This story has been updated.

Connecticut Voices for Children released its annual report on the state of early childhood on Monday, painting a picture of a system that is struggling to meet a demand but is hopeful about a plan to expand access to early childhood education.

The report calls 2025 “a transition point” for early childhood education in Connecticut.

“This session’s policy changes lay out an ambitious path forward that, if given continued support, could begin to address long-standing structural barriers,” the report says.

Those policy changes include the creation a new endowment for early childhood education, a signature issue of Gov. Ned Lamont that will draw from General Fund surplus funds each year. The fund received $300 million from last fiscal year’s General Fund operating surplus.

But for this fiscal year and others going forward, the endowment would receive the full operating surplus — provided one exists. The transfer also would be reduced if additional dollars are needed to bring the state’s rainy day fund to its legal limit, which is 18% of the General Fund.

Depending on how quickly that fund grows, it will eventually allow families making less than $100,000 to pay nothing for infant and toddler care and pre-K, while families making more than that would pay no more than 7% of their annual household income toward those expenses.

But the report released Monday shows why that system needs a significant overhaul, with dysfunction at virtually every level, from the low compensation for workers, lack of spots for kids, unaffordable options for parents and closures of existing businesses due to the inability to make a profit in the sector.

According to the report, there has been little improvement in the number of spots for early learners over the past decade. Most notably, enrollment in publicly funded infant and toddler care grew by 34%, while preschool age enrollment in such programs fell by 9%. By late 2024 and into this year, the wait list for Care 4 Kids, a program that helps low to moderate income households pay for child care, grew to more than 3,000.

The number of providers also declined significantly, from 4,527 in 2014 to 3,861 in 2024. The report puts blame on low wages and incremental policy shifts created in a piecemeal fashion, and it calls early childhood education “a fragile and untenable system that is nonetheless essential infrastructure, central to a thriving economy.”

The report applauds the creation of the early childhood education endowment but also sounds a note of caution to lawmakers, urging them to stay the course to that enough money is set aside to make the model work as imagined. The fund depends, after all, on surplus funds.

“While ambitious and moving in the right direction, much of the realization of this legislation will depend on an economic climate that is conducive to a growing endowment and continued funding for existing programs,” the report said.

Ruchi Sheth, the principal author of the report, was optimistic about the joint impact of legislation passed during the 2025 session.

“This legislation in tandem will increase child care slots, make child care more affordable for families and increase provider pay to increase the state’s ECE (early childhood education) system,” Sheth said.

Still, Connecticut Voices for Children had a number of policy recommendations. First, stick to the endowment goals set out. Next, the group recommended that the state index personal income tax to inflation, to account for lagging cost of living increases to worker pay and to ensure that taxes don’t continue to take bigger bites of household income over time.

The group also urges the state to hire more auditors to improve what they called an “exceptionally low” audit rate of 0.39%, which they said results in a significant loss in uncollected tax revenue. According to Sheth, other state tax agencies have an average audit rate of 3%.

“With damaging changes at the federal level that shift more costs onto the states, this lost revenue means there’s less available to invest in essential programs such as child care, health care education and more,” Sheth said. Sheth called investment in audit capabilities a common sense investment.

Finally, the group recommends establishing scheduling protections for hourly workers, a key issue for early childhood education workers.

“Our position is that early childhood is essential infrastructure and should be resourced as such,” said Emily Byrne, the executive director of Connecticut Voices for Children. She said that the policies enacted in 2025 could prove to be “the most transformative and comprehensive early childhood policy in the country. However time will tell whether what Connecticut enacted this year meets the intended promise. Because ECE is in transition, it’s still very fragile.”

The group says Monday’s report is a stake in the ground, “a marker of where Connecticut is today, from which we can measure continued progress.

Correction: A previous version of this story reported that the new endowment for early childhood education would draw up to $300 million from state budget surplus funds each year. Although the fund received $300 million last fiscal year, the endowment would receive all of any operating surplus in this fiscal year and beyond, minus any money needed to bring the state’s rainy day fund to its legal limit, which is 18% of the General Fund.