Vermont’s Child Care Financial Assistance Expansion: Payroll Tax-Funded Subsidy Growth

Vermont's Child Care Financial Assistance Program, expanded through Act 76 in 2023 with ongoing updates in 2024-2025, uses a state payroll tax to raise eligibility to 575% of the federal poverty level (FPL) and eliminate copays below 175% of the FPL. This government-led initiative increases provider payment rates and supports families, adding thousands to affordable care access.

Vermont’s childcare shortages limited workforce participation, costing the state $1.2 billion annually in lost earnings and productivity. Childcare capacity met only 50% of demand. High costs—exceeding 20% of household income for 60% of families—led to an average of 13 work absences per parent. Gender disparities persisted: 48% of mothers reported being overlooked for promotions, and 42% feared parenthood would negatively impact their careers. Low provider wages, averaging $14 per hour, contributed to an 18% turnover rate, reducing care quality for approximately 100,000 children under age six. Moreover, eligibility for the childcare credit was at 350% FPL, leaving many families ineligible, hindering economic growth and child development in rural areas. Without reform, families face ongoing instability, limiting early intervention opportunities.

Funded by a state payroll tax, the Child Care Financial Assistance Expansion expands eligibility from 350% to 575% of the Federal Poverty Level (FPL) by the end of 2024. It waives copays for families earning below 175% of the FPL and increases provider reimbursement rates. Implementation is led by the Department for Children and Families, with changes taking effect in June 2024 and supported by outreach efforts and strategic partnerships. The expansion is expected to benefit thousands of families, with a 4.8% increase in providers accepting subsidies between July 2023 and December 2024. Ongoing monitoring shows more program openings than closings across the 2024–2025 quarters. This model promotes equity by reducing provider turnover and increasing wages, ultimately improving care quality. Continued advocacy supports program sustainability and enhances financial stability for families statewide.

~3-6 months