15 May 2025

Replace the ECE funding model

The current ECE funding model is outdated and not fit for purpose. The sector urgently needs an investment strategy and funding model that better supports today’s working whānau, tamariki and ECE services to deliver quality education.

Early childhood education (ECE) services in Aotearoa New Zealand are currently funded through bulk funding. However, the funding model is overly complex, outdated, and poorly aligned with the sector’s goals and needs. Change is urgently needed, but any contemporary funding model must enable high-quality, accessible, and sustainable ECE.

If we want a viable and effective ECE sector that delivers strong educational and social outcomes for all children | tamariki, we need sustained and sufficient investment. Funding ECE is not merely a cost, it is a strategic investment in national wellbeing and long-term productivity.

The case for change

The government currently funds the ECE sector through a complex and outdated funding model. This was introduced decades ago, and it is no longer fit for purpose. Over time, iterative adjustments made in response to changing sector needs and initiatives have resulted in a funding system that is unnecessarily complex and confusing. The ECE landscape - as well as education policies and priorities - has evolved significantly, and the funding model does not effectively support the sector.

The funding model is a barrier to achieving the full educational, social and economic benefits of ECE. It puts pressure on services, teachers | kaiako, and whānau, for instance:

• Navigating the complex model and layers of rules creates an administrative burden for the ECE services the funding is intended to support. This takes ECE staff’s time and attention away from the tamariki in their care.

• Funding does not reflect the true cost of quality ECE provision. While costs continue to increase, funding has not kept up. This undermines pay parity and the sustainability of the ECE kaiako workforce. As a result, we are seeing ECE services close, whanau fees becoming increasingly unaffordable, and the underpaid and undervalued ECE workforce experiencing burnout.

• ECE services don’t have funding certainty to plan ahead, and many quality services are struggling to remain viable and cost effective for whānau. The number of licensed ECE services has declined by 5% since 2019 . Funding pressures are contributing to this. This destabilises the sector and reduces the diversity of service types and limits choice for whānau.

• The funding model stifles diversity in the network of ECE services. A diverse ECE sector allows whānau to make choices, from kindergartens, education and care - both community and private services, Montessori, Steiner, Barnardos, kōhanga reo, home-based services, playcentres, and Pacific language nests.

What do we need?

The current funding model is outdated and has been subject to piecemeal changes that have made it unwieldy. To truly drive change, the sector deserves a clean slate. This starts with a funding review, with the intention of using the learnings to develop an investment strategy and funding model to support a sustainable, quality ECE sector in Aotearoa.

A first principles funding review

Government agreed to commission an ECE funding review in 2024, recognising that significant change is needed. A first principles funding review will need to seek to understand:

• The current funding model, its strengths and weaknesses, expenditure, and value for money.
• The policy and legislative framework influencing and regulating the ECE sector.
• Tamariki and whānau needs. challenges facing ECE services and kaiako.

The sector knows what works and what doesn’t, so the review must involve meaningful engagement, including modelling options and testing before implementation would work in practice.

An investment strategy

Effective investment requires a clear strategy. We need a long-term strategy that supports a viable, thriving, innovative ECE sector. The lack of a strategic approach is what contributed to the current state of our ECE funding model. Iterative changes made, without a cohesive plan, risks the ineffective use of government funding.

This requires a shift in thinking, to reframe ECE as an investment, not a cost. Investment in ECE benefits not only each child | tamaiti, but also their whānau, communities, and the wider economy. The benefits are not just educational, there are also positive health, and social outcomes to be gained from quality ECE.

This perspective aligns closely with the Social Investment Agency’s approach - effective investments that improve long-term outcomes for New Zealanders. ECE is one of the most effective early interventions available. From an economic perspective, it provides an excellent return on investment. ECE is a powerful lever for improving social equity, lifting educational achievement, promoting equality, and enhancing long-term economic wellbeing in Aotearoa. To realise those benefits, the sector needs strategic and sustained investment.

A fit-for purpose investment model

An updated investment model is essential to underpin sustainable, affordable, high-quality ECE provision. This must:

• deliver on the ECE investment strategy.
• support the teaching workforce.
• keep tamariki at the centre and meet whānau needs.
• support Te Whāriki e Whāriki: He whāriki mātauranga mō ngā mokopuna o Aotearoa Early childhood curriculum.
• address ratios and group sizes.
• have the flexibility to adapt and grow with changing needs.
• promote a diverse ECE network.
• be transparent and simple to navigate.
• support continual improvement and workforce development.
• provide long-term certainty for ECE services.
• Align policy, legislation, and investment in ECE to support quality delivery.

A call for action

Only government has the levers and ability to drive systematic change. While there appears to be a commitment to undertake an ECE funding review, this has not commenced. A comprehensive funding review requires Cabinet approval – and more importantly, a commitment to sufficient, sustained investment. To ensure this used effectively requires an ECE investment strategy.

Reframing ECE as an investment fundamentally changes how it is funded. It requires long-term vision, planning, and bipartisan commitment. We recommend co-designing an investment strategy with the sector, underpinned by a robust and future-focused investment model.

To achieve a sustainable, quality ECE sector, we must take a holistic approach. An investment strategy cannot progress in isolation. It must be coordinated with and informed by the ECE Regulatory Review, the Learning Support Review, and the development of a Strategic Teaching Workforce Plan (necessary to address ongoing kaiako shortages across all sectors including pay parity), policy and legislation. These initiatives are interconnected and essential to delivering meaningful and lasting change. We want to set the foundations for a sustainable and quality ECE sector for generations to come. Smart, future-focused public investment will support the wellbeing of our tamariki and the prosperity of our communities.

What role does Te Rito Maioha play?

In our view, a funding review is the logical first step. While the Government agreed to commission an ECE funding review in June 2024, the scope and terms of this must be approved by Cabinet, and so far, there has been no action.

We have worked with our fellow leaders in the ECE Sector Partnership to draft a suggested Terms of Reference for the review and provided this to the Associate Minister of Education (Early Childhood Education). Our suggested Terms of Reference in summary recommends:

• undertaking a first principles funding review to assess the current ECE funding model and sector landscape.
• developing a long-term ECE investment strategy aligned with a social investment approach.
• identifying and assessing investment model options that support a sustainable, quality ECE sector.
• engaging meaningfully with stakeholders to ensure broad input and build support for change and enable successful implementation.

We support a funding review and have offered to pilot any proposed changes to ensure they are fit for purpose. We welcome any thoughts you may have, please send these to members@ecnz.ac.nz.

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Media Contact

Rob McCann - Lead Communications Advisor | Kaitohutohu Whakapā Matua
022 411 4560
rob.mccann@ecnz.ac.nz