Two years ago, the Vermont Legislature passed a law that says no Vermont family should spend more than 10% of its annual household income on child care costs. And this week, lawmakers found out how much it’ll cost to make it happen.
According to a report commissioned by the Legislature and conducted by the RAND Corporation, if Vermont wants to pay its providers fairly and keep parents’ expenses below the 10% limit, then elected officials will have to come up with between $179 million and $279 million in new public funding.
Waterbury Rep. Theresa Wood, chair of the House Committee on Human Services, said she isn’t ready to commit to an appropriation of that magnitude.
But she said it’s time for lawmakers to go further on child care than they’ve been willing to in the past.
“The depth and breadth of what we need to do for Vermont’s families is broader than tinkering around the edges,” Wood said. “You know, we are talking about a big investment for a big payoff.”
Exactly how much lawmakers are willing to spend on early education will become clearer when the House and Senate introduce their respective child care bills in the coming days or weeks. Wood and other Democratic lawmakers, however, are already indicating that they’re prepared to raise taxes in order to fund new child care investments. And the RAND report recommends several options to generate that new revenue.
A 0.9% payroll tax, a 2% increase in the sales tax, or expanding the sales tax to include services as well as goods, could each generate $194 million in new revenue annually, according to the report.
In his inaugural address earlier this month, Gov. Phil Scott issued a preemptive strike against any new tax proposals from the Democratically controlled Legislature.
"You can’t have a strong economy without a strong workforce and a strong child care environment.”Chittenden County Sen. Ginny Lyons
“We must find ways to achieve our shared goals without adding taxes and fees because this only increases the cost of living,” Scott said.
Some lawmakers, however, say investments in child care — even if they require tax hikes on individuals or businesses — will deliver robust returns for Vermont.
“This is about taking care of children, taking care of child care centers and families, but most importantly setting a tone for our economy going forward,” Chittenden County Sen. Ginny Lyons said Tuesday. “Because you can’t have a strong economy without a strong workforce and a strong child care environment.”
Lawmakers aren’t the only ones calling for tax increases. In an open letter to legislative leaders this week, about 200 hundred business owners affirmed their support for “a public financing mechanism that will fund a statewide system of child care that caps family costs at no more than 10% of annual income and ensures fair compensation for early childhood educators.”
“Operating and growing sustainable businesses in Vermont revolves around recruiting and retaining talented people,” said Michele Asch, CEO of Twincraft Skincare, and Christine Dodson, CEO of Mamava. “The severe lack of affordable, quality child care is an extreme obstacle to hiring and retaining employees and attracting outside talent to the state.”
The funding range of $179 million to $279 million in the RAND report isn’t just for subsidies for parents. The funding would also allow the state to pay child care providers significantly more than they’re making now.
With an average wage of about $14 an hour, the people that provide direct child care services in Vermont are among the lowest-paid in the state. Those low wages are one reason child care centers have so much trouble recruiting and retaining workers.
Increasing funding by the levels called for in the report would allow Vermont to put salaries for child care workers on par with what public school teachers make.
One key question for lawmakers now is the income threshold at which parents should be eligible for child care subsidies.
The lower range in the RAND report of $179 million assumes that Vermont maintains eligibility guidelines as they exist today: 350% of the federal poverty level, or about $93,000 in annual household income for a family of four.
At $279 million in additional funding, the state could begin expanding child care subsidies to households up to 500% of the federal poverty level.
Child care subsidies in Vermont are already more generous than in most other states, according to the report, and the state already spends more than $100 million a year to offset costs for families.
"The severe lack of affordable, quality child care is an extreme obstacle to hiring and retaining employees and attracting outside talent to the state.”Vermont business owners, in an open letter to the Legislature
The RAND report includes an economic impact analysis that looks at what would happen if Vermont eliminated obstacles to child care that parents face now. According to the report, increasing child care subsidies would expand the labor force by 600 to 2,800 workers — less than a 1% increase in the overall labor force in Vermont.
Gross state product, meanwhile, would increase by anywhere from $59 million to $283 million.
Wood said she was somewhat underwhelmed by those projections.
“We certainly were expecting to be a greater economic impact in terms of that return on investment,” she said.
But she said those estimates don’t account for the in-migration of young families Vermont might enjoy if parents living in other states come to see the Green Mountains as a child care haven.
Aly Richards, CEO of Let’s Grow Kids, an organization pushing for increased child care investments, said the economic impact analysis in the RAND report was limited to a five-year time horizon.
She said the long-term economic benefits related to children getting high-quality care between the ages of 0 to 5 will yield far more for Vermont than the amounts cited in the report.
“We know there are a lifetime of benefits and they only grow in size over time when you give kids what they need,” Richards said.
Richards also said the projected increase in the labor force that would spring from increased child care subsidies is nothing to sniff at.
“No other public policy initiative in our time here has the potential to mobilize thousands of workers in Vermont at a time when we desperately need them,” she said.
Wood said child care isn’t the only policy priority for the Legislature this year. And she said House lawmakers plan to introduce and pass a statewide mandatory paid family and medical leave program.
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