This report describes the history, features, and basis of bulk funding in New Zealand's early childhood services. The report likens bulk funding to a "quasi voucher" system and reviews research studies and evidence of the impact of bulk funding on kindergartens and childcare centers. The review shows that limited funding has pressured kindergarten associations to make choices to increase group sizes, maximize roll numbers, and in some instances charge fees and disband professional advisory positions. Teachers' pay has continued to be low and conditions have been eroded. Similar effects are evident in the childcare sector. In addition, some business owners of childcare centers have used government funding for purchase and development of their own property and their own capital gain. Based on the review, the report concludes that the system of bulk funding works against the government's twin policy objectives of enhancing quality and improving participation for all preschool children. It shows that disparities in participation that were evident in 1989 still exist in 2001. The report affirms the importance of resources for staffing and curriculum implementation and an infrastructure of support. (Contains 43 references.) (Author/KB)