Early childhood teachers are being asked to take pay cuts, slash hours and even quit while parents face higher fees.
Three years after the Government capped funding for qualified workers in early childhood centres from 100 per cent to an upper limit of 80 per cent, drastic measures are being taken to pay trained staff as rolls decline and competition, particularly from daycare centres, increases.
Advocates say last month's Budget did little to address money woes facing pre-school education.
Early Childhood Council chief executive Peter Reynolds predicted parents would pay higher fees and more centres would close.
Reynolds said most centres had lost tens of thousands of dollars of annual funding since 2010.
One early childhood teacher, who did not want to be identified, said staff at an Auckland centre were recently given a choice to cut hours, reduce their pay rate or leave.
The Ministry of Education's manager of early childhood education disputes the sector is in trouble, saying it is enjoying unprecedented growth and affordability.
ECE group manager Karl Le Quesne said more children were attending some form of pre-school education than ever, and there was no evidence of financial straits.
"Early childhood education is still significantly more affordable for parents now than it was in 2007 before 20 Hours ECE was introduced," he said.
The Government had increased spending on early education from $0.86 billion in 2007 to $1.5 billion this year. Also, $12 million had been put aside until 2017 to help struggling services get back on their feet, he said. However, in a just-released survey by ChildForum a grim picture emerged of the sector.
The Sentiment Survey, conducted last month, found early childhood teachers were fed up of being treated as babysitters, there was a widespread fear of job cuts, and there were accusations of "flashy" new centres poaching clients in an already saturated market.
New Zealand Childcare Association spokesman Martin Svehla said centres would go out of business unless the Government injected more money into the sector.
Svehla said in last year's Budget about one-third of early childhood centres received a targeted funding increase. The majority of centres were left to absorb rising costs and look for ways to stretch their money, including raising fees.
Until the sector was better funded, pre-school education would continue to suffer with cuts to teacher ratios and more unqualified staff in charge of children.
He said the problem was compounded by a decline in the birth rate.
No room in the class for graduate
Newly qualified early childhood teacher Chloe Feeney says lecturers warned students at the beginning of their training of huge changes in the sector.
As a student at Otago University, the affect of reducing qualified staff in childcare centres was something that didn't really concern her - until studies ended last November. "We learned pretty quickly what it meant," she told the Herald on Sunday.
Feeney, who graduated with a Bachelor of Education endorsed in early childhood education, has struggled for four months to find a permanent position, managing to pick up only relief work.
She said there was stiff competition for the few vacant positions in Dunedin and she would have to move this year if she couldn't get a permanent job.
"I've had three months of relief work at the moment but I'm thinking of going to the North Island somewhere."
She said it was disheartening at times to still be waiting for an opening but she was committed to a career in early childhood teaching. "I am passionate about teaching children - especially children under 2 - and I want to be part of their learning journey."