Leading the charge for historic investments in childcare was my first priority during this past legislative session. I heard from more Vermonters, most of them women, about childcare than any other issue during the 2023 session. In the fall of 2022, I worked with three colleagues in the House and Senate to craft legislation and was lead sponsor of S.56, the initial bill that eventually led to Act 76, the monumental childcare legislation that became law after the Legislature overrode the Governor’s unfathomable veto of the final bill, H.217. Below is a summary of the childcare and prekindergarten provisions of Act 76, which will expand access and affordability for families and better support childcare programs and early childhood educators. Because of the unusual path for the childcare bill, Act 76 also contains changes related to workers’ compensation and unemployment insurance, which are not directly related to the childcare provisions in the legislation.
Child Care Financial Assistance Program — Family Support. Act 76 makes multiple changes to the current Child Care Financial Assistance Program (CCFAP), which provides financial assistance to families to help with the cost of childcare. Beginning on April 1, 2024, Act 76 increases the income level at which families pay no co-payment for childcare from 150% of the federal poverty level (FPL) to 175% FPL, which under current FPL levels would be an increase from $45,000 annual income for a family of four to $52,500 for a family of four. At that time, the Act also expands eligibility for CCFAP (with copay) from 350% FPL to 400% FPL , or $105,000 annual income for a family of four to $120,000 for a family of four. On October 1, 2024, the act further expands eligibility for CCFAP from 400% FPL to 575% FPL, or $172,500 for a family of four under current FPL guidelines.
The family contribution (co-payment) scale is adjusted to begin at $50.00 per week for families at 176% FPL, with incremental increases to the amount families pay weekly based on family income and size. You can see current CCFAP income eligibility and family payment share levels on the Department of Children and Family (DCF) website. Act 76 authorizes DCF to adjust the subsidy and family contribution to account for increasing child care costs, not to exceed 1.5 times the most recent annual increase in the NAICS index for education services, and prohibits a regulated child care provider from increasing their tuition rates more than this same rate. Beginning on July 1, 2024, Vermont residents whose citizenship status would otherwise exclude them from participating in CCFAP will be eligible for CCFAP, using solely State funds. Finally, the Act prohibits childcare providers from charging waitlist or application fees for children who qualify for CCFAP.
Prekindergarten. Vermont’s “universal” pre-kindergarten program funds 10 hours per week of prekindergarten (pre-K) education in both public schools and private community and home-based preschool programs. Act 76 seeks to expand hours and access to pre-K education and establishes the Prekindergarten Education Implementation Committee to develop a plan, based on a comprehensive list of factors, for the implementation of prekindergarten (pre-K) programs for four-year-old children in either a public school setting or through the school district by contract with private providers. The Agency of Education (AOE), in consultation with the Committee, must develop a model contract for school districts to use for contracting with private providers for pre-K services. AOE must also analyze and issue a report regarding the cost of educating prekindergarten students as compared to kindergarten students in the context of a full school day and makes changes to the school funding formula related to pre-K students. Finally, AOE must submit a plan to the General Assembly for the purpose of elevating the status of early education within the Agency.
Child Care Financial Assistance Program — Provider Support. In FY24, $20 million is appropriated for payments to child care providers in preparation for the CCFAP eligibility expansion and provider rate adjustment. These payments may be used for multiple purposes, including increasing capacity for infants and toddlers, improving facilities, expanding hours of operation, and increasing workforce capacity. Beginning on January 1, 2024, Act 76 readjusts the child care provider reimbursement rate within CCFAP to be 35% higher than the 2023 5-STAR (STep Ahead Recognition System) rate, and then decouple the STARS program from the CCFAP reimbursement schedule.
The payment schedule must account for the age of the children served and type of childcare setting, and use an enrollment- rather than an attendance-basis for reimbursing childcare providers. On July 1, 2024, payments to providers will be adjusted to reduce the differential between family childcare homes and center-based childcare and preschool programs by 50 percent. In order to participate in CCFAP, child care providers will be required to disclose certain ownership information.
The Act creates the childcare quality and capacity incentive program to reward childcare providers for certain achievements, including achieving a higher level in the quality rating and improvement system, increasing and maintaining infant and toddler capacity, and providing nonstandard hours of child care services. The Legislature intends to appropriate at least $10 million for these payments annually. DCF will also review and amend some of its rules to make participation in CCFAP easier for families and providers. In order to support all of this work, Act 76 creates 11 new positions within the DCF, and requires a report on how to reorganize DCF to elevate the status of childcare within the Agency of Human Services.
Act 76 continues support for student loan repayment and scholarship programs for early childhood educators and requires more work and recommendations on setting a minimum wage level for early childhood educators. The Act engages Building Bright Futures in monitoring and providing technical assistance for the implementation of the Act. If you’re interested in another summary of the legislation, check out the Let’s Grow Kids summary of Act 76.
Funding and Child Care Contribution. In addition to the specific funding described above, Act 76 appropriates $47.8 million to increase funding for the CCFAP assistance to families and payments to childcare providers. This is in addition to funding appropriated in the FY24 state budget for CCFAP. The estimated cost of the full eligibility and payment increases is approximately $125 million in FY25.
In order to fund these increases in support for CCFAP, beginning on July 1, 2024, Act 76 establishes a Child Care Contribution payroll tax of 0.44% on wages and 0.11% on self-employment net income. Employees will be responsible for up to 25% of the payroll tax and employers will be responsible for at least 75%, but may opt to pay more as a benefit to their employees. Employers will withhold the employee share of the tax and remit the full amount to the Department of Taxes. An estimated $81.9 million will be raised in the first year. The Department of Taxes will administer the program and oversee a new Child Care Contribution Special Fund. The Department will receive funding and new positions to do this work. For more detailed information about the fiscal impact of Act 76, see this Joint Fiscal Office Fiscal Note for the legislation.
Photo note: The header photo is of the four legislative leaders who worked together during Fall 2022 to develop the childcare the bills that were introduced in January 2022 and resulted in Act 76. They are Rep. Jessica Brumsted, Sen. Ginny Lyons, Rep. Theresa Wood, and me. We’re standing with a version of the final bill which was signed by children and legislators at a celebration on the State House lawn after Act 76 became law.
Ruth for Vermont 