Ontario's Financial Accountability Office, an independent officer of the Legislative Assembly, released its review of the Ministry of Education's 2025 spending plan. The report contains projections and analysis that every licensed child care operator in Ontario should understand. Not because it changes anything about how your centre is funded today, but because it puts hard numbers to the structural pressures that have been squeezing operators for years.
The numbers are not reassuring.
The Funding Gap Is Larger Than Most Operators Realize
The FAO estimates that the CWELCC program will cost $4.2 billion in 2025-26, rising to $5.2 billion in 2026-27 and $5.4 billion in 2027-28. These estimates assume that average daily fees are reduced to $10 by the end of March 2026 and that the Province reaches its target of 375,111 licensed spaces enrolled in the CWELCC program by the end of 2026.
Neither of those assumptions is currently on track.
Ontario's average daily fee remains at $19, not $10. The Province committed to $10 per day by September 2025, then revised that to March 2026. As of this writing, that target has not been met. Ontario has stated it would require an additional $2 billion per year from the federal government to reach $10 per day.
On spaces, the FAO estimates the Province will need to create an additional 33,090 licensed child care spaces in 2026 to hit its target. That would be more than double the average annual increase in spaces over the previous three years. The staffing shortages that operators have been navigating directly are the primary structural barrier to meeting that target.
The Federal Funding Shortfall
The FAO's most significant finding for the period ahead is its estimate of a federal funding shortfall for the CWELCC program of $1.9 billion in 2026-27 and $2.0 billion in 2027-28, based on the federal government's previously proposed funding levels.
This report was written before the federal government's June 19, 2026 announcement of $5.4 billion in additional funding over two years. That announcement narrows the gap the FAO identified, but the degree to which it closes it depends entirely on how the federal dollars are allocated between provinces and what terms Ontario accepts in its renewed agreement. Ontario Education Minister Calandra's statement that the province is reserving judgment until it sees specific provincial allocations reflects exactly this uncertainty.
The FAO's numbers make clear why Ontario signed only a one-year extension while other provinces accepted five-year renewals. The math did not work. Whether the new federal announcement changes that math sufficiently to bring Ontario into a longer agreement is the central question for CWELCC operators heading into the second half of 2026.
Ontario Spends Less Per Child Than the National Average
The interprovincial comparison in the FAO report provides important context for understanding why Ontario's benchmark rates are structured the way they are.
In 2023-24, Ontario's child care spending per child aged zero to twelve was $2,199. The national average was $2,654. Ontario spent $455 below average, ranking fifth lowest among provinces. British Columbia spent $2,655 per child. Quebec spent $4,339.
For operators who have been asking why their benchmark allocation does not cover their actual costs, this comparison is part of the answer. Ontario's per-child investment has been materially lower than most comparable provinces. The benchmark rates built into the April 2026 cost-based funding guideline reflect what the provincial system has historically been willing to spend, not what operators in high-cost regions actually need to deliver quality licensed child care.
The Ministry Spending Plan Falls Short by 2027-28
The FAO's broader spending analysis found that the Ministry of Education would need to grow spending at an average annual rate of 3.2 per cent over the next three years to maintain current service levels. The 2025 Ontario Budget projects growth of only 2.5 per cent annually.
For child care specifically, the FAO estimates the program would need annual spending growth of 5.9 per cent to maintain current service levels. The budget plan falls significantly below that threshold by 2027-28, when the Ministry's spending plan is projected to be $0.9 billion below what the FAO estimates is required to maintain existing service levels.
That $0.9 billion gap does not appear as a line item in your Program Cost Allocation. But it shapes the environment in which your allocation is calculated. Benchmark rates are a policy choice, not an actuarial calculation. When the province is operating below its own cost drivers, the pressure to contain benchmark growth is real.
What This Means for Operators in 2026
The FAO report does not change your 2026 funding allocation. Your benchmark rates, your eligible cost framework, and your reconciliation obligations are all fixed under the April 2026 guideline. What the report does is confirm, in the language of Ontario's own independent financial officer, that the system is structurally underfunded relative to the costs operators are actually incurring.
That context matters for several reasons.
If you are navigating a cost review, the FAO report supports the case that your costs reflect structural realities in the Ontario child care sector, not operational inefficiencies unique to your centre. Ontario spending below the national average per child, combined with cost-based funding benchmarks that the FAO acknowledges need to grow faster than the budget provides for, is the system your cost structure exists within.
If you are trying to understand whether the federal $5.4 billion announcement changes your funding picture, the FAO report provides the baseline against which that announcement needs to be measured. The shortfall the FAO identified was $1.9 billion per year. Whether the new federal money covers that gap in Ontario, and how quickly any changes flow to the benchmark level, are questions that will not be answered until the provincial allocation is confirmed.
If you are making operational decisions about staffing, capacity, or program design for 2027 and beyond, the FAO's numbers suggest that expecting the current funding pressures to resolve quickly is not a sound planning assumption.
The most productive thing an operator can do in this environment is understand exactly where their centre stands under the current formula. Know your Program Cost Allocation. Know your eligible cost run rate. Know the gap between them and what it means for your year-end reconciliation. Know your WEG and WCF entitlements and whether you are claiming them fully.
ChildcareFundingIQ was built for exactly this. The platform walks through your full CWELCC cost-based funding allocation using 2026 benchmark rates, models scenarios for operational changes, and tracks eligible costs by GIFI and FIN codes so you are not reconstructing your financial position at year-end when it is too late to act.
If you need direct support navigating a cost review, reconciliation, or the implications of the funding environment on your centre's financial position, our consulting services are available for operators who need an advisor working exclusively on their side.
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Learn More →Source: Financial Accountability Office of Ontario, "Ministry of Education 2025 Spending Plan Review," 2026. Available at fao-on.org.