Cash-strapped preschool services argue funding is lagging behind inflation.

Early childhood providers say they will likely have to put up parent fees as government funding fails to keep up with inflation and wages.

This year's Budget gave $75 million more over four years to the sector, however most of that was in targeted funding for lower-income families.

The Government wants 98 per cent of all children to be in early childhood education by next year, and has turned its focus to ensuring the most vulnerable children are enrolled.

However, sector body the Early Childhood Council, which represents more than 1000 education and care centres across the country, said that meant after adjusting for inflation its universal funding was down 9 per cent since 2010.

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The Kindergarten Association said the rate it received an hour for an all-day service was less than it was eight years ago. Playcentre said it got only 60 per cent of what its most similar service, Kohanga Reo, received.

Peter Reynolds, the chief executive of the Early Childhood Council, said that for an average centre, an increase in wages alone would cost $15,000 per year, based on a Labour Cost Index of 1.9 per cent.

He said increased costs would put some families "under terrible pressure".

Since 2010, many centres had replaced qualified educators with unqualified staff, most had slashed professional development and some had cut child-teacher ratios, he said, and it was likely most would now have to increase fees.

Where raised fees weren't an option, services would make cuts - such as fewer trips or no new equipment.

"It is sadly clear that the Government has let down early childhood education in this Budget, and those centres already under financial pressure will soon feel the pressure even more keenly," Mr Reynolds said.

He said it was clear the Government had a long-term strategy to increase the portion paid by parents "one little bit at a time".

Head of the HomeBase Childcare Association Evan Kidd said Mr Reynolds' calculations were a "fair comment for the whole sector".

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He said he would have expected around a 2 per cent increase to keep up with rising costs.

Co-president of Playcentre's national federation Viv Butcher said it was also suffering increased costs, but its bigger issue was not receiving an equitable funding rate in the first place.

Its most similar service, Kohanga Reo, had a $7.74 per hour standard rate per child, where Playcentre's is $4.96.

For Playcentre, that was an annual difference of $1.5 million nationally.

"Parents take up the slack to get these results at our centres. Alongside increases for factors like inflation, putting base rates right would take a lot of pressure off our families," Ms Butcher said.

New Zealand Kindergartens chief executive Clare Wells said because it had pay parity with schools, it received a slightly higher hourly rate than education and care services.

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However, cuts in 2011 had meant a 14 per cent decrease in funding.

She said it would like to see funding to ensure every teacher-led early childhood education service had 100 per cent qualified teachers. That funding was cut in 2012.

A spokesman for Education Minister Hekia Parata said the Government was committed to quality early childhood education.

It had almost doubled spending on ECE to $1.6 billion since 2008. In addition to the extra $75 million in this year's Budget, the ministry had increased the Childcare Assistance subsidy from $4 to $5 an hour.'

Centres make tough choices

Increasing parent fees at her early childhood centres is the last thing Jess Moselen wants to do - but a lack of extra funding is making it harder and harder to resist.

Ms Moselen is the area manager for three Next Generation centres in Birkenhead Auckland, where their biggest priority is quality.

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They have 100 per cent qualified teachers and high numbers of teachers per child, something Ms Moselen is reluctant to give up.

"But we are going to have to make some changes from the Budget. The loss of money has been continuous," she said.

The first things to go would be the owners' salaries and professional development for teachers, which would be tough, because early childhood educators had been fighting for so long to be recognised as "more than a babysitting service".

The next thing would be upgrades - such as new equipment or a new playground, plus any extras, like trips.

Ms Moselen said if they were really pushed there may be an increase in fees.

"But that is something we would avoid more than anything because families are struggling, too."

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She said while the Government was spending more on the early childhood sector overall, that was not reaching the middle class.

"We aren't seeing any more money here."

Jess Moselen. Photo / Dean Purcell
Jess Moselen. Photo / Dean Purcell

Example: Centre funding

Based on Next Generation centre in Birkenhead

What they get:

$11.43 per hour, per child in 20-hours free funding, which has a cap of six hours per day.

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What they charge: $48.50 per day, for an all-day service for children 3-years plus. There's a two-day minimum per week.

What they pay: Anywhere from $25 per hour for a qualified staff member.

What they want: More like $12.50 per child. "Not $20 per hour or anything like that," says area manager Jess Moselen.

NOTE: There is a variety of Early Childhood Education funding rates depending on child age, service type, length of time in service and deprivation.

- additional reporting: Belinda Feek