Should Vermont’s child care solution be every state’s?

The extreme shortage of child care is an urgent nationwide problem. But a Vermont solution could serve as a national model for action.

In a February 2023 survey of child care providers in the state, nearly 1 out of 5 said they feared they’d go out of business within the year. That dramatic response fueled officials and state partners to find a solution.  

“The results of that survey helped to drive home how urgent the situation was for the child care industry at this moment,” says Erin Roche, Vermont director of the nonprofit First Children’s Finance, which conducted the survey. “The information was crucial in letting the legislature know that something really had to happen.”

It worked, because the following May lawmakers passed comprehensive legislation that has already shown great promise in altering the situation that Vermont families, the state’s workforce and businesses have faced. The new law increases the number of families that can receive financial assistance for child care by increasing eligibility from 350% of the federal poverty level to 575%.  The law also provides for higher reimbursement rates for child care businesses, with the expectation that increased funding will improve pay for hard-to-find staff.

To take advantage of the subsidies, families who fall within the income level guidelines, fill out a child care financial assistance application and the state’s Child Development Division then calculates the subsidy they’re entitled to and sends that amount directly to the family’s child care program. Hypothetically, if the center costs $400 a week for one child, a three-person family that qualifies for a $250 subsidy will only need to pay the center $150 each week. At lower income levels, there may be no or only minimal copays, which rise along with income. The amount of the subsidy goes up with the size of a family, so an additional child at the same center may not cost that family more.

Most importantly, the law ensures that state funding continues in future years based on a dedicated new payroll tax that began July 1 and is projected to bring in $80 million in its first year, which is in addition to about $60 million being spent out of the general fund. Although state data is not yet available, anecdotally the legislation has already resulted in dramatic increases in pay for child care workers, which observers argue will have a significant impact on quality of care by attracting the best and brightest.

By July, 1,000 new child care spaces had opened. “This means that child care providers can count on the money,” says Rep. Jessica Brumsted, who is vice chair of the state House Committee on Human Services. “We’ve made a real commitment to pay what it costs to deliver child care.”

This kind of sustained state funding is rare, though New Mexico also has developed a way to ensure long-term funding by devoting a portion of its oil and gas money to child care. “Running a sustainable business is a key factor for quality,” says Roche.

Six months after the law’s passage, the state’s 2024 survey of child care providers showed a dramatic reversal in their attitudes about the future. Just 5% said they’d expect to go out of business over the next two years, down from 20%. What’s more, in the first three months after the law’s passage, more child care centers and home-based businesses opened than closed. That was the first time that had happened since the state started tracking this data in 2012.

Inside the Legislation

Despite being vetoed by Gov. Phil Scott, Vermont’s new law made history with a bipartisan veto override. The first elements of the law went into effect on July 1, 2023. In addition to major changes in family eligibility, the law lifted the per-family reimbursement rate the state pays to child care centers and home-based programs by at least 35%, and sometimes as much as 80%. In addition, it abandoned a tiered system that provided reimbursement based on a program quality rating. This reduced implementation complexity, creating a more equitable system and providing resources to all programs to achieve better programming and training.

The newly available funding enabled the state’s Child Development Division, part of the Vermont Department for Children and Families, to extend its contracts with First Children’s Finance, which provides consulting assistance to child care organizations, including financial, long-term planning, board governance, and other basic information, on starting and sustaining a small business. Small grants for capacity building are also available.

All of this has been implemented on a staggered basis with the last piece falling in place this coming fall.

Keys to Vermont’s Path Forward

One key to the legislation’s passage was the bipartisan nature of the support and the interest of many businesses in addressing the scarcity and expense of child care and its impact on the Vermont workforce. Gov. Scott had supported general fund increases for child care, but vetoed the bill because of the new payroll tax. He argued that Vermont already taxed residents and businesses enough. In a weekly briefing following his veto, the governor said, “We share similar goals and priorities but where we differ is how we pay for it and the speed in which we get there. … I’m not vetoing child care. I’m vetoing the payroll tax.” 

Another critical element to the program’s success has been a lengthy and multidimensional advocacy effort in which the first seeds were planted in the early 2000s and picked up steam about a decade ago. That’s when the advocacy organization Let’s Grow Kids set a goal in 2014 of achieving high quality, affordable child care and education for all who need it by 2025.

This multiyear buildup has also meant that a healthy supply of both local and national evidence was brought to play in creating the law. The motivation to find a solution was bolstered by extensive research on child development, which strongly demonstrates the link between high quality experiences in the first years of life and future health, happiness and success.

Next Steps

While optimism about child care is high in Vermont, there are still unanswered questions. “Indicators are positive, [but] it’s very early. We still don’t know what uptake of financial assistance will be and are working from projections,” says Janet McLaughlin, head of the state’s Child Development Division.

With Act 76 aimed at ages 0 to 3, the state still needs to figure out how to achieve its goal of equitable, accessible full-time pre-K programs for four-year-olds. That question is now in the hands of a study committee that is made up of a wide variety of stakeholders with recommendations due in early 2025.

Of course, a key to the law’s success falls on how it is implemented— an issue that was closely considered as the pieces of the legislation were put together. To ensure that implementation is faithful to the state’s early childhood vision and strategy, Building Bright Future, a public-private partnership and Vermont’s early childhood advisory council, has the task of bringing together all the organizational players, centralizing data, and establishing metrics to gauge success and monitor progress over time. It will provide annual reports to the state on the impact of Act 76, while monitoring the entire early childhood system, and making recommendations for the following year.

Meanwhile, Vermont officials and organization leaders are hoping that their child care solutions will guide other states, which are dealing with their own shaky unsustainable child care businesses, a shortage of child care workers and skyrocketing family costs that in some places can exceed the average cost of a four-year public university education, as USA Today reported in June.

That’s not an option for a lot families, many of which are struggling to find affordable child care, which rose from 17.8% to 23.7% after federal pandemic aid was taken away in fall 2023, according to a study by the National Women’s Law Center.

Although building adequate child care infrastructure from the start feels complex, “on the ground it’s really quite simple,” says Aly Richards, executive director of Let’s Grow Kids. “The simple way to think about this problem is parents can’t afford to pay more and early educators can’t afford to make less so that’s where public investment comes in. What we’re doing is working, which I think is the best thing we can do for other states.”