside Benton and Washington counties, where reimbursement rates are lower.
The removal of Better Beginnings high-quality reimbursement differentials means higher-rated programs no longer receive higher rates tied to their Better Beginnings level, leaving reimbursements only dependent upon age of children served and geographic region.

What this means for access and stability

When families pay more and providers receive less, affordability and stability might become fragile.

Family affordability: Out-of-pocket costs rise, which can lead to reduced hours of care, unpaid balances, or families exiting the program (including movement into informal care).
Provider sustainability: Thinner margins will likely make staffing and classroom stability harder, especially for higher-rated Better Beginnings programs, which must maintain lower child-to-staff ratios. To offset lower reimbursements, some providers may raise private-pay tuition rates, limit the number of SRA slots, or stop participating in the program altogether, reducing available seats.

These pressures are uneven by income tier, child age, and region, so local effects will differ across the state.

Policy details in brief

Copays: Now depend on household income tier and child age. Families above 40% of the State Median Income (SMI) pay copays that range from 20% to 70% of the reimbursement rate. Very low-income families pay 0% for infants through pre-K, but 20% for school-aged children.
Reimbursement rates: Reset to early-2024 levels and no longer vary by provider quality. Rates still differ by age group and by geographic region; i.e., whether a child is in Benton/Washington county or elsewhere in the state.
Accounting detail that matters: Copays are deducted from the state reimbursement rate, not added on top. This means providers can receive less total payment even as families pay more.

How we estimated the impact

OEP linked July 2025 SRA enrollment provided by the Office of Early Childhood (OEC) to providers’ Better Beginnings ratings and the state’s new and prior copay and rate schedules, then modeled what families and providers would pay or receive under each policy. For consistency, we used full-time, full-year care and assigned income tiers using FY 2026 State Median Income (SMI) for a family of four.

Important caveats:

Missing income records and children attending multiple providers could mean more families are affected than we can count cleanly.
Using a single family size (family of four) and assuming full-time care for everyone can overstate costs for some families and understate for others who pay copays across multiple placements or use part-time or extended care.
Missing quality ratings for some providers means we may underestimate reimbursement losses where the old Better Beginnings high-quality differential applied.
Not observing special education or special needs child-level designations means that we cannot include these additional rates in our analysis.

Examples of what the changes mean in practice for SRA-enrolled children and the providers who serve them

Family Examples

Family Example 1: Family of four earning 65% of SMI (≈$4300 per month) with a three-year-old in full-time care at a Better Beginnings Level 3 provider in Conway, AR
Before the change, this family paid $0 in copays. Under the new policy, families at >60–75% SMI with a Pre-K child owe 40% of the $33 daily reimbursement rate, or $264 per month (20 days × $13.20). That is about $3,168 per year, roughly 5% of monthly household income for the same care. In this example, the provider’s quality level did not affect the family’s copay before the change because the family was below 75% SMI, and under the new rules copays are not tied to Better Beginnings ratings.
Family Example 2: Family of four earning 80% of SMI (≈$5300 per month) with a five-year-old in full-time care at a Better Beginnings Level 6 provider in Fayetteville, AR
Before the fall 2025 SRA changes, this family paid 4% of the $55 daily rate because income was above 75% SMI and the child attended a Level 6 provider, which is about $44 per month. Now they owe 40% of the new $39 daily rate, or $312 per month, an increase of $268 monthly (about $3,200 per year). In this example, the family was originally paying a copay based on their household income and provider quality level. The copay was increased to a larger percentage based on household income and child age, but it is not adjusted for provider quality rating under the new policy.
Family Example 3: Family of four earning 70% of SMI (≈$4650 per month) with two children, one infant and one four-year-old, in full-time care at a Better Beginnings Level 2 provider in Pine Bluff, AR
Before the change, this family paid no copays for either child. Under the new policy:
- Infant:(30% × $36 daily rate) × 20 days = $216 per month
- Pre-K:(40% × $33 daily rate) × 20 days = $264 per month
- Together, the family now owes about $480 per month(≈ $5,760 per year), roughly 6% of monthly household income.

Provider Examples

Provider Example 1: Better Beginnings Level 2 child care center with 12 SRA-enrolled children in Little Rock, AR
Before the policy changes, statewide Level 2 rates were $39 per infant, $38 per toddler, and $33 per Pre-K child. Under the new statewide schedule, they are $36, $35, and $33, respectively, and not differentiated by provider quality level.
- Infants/toddlers: $3 per day less × 20 days =$60 per month per child x 4 children = –$240 per month
- Pre-K: $0 per day less × 20 days =$0 per month per child x 8 children = –$0 per month
- This provider’s total reimbursement decreases by about $240 per month ($2,880 per year).
Provider Example 2: Better Beginnings Level 6 child care center with 30 SRA-enrolled children in Jonesboro, AR
Before the fall 2025 changes, the provider was reimbursed $55 per day per child. Under the new schedule, that amount is $33 per day, or a $22 decrease per child per day. This results in –$440 per month per child (assuming 20 days of care for all).
- With 30 children enrolled full time, the center’s total reimbursement drops by about $13,200 per month (-$158,400 per year).
Provider Example 3: Better Beginnings Level 6 family home with 2 infants and 5 PreK SRA-enrolled children in Rogers, AR
Before the fall 2025 changes, Benton County Level 6 rates were $75 per day for infants and $55 per day for pre-K. Under the new Benton/Washington schedule, those rates are $43 per day for infants and $39 per day for pre-K. That means a decrease of $32 per day per infant and $16 per day per pre-K child. Under the new structure, the provider’s Better Beginnings level no longer affects the reimbursement rate, so a Level 6 family home and a lower-rated program in the same geographic group receive the same base rates for the same age groups.
- Infants: 2 children × (-$32 per day × 20 days) =-$1,280 per month
- Pre-K: 5 children × (-$16 per day × 20 days) =-$1,600 per month
- This provider’s total reimbursement decreases by about -$2,880 per month, or by –$34,560 per year

Together, these examples illustrate how the fall 2025 SRA policy changes shift the financial balance of the program. Families are now responsible for a greater share of total costs, while providers receive less from the state even when serving the same children. The size of these changes varies: we see larger changes for (1) higher-rated programs in Better Beginnings that previously received higher reimbursements, (2) programs that serve more infants and toddlers, and (3) programs that operate outside Benton and Washington counties where base rates remain slightly higher.

What to watch next

The effects of these changes will take time to fully understand. As families, providers, and the state adjust to the new copay and reimbursement structure, the data that emerge over the coming months will reveal whether the system remains stable and absorbs the changes. Below are a few key areas to watch as implementation continues.

Provider participation and seat availability
Track provider entries and exits from SRA, changes in the number of available seats by region, and any adjustments in private-pay tuition rates that may occur in response to thinner margins.
Family affordability and participation
Monitor copay distributions, unpaid balances, and exits from the SRA program. Pay particular attention to families using school-aged care, where part-time or seasonal patterns could signal affordability challenges.
Quality and staffing signals
Watch for changes in staff turnover and Better Beginnings participation, especially among higher-rated programs that lost quality differentials. Trends in rural or small-community access may also signal whether the new structure is creating gaps in available care.