Internal audits at the Maryland State Department of Education identified $66.5 million in childcare overpayments sent to providers across the state between 2023 and 2025 — and most of that money was never recouped. The figure surfaced in an email sent to officials on September 9, 2025, and has since drawn scrutiny over how a rapidly growing taxpayer-funded program handled its own mistakes.
A Program That Outgrew Its Guardrails
The Maryland Child Care Scholarship Program, which provides cash assistance to families with income-eligible children younger than 13 — or children up to 19 with a qualifying disability — is administered by the Maryland State Department of Education. According to WBFF's Project Baltimore, the program expanded rapidly, adding hundreds of millions of dollars in additional taxpayer funding, and the department had inadequate systems to track or correct overpayments as enrollment climbed. Funding for the scholarship program rose from $132 million in 2022 to $560 million in 2026, an increase of more than 300 percent, with annual growth of roughly $430 million.
Enrollment told a similar story. The Maryland State Department of Education says the program grew from about 21,000 children in January 2023 to more than 45,000 in 2025 — a surge the agency itself has described as reaching the program's maximum budget capacity. That expansion prompted officials to temporarily stop issuing scholarships to new families starting May 1, 2025, through a partial enrollment freeze, though providers continued receiving payments for children already enrolled, per the department's own enrollment freeze notice.
Officials Step Back From Broad Recoupment
At a virtual townhall for childcare providers statewide on September 10, 2025, led by Maryland State Superintendent of Schools Carey Wright and Assistant State Superintendent Sarah Neville-Morgan, the department decided not to pursue broad recoupments of past overpayments. That decision came as providers statewide pushed back against reimbursement demands around the same time, according to Project Baltimore's reporting. One childcare provider told the outlet the state had mistakenly paid providers and then allowed them to keep the money, while a confidential source said providers had already spent the funds and that people advocated for them to keep it.
Documents obtained by Project Baltimore show the department even agreed to return millions of dollars that some providers had already repaid. The department has recouped overpayments determined to be fraud, but could not provide the amount recouped specifically for fraud-related cases when asked by the outlet. Maryland code requires collection of overpayments when childcare providers fail to correctly report information, which is the legal basis Project Baltimore's investigation cites in concluding the overpayments should have been returned to the state.
Repayments Trickle In, Far Short of the Total
The state began recouping some overpayments by 2023 and has received $4.1 million in repayments for childcare overpayments between January 2023 and September 2025, along with another $433,429 in physical checks, according to an email reviewed by Project Baltimore. Those sums fall far short of the $66.5 million identified in the internal audits. In a statement to the outlet, the Maryland State Department of Education did not dispute Project Baltimore's findings and said it is working to verify the audit figures, improve payment reviews, clarify program requirements, and strengthen oversight. The department said its goal is to protect public funds without requiring repayment solely because of system limitations or processes misaligned with program requirements.
Maryland is not alone in facing questions over childcare subsidy payments. In neighboring Washington state, auditors flagged an estimated $37 million in questionable childcare payments made with federal dollars in a single year, according to the Washington State Standard. Separately, a federal Child Care and Development Fund rule that took effect in April 2024 now requires states to cap family copayments and pay providers before or at the start of service, per the U.S. Government Accountability Office.
What Comes Next for Maryland Families
Maryland's fiscal 2027 budget, signed by Governor Wes Moore, continued record state funding of $434 million for the Child Care Scholarship program, even as the enrollment freeze has left a waitlist of more than 3,000 families, according to a February 2026 briefing prepared for the Maryland General Assembly. Starting July 1, 2026, families experiencing homelessness who meet the program's other requirements will be exempt from that waitlist and will receive a scholarship directly, per the department's enrollment freeze guidance. For now, the unresolved $66.5 million sits as a reminder of how quickly the state-run program scaled up — and how far its internal systems lagged behind.
