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Vermont Passes Historic Child Care Legislation That Includes New, Long-Term Funding

On Tuesday, June 20th, Vermont allies at Let’s Grow Kids celebrated a significant milestone for children, families, and early childhood educators. The Vermont state legislature made a historic investment in the state’s child care system of more than $76 million in new funding in state fiscal year 2024 and nearly $125 million in state fiscal year 2025. Despite facing political challenges and uncertainty, Act 76 found a path forward through a veto override with multi-partisan support.

For Families: Expanding Access and Equity

The bill brings transformative changes that will positively impact Vermont families. Currently, the Child Care Financial Assistance Program (CCFAP) utilizes a per-family co-pay model to provide financial support to eligible children and families. The bill will expand the income eligibility cap for CCFAP from 350% of the federal poverty level (FPL) to 575% of the FPL by the end of 2024. Additionally, the no-copay income cap will increase from 150% of the FPL to 175% of the FPL.

Recognizing the diverse needs of residents, the bill introduces a new CCFAP eligibility category for resident families who meet all program requirements except for their citizenship status. This category will be exclusively funded by the state, ensuring privacy protections for all participating children and families. Furthermore, the bill mandates collaboration between the agency administering the child care subsidy program and the Office of Racial Equity to enhance accessibility and eliminate disparities by providing application materials in multiple languages and collaborating on outreach to Vermonters.

A committee will be established to study the expansion of Vermont’s Universal Pre-K (UPK) program. The aim is to transition from a 10-hour per week program for three- and four-year-olds to a full-school-day program for four-year-olds while retaining the program’s mixed-delivery approach.

For Early Childhood Educators and Child Care Programs: Investing in Quality

The Act directs substantial investments towards early childhood educators and child care programs. Beginning in July, child care subsidy payments to providers will be decoupled from a program’s QRIS recognition level, and all subsidy reimbursement rates will be increased to match the rates currently paid to 5-STAR programs. This will help to provide more financial resources to programs working to elevate their quality and help to reduce disparities in families’ access to CCFAP based on lack of availability of higher-quality programs. In January 2024, reimbursement rates will see an additional 35% increase for all programs. This increase will move the state nearly halfway towards paying reimbursement rates based on the true cost of providing quality child care. Moreover, family child care home rates will be raised again later in 2024 to bridge half of the gap between family child care homes and center-based program rates. Importantly, reimbursement payments will be based on child enrollment rather than attendance, aiming to provide reliable, stable funding for programs.

To support child care programs in preparing for the subsidy system expansion, sustaining the early childhood education workforce, and improving facilities, the bill allocates $20 million in one-time “Readiness Payments.” An ongoing child care quality and capacity incentive program is also established, with the legislature signaling its intent to allocate $10 million annually, starting in July 2024.

Recognizing regulatory challenges, the bill addresses them by reducing the required on-site presence of center-based child care program directors from 60% to 40% of operating hours. This adjustment aims to enable one director to oversee multiple sites effectively. Additionally, the bill mandates collaboration among state agencies to streamline the duplicative fingerprinting process for early childhood educators and create easier access to grants for programs serving children with disabilities who require special accommodations.

Governance and Administration: Strengthening the System

Recognizing the importance of early childhood care and education, the bill includes directives for proposals to restructure the Department for Children and Families and the Agency of Education. The goal is to elevate the status of early childhood care and education within these government agencies. Additionally, the bill creates 11 new permanent positions at the Child Development Division to address the growing administrative needs of the division.

To ensure data-driven decision-making and accountability, the bill emphasizes collecting additional data on Vermont’s Universal Pre-K Program. It also provides increased resources to Building Bright Futures, Vermont’s early childhood public-private partnership and state advisory council, enabling them to monitor the implementation of the bill and future transformations in early childhood education.

Funding the Vision: A Sustainable Approach

In the initial fiscal year, the bill will be funded through a combination of one-time funds and an increased base appropriation to the child care subsidy program from the state’s general fund. In subsequent years, the program will be sustained by the increased base budget and revenue generated from a new payroll tax. The payroll tax, applicable to employees and self-employed individuals, will amount to 0.44%. For employees, the tax will be split between employers and employees, with 0.33% paid by the employer and 0.11% by the employee. Self-employed individuals will only be responsible for the employee share of 0.11%.

By expanding access, supporting early childhood educators, and strengthening governance structures, the state paves the way for a brighter future. This comprehensive bill lays the foundation for an equitable and high-quality child care system, fostering the development and well-being of Vermont’s children for generations to come.

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