Ontario’s struggle to meet key targets under Ottawa’s national $10-a-day child-care program is fuelling new warnings that provinces and territories have become financially dependent on federal funding to sustain their systems — a dynamic one policy analyst describes as a “golden handcuff problem” in Canadian child care.
A newly released report from Cardus examining Ontario’s first three years under the Canada-Wide Early Learning and Child Care (CWELCC) agreements argues the province has been forced into a difficult bargaining position as governments negotiate the next phase of federal support.
“Ontario in particular, finds itself in a difficult bargaining position,” the report’s author writes, noting that despite receiving more than $10 billion over the first five years of the federal program, Ontario has not met its space-creation targets and has indicated it will not reach the $10-a-day fee objective in 2026.
The federal government has been seeking longer-term commitments from provinces and territories to extend the program beyond its initial rollout. Almost all jurisdictions have signed five-year extensions beginning this April, according to Cardus, while Alberta and Ontario signed one-year agreements in hopes of securing more time for negotiations.
The Cardus paper, titled Child Care Funding Update: Ontario—2022–23 and 2023–24, focuses on how Ontario managed rising program costs and attempted to balance spending against future financial pressures. The analysis suggests that even as federal allocations increased annually, the province anticipated a sharp escalation in expenditures later in the agreement period.
“Although the annual federal allocations increased each year, Ontario foresaw that expenditures would rapidly increase in the latter years of the agreement,” the report states.
To manage that trajectory, Ontario carried forward large amounts of unspent federal funding in each of the first three years of the agreement. “In an effort to buffer increasing costs, the province strategically carried forward over $1 billion in unspent federal funding in each of the first three years of the agreement,” the report says.
Cardus estimates that Ontario entered 2024–25 with a substantial pool of federal resources available. “We estimate that with unspent federal funds and the annual federal allocation, Ontario had about $4 billion in federal funding at its disposal in 2024-25. Still, the province continued to struggle,” the report notes.
The findings highlight the operational challenges facing Ontario’s child-care sector, including issues related to staffing, availability, and the ability to bring new spaces online — even where funding has been committed.
One of the most striking indicators cited in the report comes from the Office of the Auditor General of Ontario, which found that a significant portion of CWELCC spaces were not being used. “The Office of the Auditor General of Ontario found that 27 percent of CWELCC spaces in 2023 (or about 80,500 spaces) were empty or not operational,” the report states.
The author argues that the gap between funding and delivery points to deeper structural issues in how the program is being implemented in Ontario. “The province is heavily dependent on billions in federal funding, but failing to deliver an effective child care system,” the report says.
Under the CWELCC agreement, Ontario was allowed to include some previously created spaces in its overall targets. The Cardus report says Ontario “was permitted to count 15,000 previously created spaces toward the targeted 86,000 spaces to be created by the end of 2026.”
However, provincial data reviewed in the analysis show Ontario still falling short of interim benchmarks. “Provincial data show that the number of net new CWELCC spaces as of December 2022 was 12,629 compared to 2019 —the baseline year identified in the Agreement for measuring space growth. This is 2,371 fewer spaces than the 15,000 carried into the Agreement,” the report states.
Progress improved the following year but remained below target. “By December 2023, 25,571 net new CWELCC spaces were created since 2019, short of the 42,000 net new spaces targeted by that date,” the report says.
Beyond Ontario, Cardus argues the broader federal program demonstrates how costly and complex child-care policy becomes when governments become deeply involved in day-to-day sector operations.
“The federal child care program offers a cautionary tale about the expense and complexity governments encounter when they entrench themselves in the operational realities of the child care sector,” the report states.
Cardus is also drawing parallels to debates emerging in the United States, where New York City is considering a universal approach to daycare. In an article published by the Institute for Family Studies, Cardus senior fellow Andrea Mrozek urges caution based on Canada’s experience.
Andrea advises, “When a government system funds only one kind of care that most parents do not prefer or cannot access, all parents end up paying for child care for the few.”
In a separate op-ed, Mrozek argues that program design can narrow the definition of child care in ways that exclude parental preferences and private arrangements. “Perhaps the biggest reason why Canada and Quebec’s child care systems are failing is from an ideological aversion to private care in a different way—by defining child care very narrowly as licensed care provided by professionals,” she wrote.
Mrozek contends a more flexible model would prioritize funding families directly. “If, instead, child care is defined as the care of a child no matter who does it, including family, then the most effective and equitable system will fund the parents to use dollars as they see fit, including private care in families, unlicensed or licensed care in homes, and other forms of private care,” she wrote.
As Ottawa and provinces continue negotiating long-term funding commitments, the Cardus report suggests Ontario’s experience illustrates the pressures jurisdictions face when targets are missed but reliance on federal support grows — reinforcing what it calls the “golden handcuff” dynamic now shaping Canada’s child-care landscape.
