Vermont Set to Make Historic Investment in Child Care

Back in February, we published a blog post highlighting four states poised to enact impactful early childhood education legislation. One of the four states we mentioned was Vermont due to momentum there in expanding child care subsidy eligibility, increasing provider reimbursement rates, and expanding access to pre-K for four-year-olds.

Today, Vermont is on the brink of adding more than $120 million per year into their child care sector after the Vermont House and Senate passed a bill that could make the state a national model for its commitment to young children. “This bill takes a quantum leap forward for access, quality, and affordability for Vermont families,” said Aly Richards, CEO of Let’s Grow Kids, a Vermont-based child care advocacy organization. “It really is opening up the floodgates towards a system transformation in Vermont,” added Richards.

The legislation took many twists and turns before successfully passing both chambers by wide majorities. The Vermont Senate initially introduced a child care bill back in February that included a heavy emphasis on enacting full-day pre-K in public schools throughout the state. The pre-K component of the bill was removed due to concern over possibly disrupting private providers and replaced with a committee responsible for studying the proposal and reporting back their findings. And, up until the last minute, there was uncertainty over whether the revised bill would pass both chambers due to disagreements over how to finance the measure.

Finally, on the eve of adjournment, the major child care provisions were added to a must-pass workers’ compensation package and cleared both chambers by wide margins, with a 118-27 vote in the House and a Senate tally of 24-6. The precise vote tallies are important because they indicate that lawmakers have the votes necessary to override a likely veto from Republican Governor Phil Scott who has expressed opposition to any tax increase.

Assuming lawmakers are successful in overriding a gubernatorial veto when they reconvene in late June, the child care investments will be funded via a new payroll tax of 0.44%, of which employers will be required to pay three-quarters. The tax is expected to generate over $80 million per year and about $50 million will be added from the state’s General Fund.

If the bill becomes law, those funds will be used to improve child care quality and access to early education throughout the state in a few important ways. The eligibility cap for child care subsidies will expand from 350 percent of the federal poverty level (FPL) to 575 percent of FPL by the end of 2024, meaning that a family of four earning up to $172,500 annually will be eligible for a subsidy. Families with an annual income of less than 175 percent of FPL ($52,500 for a family of four) will not have to make any copayment under the bill, an increase from the current guideline of 150 percent of FPL ($45,000 for a family of four).

Another important element of the bill is that, beginning in July, it increases the subsidy reimbursement rates of providers to be equal to the rates currently paid to the highest rated programs under the state’s QRIS. And, starting in January 2024, reimbursement rates will further increase by 35 percent and reimbursement payments will be based on child enrollment rather than attendance, an important step towards providing predictable and stable funding. “Those dollars may be used at the discretion of the programs….They’ll use them where they need them and that is increasing wages, perhaps looking at benefits, workforce recruitment, and other elements that go into making a high quality program,” said Richards.

This legislative success was the culmination of years of advocacy by multiple groups and thousands of people. “We didn't just build a big megaphone and yell louder and louder into it. We did the work deeply as a community on all levels,” explained Richards. Richards pointed out that gaining the support of the Vermont business community was pivotal in convincing lawmakers to pass the bill. “The business community ended up being a major player and in Vermont they really did shift the final balance to getting this moving forward….As business leaders they can say that this is an investment and not an expense.”

If Vermont lawmakers are able to successfully override the anticipated gubernatorial veto in late June, the next step will be ensuring that the new law is smoothly implemented in addition to using data to measure the impact on child care quality and access over the next several years. Richards explained what advocates are hoping the end result of the law will be: “The result is that early educators are valued. People can get back to work, employers can hire, companies can grow, and kids can thrive. We really do believe it's a fiscally responsible investment. And it's going to change the trajectory of the state.”

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