The Government wants to focus early childhood education (ECE) on low socio-economic areas and has cut down the incentives for having a high proportion of registered teachers - meaning parents may have to pay more.
Figures in the budget show an extra $107 million will be spent on ECE in 2010-11, increasing the annual investment in ECE to $1.3 billion.
However, the Government also plans to save $449m by reducing the financial incentive to have over 80 percent of teachers registered.
Currently, ECE providers are encouraged to have up to 100 percent registered teachers with higher funding for registered teachers.
That will be cut with this budget.
From February 2011, the funding rate for registered teachers will be lowered and will be given only for up to 80 percent of a provider's registered teachers.
The result is there will be little incentive for providers to have more than 80 percent registered teachers.
The changes were aimed at redirecting funding and managing rapidly rising costs, Education Minister Anne Tolley said.
"Government values quality early childhood education and the contribution it makes to a good start for our children's education,'' she said.
New Zealand Educational Institute vice president Judith Nowotarski said parents would be left to pick up the funding shortfall with providers employing more than 80 percent of registered teachers.
It was "yet another attack on efforts to improve quality in the sector," she said.
Mrs Tolley said of the extra funding $91.8m over four years will be poured into five "intensive, community-led participation projects''.
They will focus on high priority areas and will be similar to existing projects in Counties Manukau and Tamaki.
"We know Maori and Pasifika children, and children from lower socioeconomic areas, benefit most from ECE, but they are the least likely to be involved,'' Mrs Tolley said.
The six-hour daily limit will be lifted allowing children to intensify their weekly ECE hours.
The Government will also increase the non-staff portion of the ECE funding to providers and funding for parent engagement programmes, supported playgroups and support for ECE providers to work more effectively with Maori and Pacific Island families.
