The Child Care Modernization Act of 2026 reauthorizes and significantly updates the Child Care and Development Block Grant Act of 1990, aiming to enhance the accessibility, affordability, and quality of child care services nationwide. Its core purposes include providing States with maximum flexibility to develop mixed delivery systems and promoting parental choice in selecting child care that best suits their family's needs. The bill also seeks to assist States in delivering high-quality, coordinated child care services that cover the full workday and work year, support continuity of care, and help parents achieve independence from public assistance. A key provision expands the definition of "eligible activity" for parents to qualify for child care assistance, now including a broader range of educational pursuits, job search activities, and various forms of paid or unpaid leave. The bill also broadens the definition of an "eligible child" to include those with family assets up to $1,000,000 and specifically includes homeless children, children in kinship care, and those needing child protective services. These changes aim to ensure more families can access crucial child care support. States are now required to develop their child care plans in meaningful consultation with a wider array of stakeholders, including parents, diverse child care providers, and employers. The legislation mandates that State plans describe how they will offer a full diversity of child care services through a mixed delivery system , encompassing faith-based and community-based providers, centers, homes, Head Start, and schools. To improve quality and support providers, the bill redefines priority populations, requires States to implement enrollment and eligibility policies supporting providers' fixed and operational costs , and dedicates at least nine percent of quality improvement funds to workforce development. States must also review health and safety requirements to reduce redundancies and clarify compliance, while supporting child care business technical assistance. A significant change involves payment rates for child care services, requiring States by 2032 to ensure rates are sufficient to cover the full cost of providing services, including fixed and operational costs. States must develop and use a statistically valid and reliable cost estimation model that reflects service delivery costs, staff salaries and benefits, and variations by geographic area, age of children, and special needs. This model must be reviewed and adjusted biennially to ensure rates remain sufficient and account for cost-of-living increases, with the Secretary offering guidance but not mandating a specific model. The bill also establishes a new Part II for Child Care Supply and Facilities Grants , authorizing appropriations for fiscal years 2028-2031 to help States, territories, and Tribal organizations expand the supply and capacity of qualified child care providers and improve facilities. These grants fund startup, supply expansion, and facilities subgrants, prioritizing providers serving specific populations and limiting federal interest in renovated/constructed facilities to 10 years, removing it for family child care homes. Finally, the legislation enhances reporting requirements, mandating States to annually report on various indicators and submit additional reports on the percentage of income families spend on child care and progress on established benchmarks. These measures aim to increase transparency, accountability, and continuous improvement within the child care system, with the Secretary reporting biennially to Congress on these findings. Additionally, the Secretary of Agriculture must revise regulations to exclude licensed child care businesses from certain loan restrictions.