Private Daycares In California Losing Business After Gov. Newsom Expanded Free Preschool

Private preschools across California are facing financial strain as Gov. Newsom’s expansion of free preschool for all 4-year-olds reshapes the child care landscape.

Gov. Gavin Newsom’s push to expand universal childcare in California is creating a mixed impact, giving more toddlers access to free preschool while leaving some private daycares struggling to stay afloat.

This school year was the start of the statewide rollout of free transitional kindergarten in California, AP News reported. Open to all 4-year-olds regardless of income, the new expansion is credited with helping families save thousands in child care costs while giving children an earlier start in school and access to services like special-education screenings.

But the expansion has come at a cost that’s disrupted the private child care market. A UC Berkeley report found that 167 preschools in Los Angeles County closed between 2020 and 2024, a decline researchers say is partly tied to the growth of the new public pre-K.

Last month, Shilpa Panech shut down Panache Enfants after 13 years of operating the San Ramon preschool, which served children ages 6 months to 6 years. After helping its 30 remaining families find new care, the closure permanently removed 72 licensed child care spots from Contra Costa County.

“Nobody gets into this industry necessarily to make money,” she said through tears. “We’re in it because we love the kids and their families.”

Panech has since transitioned into a second career as an elementary school teacher, giving her a firsthand look at the shift toward public early education. She said the transitional kindergarten classes and after-school programs she’s observed have been “fantastic.”

“I think this was wonderful,” she said. “I think this is something our country needs, our state needs. It’s important for families to be able to afford child care and to be able to go out and work. For private providers, I wish it would have been more gradual, I wish there would have been more opportunities.”

As Newsom prepares to leave office after two terms, he touted what he called “the most significant expansion of child care in America” during his January State of the State address. Over seven years, his administration has nearly tripled funding for early childhood programs, from about $5 billion in 2020 to more than $14 billion, creating 130,000 subsidized child care spaces and expanding benefits for providers.

The centerpiece of that effort is the statewide rollout of free transitional kindergarten, now available for the first time to all 4-year-olds regardless of income.

“If anyone doubted that the state was going to be able to stand up an entire TK program in five years, you would never know it from how smoothly it’s gone for us this year,” said Melissa Chen of San Jose, who along with her husband, was paying $1,800 a month for private day care before enrolling their son in transitional kindergarten.

While they still pay for after-school care, the cost is about a third of what they previously spent on preschool. But some providers say the shift has been devastating.

Frisha Moore, owner of Moore Learning Preschool & Child Care Center in Elk Grove, went from having a full waiting list to struggling to break even and now considers closing “every single day.” A shutdown would eliminate 91 licensed child care slots, including 20 for infants and toddlers, where options are already limited.

Private providers like Moore operate on thin margins, relying on older preschoolers to help offset the higher costs of infant care. With many 4-year-olds shifting to free public programs, enrollment has dropped, leaving her center about 40% full. Most families use low-income vouchers that don’t cover operating expenses, and rather than raise fees, she’s cut staff and combined classes to stay afloat, even as unpaid loans make closing difficult.

“This is like my second child,” she said.

Patricia Lozano of Early Edge California said the state needs to expand options for families while helping private providers stay open for younger children. Advocates are urging partnerships between school districts and private centers for extended care, along with increased funding for child care vouchers.