In May's Budget, the Government announced the sector would save $280 million over four years by reducing the financial incentive for centres to have 100% qualified staff.
The previous government had encouraged ECE providers to have all staff in their centres qualified and they had received subsidies for them, but from February, only 80% of a centre's staff would receive funding.
A survey of 435 providers, conducted by the Labour Party, revealed 94% of them would lose funding.
For Otago providers, the average amount lost would be $48,500.
Of the 410 surveyed services which would lose funding, 89% intended to increase fees or charges.
In Otago, these fee increases range from $5 to $40 a week.
Nationally, they range from $2 to $80, but more services (44%) would rather increase their fees than both raise fees and reduce the number of qualified staff.
The survey also showed, as a flow-on effect of the funding cuts, 59% of services expected participation to decrease, affecting more than 15,000 children.
However, Minister of Education Anne Tolley rejected the Labour Party survey, labelling it "scaremongering".
"Labour is responsible for the out-of-control spending in ECE and we are having to slow the unsustainable rate of growth," she said.
On average, kindergartens received $325,000 a year in taxpayer funding and she would be "very disappointed" if services passed on any costs to parents.
But Dunedin Community Childcare Association director Jo Ellis said small savings made from organisational changes to the association's centres were not enough to cover the funding cuts.
Passing on costs to parents was not desirable, but "we have to be viable", she said.
"We are trying to mitigate as much as we can with optional charges."
The association's board would have a "serious look" at increasing fees, but she could not indicate how much a rise might be.
Central Otago Kindergarten Association manager Angela Jacobson said the decision to increase fees by about $18 a week for a 3-year-old was made in August.
Parents' reaction to the increase was not "totally negative" because the increase was not as high as those of other centres, she said.
Ms Ellis and Ms Jacobson described the funding cuts and changes to qualified teacher targets as a "slap in the face" and a "sad step backwards", respectively.
