The bill was introduced by Representative Michael Marcotte in February, 2023. It was reviewed by the House Commerce & Economic Development Committee, the Senate Economic Development, Housing and General Affairs Committee, and the relevant money committees. The bill incorporated many of the provisions from S.56, which the Senate had worked on.

The bill is intended to make significant investments in Vermont's child care system by increasing the quality of early childhood education and afterschool programs, provide financial and workforce stability, address workforce shortages, and maintain a mixed-delivery model which assigning schools with providing pre-k services for 4-year-olds.

Summary (as passed):

• The eligibility for the Childcare Financial Assistance Program (CCFAP) is expanded. Families with an annual gross income (AGI) of less than 175% of the current federal poverty level will not have a co-payment. This is up from 150% of FPL. The threshold for families who are eligible for a subsidy but are required to cover a co-payment was increased from 350% of FPL to 400%. Families who have an AGI over this threshold are not eligible for a subsidy. These are effective April 1, 2024.

  • For a family of two in 2023, the FPL is 19,720. This would mean that single parents would be eligible for a full subsidy up to $26,580 in AGI.
    
    
• Starting on October 1, 2024, the eligibility for subsidies increases to 575% of FPL.
  
  
  • For a family of four in 2023, the FPL is $30k. This would mean eligibility would extend to $172,500 of household AGI.
    
    
• The weekly family contribution (co-payment) will start at $50 per week for FY2024, and increase on a sliding scale (based on income) that is set by the Department for Children and Families (DCF).
  
  
• The bill extends eligibility to any resident who would be excluded (under federal rules) from receiving a subsidy, which will be covered by the state of Vermont. It also directs program administrators to rot retain citizenship status data for the families of children no longer participating in the CCFAP.

• Families who are seeking employment may participate in the CCFAP for up to three months, and the Commissioner for Children and Families may extend that period if necessary.

• Starting in FY2024, the state will allocate equalization (property tax) funds among school districts based on the number of pre-k children in each district, the number of hours and slots offered in the programs, and the number of students enrolled in public pre-k education programs.
  
  
• In FY2024, DCF is directed to increase the base child care provider reimbursement rates 35% in the CCFAP, accounting for the age of the children served.
  
  
• In FY2024, $20M is appropriated from the General Fund for the purpose of providing the expanded payments to the CCFAP.

• The bill signals that the legislature "intends" to appropriate at least $10" for a child care quality and capacity incentive program (yet to be identified).

• Providers are prohibited from charging an application or waitlist fee for child care services where the applying child qualifies for the Child Care Financial Assistance Program.

• Building Bright Futures is awarded $266,707 to monitor accountability for expanded child care, prekindergarten, and afterschool and summer care; support stakeholders in collectively defining and measuring success; and provide technical assistance to build capacity for DCF and the Agency of Education.
  
  
• The Legislature intends to establish minimum wage for child care providers that aligns with the recommendations of a recent Vermont Association for the Education report. The goal being to reach provider reimbursement rates that are equivalent to NAICS code 611 (Educational Services), when adjusted for inflation.
  
  
• The bill creates a payroll tax, dubbed the "Child Care Contribution," with a rate set at 0.44% percent of each employee's covered wages and 0.11% on each self-employed individual's self-employment income.

• The Department of Taxes is provided $4.2M from the General Fund for the implementation of the Child Care Contribution payroll tax.

• Starting in FY2024, the rate of contribution for workers' compensation insurance will increase to 1.5%. The rate for self-insured workers' compensation remains at 1%.

• Employees are now eligible for adjustments every July 1st and dependent children now qualify for a $20 bump per week.

• Reports:

  • A Prekindergarten Education Implementation Committee (PEIC) was created to assist the Agency of Education in improving and expanding pre-k education a full-day basis, through the public school system, by July 2026.

    • This would transition children who are three years of age from the 10-hour prekindergarten benefit to child care and early education.

    • The Committee will review strategic options for expanding prekindergarten and make recommendations for oversight of the system and other changes deemed necessary.

  • The Agency of Education (AOE) is directed to develop a model contract for pre-k education services in consultation with the PEIC and other relevant stakeholders by December 2024.

  • The AOE is asked to provide legislators with a report regarding the cost of educating a prekindergarten student in the context of a full school day, and recommend a plan for applying sufficient pupil weighting (for tax purposes) to prekindergarten students.

  • DCF will review and consider amending its rules prohibiting a person or entity registered or licensed to operate a family child care home from concurrently operating a center-based child care and preschool program or afterschool and summer care program.

  • The Vermont Crime Information Center, in collaboration with the Agency of Education and DCF, is asked to submit recommendations to streamline and improve the timeliness of the background check process for child care and early education providers.

Analysis:

While expanding subsidies, particularly for multi-child and single-parent families is critically important for workforce expansion, stability, and career prospects for middle-class families, this bill perhaps pushes too far to fast. The upper limit on subsidies would increase 44% in the next 18 months, rapidly expanding subsidies into families that are likely already paying out of pocket today without undue financial burden. Seemingly this is being done to prepare for an expected increase in provider costs as the legislature is preparing to pass a minimum wage mechanism for child care and early education providers. However, we would encourage a slower timetable that doesn't introduce new costs so rapidly and has the potential to grow with state revenues.

We already know (rightly so) that this is a top priority for lawmakers and we should be comfortable with a multi-year commitment to expanding access to these services. Creating a new funding source for a program of this scale may be justified, but not when we are increasing spending in so many other areas (the budget alone this year grew at nearly twice the rate of inflation).

As a point of reference, the median household in Vermont could expect to pay about $300 per year under the new payroll tax, whereas subsidy recipients might receive up to $2600 in benefits.

Current Status:

The legislature overrode Governor Scott's veto of the bill on June 20, 2023. The bill will fully go into effect July 1, 2024.