Often the result of years of effort by broad coalitions, legislation in numerous states has passed that establishes permanent, dedicated funding streams for early childhood—funding that exists outside of the recurring appropriations process.
Arkansas
Arkansas’s legislature in 2025 created a Food Insecurity Fund, which is funded through set-aside revenue from medical marijuana taxes. Distributions from the fund cover the $14-million-plus cost of providing free breakfast for all of the state’s public school students.
In addition, since 1987, a portion of the fee for a marriage certificate in Arkansas is earmarked for the Arkansas Children’s Trust Fund. The Arkansas Children’s Trust Fund is currently housed within the Arkansas Division of Children and Family Services and supports programs such as the Baby and Me Program, enhancing schools that utilize the Community Schools Model, and other child abuse prevention awareness activities.
Arizona
In a 2006 ballot initiative, Arizona voters approved a tobacco tax increase dedicated to funding early childhood services. A First Things First state board and local regional partnership councils share the responsibility of ensuring that these early childhood funds are spent on strategies that will result in improved education and health outcomes for children younger than age 5.
California
The California Children and Families Act of 1998 increased taxes on cigarettes and tobacco products and dedicated the revenue to First 5 California. The revenue generated from a 50-cent tax per pack of cigarettes is used for a variety of early childhood development purposes, including early care and education. First 5 county-level commissions administer the funds.
Colorado
Colorado earmarks excess collected nicotine tax revenues for free preschool for 4-year-olds statewide. An earlier successful ballot measure raised the nicotine tax to fund a variety of health and education programs, including universal preschool, however the state constitution requires the state to either refund excess tax revenue or seek voter approval to retain it. In 2023, Colorado voted to retain the excess and dedicate it to universal pre-k. (Colorado also recently repealed a state ban on local tobacco taxes.)
In addition, Colorado state law allows local voters to create special local taxing districts called Early Childhood Development Special Districts that dedicate their revenue to funding services for children birth through 8. Once created, the districts can seek voter approval to levy property taxes and sales and use taxes in the district to generate revenues to provide early childhood development services.
Connecticut
Connecticut has a unique set of fiscal constraints created in 2017 that result in yearly unappropriated surplus revenue. In the 2025 session, an Early Care and Education Endowment was created that receives all of the unappropriated surplus at the end of each year, which averages $450 million annually. The fund was seeded with a $300 million investment and is managed by a private board, which uses the funds to expand child care and pre-k.
Since 2014, Connecticut has also been expanding pre-k with funds from the Tobacco Master Settlement Agreement. Smart Start grants fund preschool classrooms in public school buildings and are budgeted at $10 million per year through 2025.
DC
The District of Columbia has a wealth tax, the proceeds of which must be allocated to the Early Childhood Educator Pay Equity Fund. The Early Childhood Educator Pay Equity Fund is a first-in-the-nation program aimed at achieving pay parity between early childhood educators and their K-12 counterparts.
Florida
Since 1946, Florida state law has allowed for the creation of special local taxing districts that dedicate their revenue to funding child-and-youth services or early childhood supports. Once created by local voters, taxpayers pay a portion of their property taxes to a local Children’s Service Council that administers the funds.
Georgia
Georgia funds its preschool program with dedicated lottery allocations. The state’s mixed-delivery system was created alongside the passage of the education lottery. During the 2024 legislative session, the Georgia General Assembly invested an additional almost $100 million to make critical improvements to Georgia’s Pre-K, including increasing pay for Pre-K lead and assistant teachers’ salaries, reducing class size from 22 to 20 students/class, and increasing the amount of start-up grants for the first time since the program began in 1992.
Kansas
In 1999, the Kansas Legislature created the Kansas Endowment for Youth (KEY) Fund and the Children’s Initiatives Fund, and used the payments Kansas receives from the Master Tobacco Settlement to fund it. Kansas has maintained that system without substantial alteration since then. Money flows from the tobacco settlement into the KEY Fund, then into the CIF, and then is distributed to early childhood programs. The CIF is administered by the Kansas Children’s Cabinet and Trust Fund.
Kentucky
In Kentucky, 25 percent of the annual settlement Tobacco Master Settlement funds are dedicated to early child care and education programs. The funds are earmarked for use by the Governors Office of Early Childhood.
Louisiana
Maine
The Fund for a Healthy Maine, the state’s tobacco settlement fund, has supported early childhood programming over the past twenty years, including home visiting, child care, and Head Start. The early care and education funding is now limited to a $1 million to fund Head Start. The Fund for a Healthy Maine program has been increasingly utilized by the last two state administrations to fund the state’s investment in Medicaid/MaineCare, as opposed to the intended health and prevention programs.
Maryland
Maryland collects gambling fees that go into the Maryland Education Trust Fund. These funds are used to support prekindergarten programs as well as K–12 systems.
Massachusetts
Massachusetts established the Commonwealth Cares for Children (C3) Grants to support early education and care providers cover the costs of operating programs and supporting workforce costs.
Missouri
Missouri has the Early Childhood Development, Education, and Care Fund, which receives approximately $35 million annually from the Tobacco Master Settlement Agreement. This funding was used to fund the Missouri Preschool Program, but that program was eliminated and replaced with grants and formula funding to support Pre-K in public schools and child care facilities. The Fund is now used to support other child care and early education programs, including ECSE, home visiting, before- and after-school programs, and child care subsidies.
Montana
In 2025, Montana established the Montana Early Childhood Special Revenue Account with a $10-million appropriation (seed funding) that gains interest over time. The funds are available to be used to support various early childhood initiatives and are managed by a public/private board. The fund may also receive private donations to expand its impact.
Nebraska
Nebraska has an early learning endowment called the Sixpence Early Learning Fund. A public-private venture, the fund was established with $20 million from the private sector and a $40 million state investment. The earnings of this combined fund is granted tocommunity partnerships focused on high-quality early learning services for infants and toddlers from traditionally under-resourced communities. Yearly disbursements typically total $2-3 million.
Nevada
Nevada dedicates birth and death certificate fees to a child abuse and neglect prevention fund. The Children’s Trust Fund was established in 1985 by the state legislature and is administered by the Department of Health and Human Services. Every two years HHS takes grant applications from primary and secondary prevention programs for child abuse and neglect. Distributions are around $1.5 million annually.
New Mexico
The New Mexico Early Childhood Trust Fund annually distributes $250 million that is dedicated to prenatal-to-five services and the state’s Early Childhood Education and Care Department.
A constitutional amendment also mandates a Land Grant Permanent Fund Distribution for Early Childhood Education. The distribution is equal to 1.25 percent of the total value of the fund and must be dedicated to early childhood education (60 percent of the allocation) and public education (40 percent of the allocation). The early childhood education distribution totals roughly $100 million annually.
North Carolina
Guidelines from the North Carolina legislature dictate a portion of lottery proceeds is spent on pre-k. In 2020, 11 percent of lottery revenue (almost $79 million) went to fund pre-k in the state.
Ohio
Money paid to the state by casino operators in excess of amounts required by Chapter 3772. of the Revised Code for licenses or fees, or by Title 57 of the Revised Code for taxes R.C. 3772.34; Sections 423.10 and 423.40 of H.B. 33 of the 135th G.A is used to support the goals of the Step Up to Quality program. Beginning in FY 2024, H.B. 33 moves funding for these activities from the Ohio Department of Jobs and Family Services (ODJFS) to the Ohio Department of Children and Youth (ODCY). The appropriation for FY 24 was $13,000,000 (a decrease from $20,000,000 in FY23).
Oregon
Oregon invested $50 million in lottery bonds to create the Child Care Infrastructure Fund. Distributions fund investments designed to expand child care and preschool facilities.
Also, nicotine taxes fund a health care package that includes Medicaid eligibility up to 133 percent of the Federal Poverty Level. The revenue is roughly $160 million per year and ensures health care for the 135,000 children between the ages of 0-5 on Medicaid in Oregon (about 40% of Oregon’s children).
Further, since 2019, Oregon has had a corporate activity tax dedicated to education – 20 percent of which is allocated to programs serving infants, toddlers, and preschoolers. The tax is a form of a gross receipts tax that applies to a variety of corporations, partnerships, and other entities consisting of $250 plus 0.57 percent of the taxable commercial activity that exceeds $1 million in the calendar year.
Rhode Island
Rhode Island has a payroll tax that funds a temporary caregivers insurance (TCI) program as part of a broader disability program. TCI covers paid family leave currently for seven weeks for birth, adoptive, and foster parents and for workers to take care of seriously ill loved ones, and will cover eight weeks starting in 2026.
South Carolina
South Carolina is the only state that provides funding for early care and education from dedicated sales tax revenue In 1984, the state instituted a 1 percent sales tax to improve the state’s education programs. A portion of these funds now go toward improving the school readiness of at-risk four-year-olds by providing free early care and education. In 2021, the state dedicated over $50 million from sales tax funds to expand pre-K services.
Vermont
In 2023, Vermont passed the nation’s first payroll tax dedicated to child care. The 0.44 percent payroll tax (split between employers and employees) generates about $80 million annually to fund expanded eligibility for subsidized child care along with increased reimbursement rates and supports for the child care workforce.
Washington
Washington has a capital gains tax dedicated to early childhood — a 7-percent tax on profits of more than $250,000 that result from the sale of stocks and bonds, excluding revenue from real estate and retirement accounts, among other exceptions. The tax raises hundreds of millions of dollars for crucial early childhood programs through 2021’s Fair Start for Kids Act (FSK).
