With $125 Million Hanging in the Air, Vermont Sets the Stage for National Child Care - Early Learning Nation

With $125 Million Hanging in the Air, Vermont Sets the Stage for National Child Care

Even After the Governor’s Veto, Sufficient Votes Exist for an Override

The Vermont legislature is close to enacting their goal of bringing near-universal child care to their state with $125 million appropriated for child care in a bill that passed through the state House and Senate. Despite Republican Governor Phil Scott vetoing the bill, the legislation appears to have enough support in both chambers for an override.

In the state House, 118 legislators voted in favor of the legislation, and only 100 are needed for an override. Twenty-four state senators voted for it and 20 are needed to override.

The child care program comes after almost a decade of work from state advocates and a desire to help shore up young families in the workforce in a state with an aging population. (Child care is still one of the top-cited reasons for keeping people, notably women, out of the workforce). “A system transformation” is how Aly Richards, the CEO of Let’s Grow Kids, a Vermont-based agency that has lobbied and organized on behalf of this state’s universal child care movement, described it.

Child care funds will be created by a 0.44 % increase in the state’s payroll tax, of which employers will pay three-quarters. It’s estimated that the tax will generate close to $80 million per year, which will be further boosted by an additional $50 million from the state’s general fund.

“What’s happened in these states will materially improve the lives of families and communities, while also creating models, momentum and mobilization for national progress. The progress in the states does not, however, negate the need for national action. We need a robust federal investment alongside state engagement to ensure that all families are able to choose the child care that works best for them.” — Julie Kashen, Director, the Women’s Economic Justice; Senior Fellow at The Century Fund

The payroll tax agreement has been hailed as a breakthrough after two weeks of an impasse between the chambers. The funds will go toward child care subsidies, and will provide generous increases both to families that pay for child care and for providers who receive the subsidies.

Previously, Vermont provided some form of child care subsidies to families whose income was at or below 350% of the federal poverty line – one of the highest eligibility thresholds nationwide. The new legislation would increase the eligibility threshold to 575% of the federal poverty level making it the highest in the nation. (New Mexico, another state that leads on providing child care, has increased their child care subsidies to 400%). In addition, low-income families that earn less than 175% of the federal poverty line will not have to make any child care co-payments.

Providers will also see a significant subsidy reimbursement increase. This July, all providers will be reimbursed at the current 5-STAR reimbursement rates from the state, with another increase of 35% coming in January 2024. Also, Vermont will increase subsidy reimbursement rates for Family Child Care Home providers, so that the gap between family child care and center-based care reimbursement shrinks by 50%.

“This home-based provider increase emerged as a strategy to really support rural child care and to almost be a rural revitalization effort,” said Richards. “This would infuse additional funding into home-based providers in the area.”

Farm workers have very specific child care needs, such as non-standard hour care and many live in child care deserts. In addition to the subsidy bump, reimbursement payments will now be based on child enrollment rather than attendance. Tying subsidies to enrollment will keep more child care providers afloat. Payments by enrollment allows providers to pay staff more reliably and plan for the future, rather than relying on a piecemeal approach. This is especially critical in a rural state like Vermont, where families are more likely to travel long distances to find care.

This distinction, explained Richards, is a matter of equity. “If you have a family that is missing days of school for a variety of reasons, especially for vulnerable families, the child care programs can no longer get payment for the program,” she said. “It was creating instability in an already fragile market. This creates more sustainable revenue for the educators and it supports the most vulnerable families that have absences that they cannot avoid.”

Support for such consistent funding increases for child care programs is notoriously difficult to achieve on a large scale. While polls show Americans want affordable, reliable child care—and such legislation has historical precedent in our country—there has been little movement in individual states and on the federal level to create the required infrastructure to provide child care for more families. Vermont and New Mexico have made headlines for their pragmatic approach to child care – New Mexico as a way to uplift struggling families and Vermont as a way to bolster a young workforce. Other states that are working to expand access to high quality child care include California, Michigan, and Minnesota, but this is hardly a unified approach for a wealthy developed country that treats child care as an individual problem and not a public good.

Julie Kashen, the director of the Women’s Economic Justice and Senior Fellow at The Century Fund, believes that the combination of public demand and political will helped spur policymakers to find a way to make child care and early learning a priority.

“What’s happened in these states will materially improve the lives of families and communities, while also creating models, momentum and mobilization for national progress,” said Kashen. “The progress in the states does not, however, negate the need for national action. We need a robust federal investment alongside state engagement to ensure that all families are able to choose the child care that works best for them.”

Despite the bipartisan support for the bill, Governor Scott announced his intention to veto the legislation. Richards explains that her coalition has a good working relationship with the Governor’s office, and the decision to veto can be traced back to a campaign promise not to raise taxes. Without the payroll tax increase, the program could not have afforded to pay providers more.

“It has come down to a fundamental difference in how you are going to think about affordability,” said Richards. “The Governor agrees child care is essential but won’t raise taxes. Those two things cannot live together. The solution is public investment. We know this is hard work. That is why we have a bipartisan movement. We are making hard choices together, but we are doing so responsibly.”

The legislative session for the veto override is scheduled for June 20 to 22.

Rebecca Gale is a journalist based in Washington, D.C. and a reporting fellow for Better Life Lab at New America.

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