In a vote that some advocates say could “change the trajectory” of the state, the Vermont Senate on Thursday gave preliminary approval to legislation that would increase child care subsidies by more than $120 million a year.
The vote follows years of advocacy by a coalition that says lack of access to affordable child care poses a threat to early childhood development for kids, and to workforce participation for their parents. And in a 26-4 vote on the Senate floor, lawmakers approved the creation of a new payroll tax to support the biggest increase in child care funding in state history.
“(This bill) would change the trajectory of our state by … making child care more accessible, affordable for thousands of Vermont’s youngest kids and their families,” said Aly Richards, CEO of the child care advocacy organization Let’s Grow Kids. “And it would improve quality by increasing compensation for early childhood educators.”
Addison County Sen. Ruth Hardy, one of the bill’s lead sponsors, said a recent report by the RAND Corporation found that child care workers make an average of just more than $30,000 a year. She said low wages have led to staff turnover that’s fueled a shortage of available child care slots statewide.
“We’ve heard ... from employers that if employees can’t get child care, they can’t work or they can’t work fulltime or they’re frequently absent."Washington County Sen. Ann Cummings
“Child care spots are difficult to find in nearly every community in our state,” Hardy said.
By substantially increasing state aid to the parents of young children, according to Hardy, Vermont will simultaneously improve affordability for parents and boost revenues to the home- and community-based centers that provide care.
The legislation also includes a universal paid leave program that would allow new parents to take up to 12 weeks of work to bond with a newborn.
The Senate, however, still has to resolve some fundamental differences with the House of Representatives over how to pay for the expanded child care subsidies. They’re also at odds over the size and scope of the paid leave program they want to emerge from Montpelier this year.
And Republican Gov. Phil Scott, meanwhile, has made clear to Democratic leaders in both chambers of the Legislature that he’ll veto any proposal this year that includes tax or fee hikes on Vermonters or the businesses they own.
A payroll tax for child care subsidies?
The legislation approved by the Senate would boost subsidy amounts for Vermonters who already qualify for the existing Child Care Financial Assistance Program. It would also expand subsidy eligibility to nearly 8,000 new households by increasing the income threshold for the program from $115,000 a year for a family of four to $180,000.
Senate lawmakers want to use a 0.42% payroll tax to fund the program. Employers would be responsible for 75% of the assessment, and the remaining 25% would be deducted from workers’ paychecks.
Washington County Sen. Ann Cummings, a Democrat, said that since staff-strapped businesses stand to benefit most from expanded availability to affordable child care, it makes sense to ask them to pay.
“We’ve heard ... from employers that if employees can’t get child care, they can’t work or they can’t work fulltime or they’re frequently absent,” she said. “It’s been trying to balance having those that benefit pay.”
Franklin County Sen. Randy Brock, leader of the Senate Republican caucus, expressed concern Thursday about what he said was the hasty process used to arrive at the payroll tax.
“We had two afternoons to do it,” Brock said. “And as a result of having two afternoons and no more time to do it, we settled on a payroll tax. And the only reason that I can see we settled on a payroll tax is because it’s the only thing we could do in two afternoons.”
Brock also warned his colleagues about saddling government and taxpayers with new financial obligations as a host of factors threaten economic stability in Vermont and beyond.
“We see the situation in the banking industry. We see high inflation. We see the potential of recession on the horizon,” Brock said. “I’m not sure this is wisest thing to do in this way at this time that has not been thought out better than is has been.”
Democratic leaders in the House are also expressing concern about the Senate’s child care funding mechanism.
“I think Americans generally perceive payroll taxes as insurance programs, like Medicare or Social Security,” said Brattleboro Rep. Emilie Kornheiser, a Democrat who chairs the House Committee on Ways and Means.
Kornheiser said payroll taxes are best used when benefits accrue to every worker that pays in. Since only a portion of the worker base in Vermont – those with young kids, or who will one day have young kids – will ever get a child care subsidy, she said she prefers an alternative funding mechanism.
Kornheiser said her committee will likely analyze options including the elimination of sales tax exemptions, and also income-based tax sources.
How big to go on paid leave?
The Senate child care bill includes a universal paid family leave benefit that would allow new parents to take up to 12 weeks of paid time off to bond with a newborn. The benefit would be a fixed payment of $600 a week, regardless of a workers’ income (though employees who make less than $600 a week would only receive the amount they would have earned had they not taken leave).
House lawmakers favor a more robust paid family and medical leave program that would provide more generous paid leave benefits, and also allow workers to take leave for personal illness or injury, or to care for an ailing family member.
Caledonia County Sen. Jane Kitchel, who chairs the Senate Committee on Appropriations, said she thinks Vermont might benefit from a more expansive paid leave policy. But she said Vermonters’ capacity to take on new tax obligations is limited. And she said if the Legislature wants to move forward with a transformation of the child care system, then it probably can’t launch a substantial new paid leave benefit in the same year.
“One of the issues is, ‘What can you pay for?’ Because anything really substantial is going require new revenues … The question really becomes one of, ‘What is politically and fiscally feasible at one time?’” Kitchel said. “It’s a matter of setting priorities and saying, ‘What do we want to do?’ And making sure that’s where we’re focusing our attention and our priorities as we’re looking at available revenues.”
Earlier this month, House lawmakers approved a much larger paid family and medical leave package that uses a 0.55% payroll tax to fund 12 weeks of paid leave for virtually every worker in the state. That programs would provide 100% wage replacement, up to about $1,000 a week, for the birth of child, an injury or illness for the employee, or to allow an employee to care for an ailing family member.
House Speaker Jill Krowinski said the House and Senate will now enter into a negotiation process that will likely yield some kind of compromise over both paid leave and child care.
Phil Scott brandishes his veto pen
At a press conference in his ceremonial Statehouse office earlier this week, Scott delivered an unusually stern speech in which he criticized the size and scope of the new spending proposals emerging from the Legislature this year.
“I have to say I’m very concerned with the direction we’re heading in,” Scott said.
Scott said tax increases and fee hikes proposed by Democratic lawmakers will affect “the seniors on fixed income, the working families who can’t afford to pay more, and the communities who need our help.”
“And I worry about how we will possibly pay for all of this as we look towards an uncertain economic future,” Scott said. “In my opinion, if this budget were to pass, with all the big-ticket initiatives that come all at once, it has the potential to hurt Vermont in both the short and long run.”
Scott has made clear that he’ll veto any legislation this year that includes tax or fee increase. But Democratic supermajorities in both chambers of the Legislature may blunt the effect of that executive power.
Based on votes in the House and Senate so far, however, Democrats have enough votes to override a veto, a possibility Scott acknowledged on Wednesday.
“And the reality is,” Scott said, “this budget and the half-a-billion-dollars in new taxes, fees and penalties, could eventually pass, even if I veto it, because they have a supermajority.”
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