State's Preschool Plan Disrupts Private Daycare Market

Transitional kindergarten program drives private preschools out of business, reducing options for parents.

Published on Feb. 24, 2026

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California's new transitional kindergarten program, which provides free public schooling for all 4-year-olds, is already having unintended consequences on the private daycare market. A CalMatters investigation found that 167 preschools have closed in Los Angeles County between 2020 and 2024, partly attributed to the new public school grade stripping away many private preschool customers. This is forcing private preschools to cater more to infants, whose care is more labor-intensive and less financially viable. The program's high participation rates, driven by the free services, are drying up the private marketplace and creating higher costs for parents who struggle to find daycare before their kids hit the eligibility age.

Why it matters

The transitional kindergarten program is part of an effort to boost educational outcomes, but its impact on the private daycare market raises concerns about unintended economic consequences and the state's ability to properly evaluate the program's effectiveness.

The details

California's 2021 law requires all public schools to offer transitional kindergarten, a free public school grade for 4-year-olds. Although not mandatory, participation rates have soared as eligibility dates have fallen and subsidies have increased, reaching over 83% in some counties like Orange County. This has stripped away many customers from private preschools, forcing them to cater more to infants whose care is more labor-intensive and less financially viable. Other state laws, like allowing childcare workers to unionize, have also stressed the private preschool market by driving up wage rates.

  • The transitional kindergarten program became fully operational in January 2026 after a five-year rollout.
  • Between 2020 and 2024, 167 preschools closed in Los Angeles County.

The players

Gavin Newsom

The Governor of California who signed the law creating the transitional kindergarten program in 2021.

Public Policy Institute of California

A research organization that found participation rates in the transitional kindergarten program have soared as eligibility dates have fallen and subsidies have increased.

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What’s next

The state plans to continue expanding the transitional kindergarten program, but it remains unclear if they will properly evaluate its effectiveness, especially in light of the program's impact on the private daycare market.

The takeaway

California's efforts to provide universal preschool through the transitional kindergarten program have had unintended consequences, disrupting the private daycare market and reducing options for parents. The state should closely monitor the program's progress and impacts to ensure it achieves the desired educational outcomes without causing significant economic harm.