2023 Early Years and Child Care Funding

Ministry of Education
Early Years and Child Care Division        
315 Front Street West, 11th floor    
Toronto ON M5V 3A4

TO: Consolidated Municipal Service Managers (CMSMs) District Social Services Administration Boards 

FROM:Holly Moran, Assistant Deputy Minister, Early Years and Child Care Division

DATE: December 5, 2022

SUBJECT: 2023 Early Years and Child Care Funding

Thank you for your ongoing leadership and commitment to ensuring that working families across Ontario have access to safe, affordable and high-quality child care.

To support municipal planning for 2023, I am pleased to provide the following:

  • 2023 Child Care, EarlyON Child and Family Centres and CWELCC funding allocations
  • 2023 Child Care and EarlyON Child and Family Centres Service Management and Funding Guideline (the guideline)
  • 2023 Canada-Wide Early Learning and Child Care System Guideline (CWELCC guideline)
  •  2023 Transfer Payment Agreement (TPA) for Child Care, EarlyON Child and Family Centres and Canada-Wide Early Learning and Child Care (CWELCC) (under separate cover)

CMSMs/DSSABs will be receiving a new five-year TPA to replace the 2018 Child Care and EarlyON Child and Family Centres TPA. This TPA will combine child care, EarlyON and CWELCC funding allocations and requirements.

The child care funding formula and existing annual child care funding will remain largely unchanged in 2023 providing stability and consistency to support the sector through the transformative work of implementing CWELCC. Funding allocations to support the implementation of CWELCC will be in addition to existing annual funding and use similar funding structures and processes as those currently in place.

Total investments from the Government of Ontario and the Government of Canada in the child care and early years program will total more than $3.9B in 2023. Funding will support the implementation of fee reductions, workforce supports, and other measures. This investment represents an increase of $1.28B, or 44%, over the 2022 calendar year.

This investment also includes an additional $24M from the renewed Canada-Ontario Early Learning and Child Care Agreement to support child care and early years program delivery. A one-time transitional grant of $85.5M is also included to help offset and assist with the impact of administrative funding changes and provide stability to the sector as the ministry continues its work on the development of the new child care funding formula.

Funding – Child Care

$1.68B is being invested for child care, including:

  • $1.23B in General Allocation and Child Care Expansion Plan;
  • $26M in Base Funding for Licensed Home Child Care;
  • $143M in Canada-Ontario Early Learning and Child Care funding;
  • $203M for Wage Enhancement/Home Child Care Enhancement Grant funding; and,
  • $85.5M in a One-Time Transitional Grant.

Funding – EarlyON Child and Family Centres

$159M is being invested in EarlyON, including:

  • $101M in provincial allocation; and
  • $58M in Canada-Ontario Early Learning and Child Care funding.

Funding – CWELCC

Over $2B is being invested in CWELCC, including:

  • $2B for fee reductions and workforce compensation; and
  • $26M for CWELCC administration to support CMSMs and DSSABs

Other Investments

  • $25.5M in ongoing operating funding is being invested to support off reserve Indigenous-led Child Care and Child and Family Programming in ongoing operating funding; and
  • $9M over three years, from 2022-23 to 2024-25, to provide mental health connections and supports to children and families.

Important Changes for 2023


A. Allocation Holdback

The ministry is introducing a 5% holdback on the 2023 Child Care and Early Years allocations, including CWELCC. The holdback will be subsequently released upon ministry review as part of the regular 2023 Financial Statements reporting and reconciliation process. CMSMs/ DSSABs should let the ministry know if the introduction of this new policy causes any cash flow concerns.



Updates have been made to remove ‘fee reduction’ as an option for funding flexibility as fee reductions now fall under CWELCC.

In recognition of continued Indigenous engagement and in support of Indigenous-led service delivery, Indigenous Elder honoraria is considered an admissible expense for early years and child care program allocations.

C.  Administration Funding

In 2023, the ministry will continue to provide an $85.5M one-time transitional grant to service system managers. The one-time transitional grant can continue to be used to help offset and assist with the administrative funding changes and provide stability to the sector as the ministry continues to work on the development of the new Child Care Funding Formula for future years.

Further information can be found in section 10 of the guideline.

D. Ontario-Canada Early Learning and Child Care (ELCC) Agreement

The 2023 budget schedule includes ELCC funding for the entire 2023 calendar year. CMSMs/ DSSABs will see an increase in their 2023 ELCC allocations compared to 2022 based on the additional ELCC funding being provided as part of the renewed agreement. The child care and EarlyON ELCC increase in 2023 is being provided proportionally based on the existing ELCC funding. The increased funding associated with the 2023 calendar year is approximately $24M for child care and EarlyON Child and Family Centres.

Further information can be found in section 7 of the guideline.

E. Canada-Ontario Early Childhood Workforce Agreement

In 2022, CMSMs/DSSABs received $113.3M in one-time Child Care and Early Years Workforce Funding to support the retention and recruitment of a high-quality child care and early years workforce through the Canada-Ontario Early Childhood Workforce
Agreement with the federal government. In 2023, CMSMs/DSSABS will be provided with approximately $28M in ongoing funding outlined in Schedule D3 of the Service Agreement.

Please review section 8 for the funding parameters (including the use of up to 10% for administration purposes), reporting and expenditure requirements for this funding.

F. Updates to Child Care Contractual Service Targets 

General Allocation Targets:

In 2023, CMSMs and DSSABs will be provided with General Allocation service targets based on the 2022 targets (as provided in the 2022 Transfer Payment Agreement).

ELCC Targets:

The 2023 ELCC targets will be based on CMSMs and DSSABs’ 2022 ELCC targets as identified in the executed 2022 Schedule C. Targets will be proportionally adjusted to reflect the increased ELCC investment in 2023.

As previously noted, the ministry acknowledges that the contractual service targets are based on the system pre-operational impacts and ramifications of the COVID-19 pandemic. Due to the continuing effects of COVID-19 recovery on the child care and early years sector, the Ministry will not levy any penalties related to contractual service targets for the 2022 calendar year. The ministry will continue to monitor the situation and may make changes to contractual service targets as necessary in 2023.

For more information, please refer to section 3 of the guideline.


  • EarlyON Child and Family Centres and Supporting Programs and Services

The ministry is providing a one-year extension to the exemption on the requirement for EarlyON Child and Family Centres to employ at least one RECE at every centre in recognition of the current RECE shortages.

Additionally, the ministry is providing $9M in funding over three years, starting in 2022-23, towards mental health supports for the early years and child care sector and for families and children through EarlyON Child and Family Centres. This funding will be proportionally allocated to CMSMs and DSSABs and First Nations.


Further to the 2023 CWELCC Funding Approach memo released on October 18, 2022, the following updates have been made to the CWELCC funding approach. All updates have been made in accordance with the terms of the Canada-Ontario Canada-Wide Early Learning and Child Care Agreement.
A. Fee Reduction and Revenue Replacement Model

To support continued savings for parents and to implement the next phase of fee reductions, starting December 31, 2022, licensees who opted in and reduced their fees by 25% in 2022 will receive funding to further reduce their fees by an additional 37% to a minimum daily rate of $12 per day. Funding is being provided to support the continuation of the revenue replacement approach to support the implementation of the CWELCC fee reduction and to provide a consistent revenue stream to licensees. Regulatory amendments have been made to O.Reg 137/15 and O.Reg 138/15 under the Child Care and Early Years Act, 2014 to support these changes.

As a reminder, CWELCC funding is being provided to CMSMs/DSSABs one month in advance to ensure that adequate cash levels are maintained to support child care licensees. CMSMs/DSSABs are expected to work with licensees as part of their budgeting and forecasting process to ensure that adequate funding will be provided to licensees to allow them to implement the requirements of CWELCC.

CMSMs/DSSABs will continue their critical role as the designated child care and early years service system manager responsible for planning and implementing CWELCC. In 2023 CWELCC administration funding will continue to be included in the transfer payment agreement with the ministry to assist with administrative costs associated with the implementation of CWELCC.

B.Cost Escalation Adjustments

CMSMs/DSSABs will have some flexibility within their allocations to support increasing costs for licensees beyond the revenue replacement funding provided to licensees. The ministry is providing approximately $130 million in additional funding for cost escalation in the 2023 allocations. CMSMs/DSSABs will provide 2.75% to all enrolled licensees as of December 31, 2022. The impact of increasing costs should not be a barrier for participating in CWELCC. Refer to section 7 of the 2023 CWELCC guidelines for further information.

G.Fee Subsidy and Parental Contribution Reduction

To apply an equitable fee reduction for families receiving child care fee subsidy, amendments have been made under O. Reg 138/15, which require CMSMs/DSSABs to reduce the parent contribution for eligible children by 50%.

Also, consistent with 2022, the minimum daily rate of $12 will not apply to fee subsidy families. Receipt of fee subsidy parental contribution reductions will depend on whether the eligible child is enrolled with a licensed child care centre or home child care provider that is participating in CWELCC.

H. Workforce Compensation

Funding will be provided to support workforce compensation for eligible RECE staff to receive an annual increase of $1 per hour, to a maximum of $25 per hour. The $1 per hour increase will be calculated prior to any employer-based wage improvements. As a result of the $1 per hour annual increase, staff at the 2022 wage floor will move to $19 for RECE program staff and $21 for RECE child care supervisors or RECE home child care visitors in 2023.

In the memo release on October 18, 2022, the ministry communicated that the annual increase would be up to $1 per hour, net of employer increases. To address concerns related to the barrier of low wages to RECE recruitment and retention, the ministry has revised this approach to provide a full $1 per hour increase for eligible RECE staff up to the $25 cap. The ministry is also providing funding for an overall cost escalation amount of 2.75% to support general wage increases, including wages of $25 per hour or higher, and other non-staff cost increases.

L. Minimum Wage Offset

On October 1, 2022, the general minimum wage rate in Ontario increased from $15.00 to $15.50 per hour. In response to this change, funding is available through CWELCC minimum wage offset to address employer pressures. To be eligible for a minimum wage offset, licensees must employ staff in positions that were earning less than $15.50 per hour (not including WEG funding) on September 30, 2022. Positions created after September 30, 2022, are not eligible for the minimum wage offset.

Next Steps

The ministry plans to consult with child care partners on additional priorities, including workforce recruitment and retention and the development of an access and inclusion framework to support space expansion priorities inclusive of needs of vulnerable and diverse populations. These consultations will provide important information and feedback from child care partners and inform the future implementation of the CWELCC system.

The ministry is working on the development of a new child care funding formula that aims to integrate the current approach for allocating child care funds with the new CWELCC system. The new funding formula will also enhance transparency and ensure sustainability of funding. The ministry also intends to share a consultation paper on the 2024 cost-based funding formula to seek feedback from the sector.

As a reminder, cash flow for CWELCC is being provided one month in advance to CMSMs/ DSSABs (e.g., funding for January 2023 is being provided in December 2022 and has been included as part of the 2022 TPA). Any funding provided as part of the 2022 TPA, including for January 2023, will be reported by CMSMs/DSSABs as part of the 2022 reporting in EFIS. The ministry expects that funding for January 2023 should be provided to licensees in a timely manner to support the implementation of CWELCC initiatives, including the additional fee reduction, effective December 31, 2022.

Thank you for your ongoing support and valuable feedback over the past year. We look forward to further opportunities to work together to support the sector, and children and families. If you have any questions, please contact your Early Years Advisor (EYA) or
Financial Analyst (FA). A listing of EYAs and FAs can be found on the ministry website.


Original signed by

Holly Moran
Assistant Deputy Minister
Early Years and Child Care Division
Ministry of Education

[c:] Early Years Advisors, Programs and Service Integration Branch 
Financial Analysts, Financial Accountability and Data Analysis Branch

Appendix A

Appendix B