Child care bill gets first committee hearing, with concern voiced about cost

MONTPELIER — The first day of testimony on a bill reimagining early child care in Vermont as a publicly subsidized system lowering family costs to no more than 10 percent of gross household income, and raising salaries for early childhood educators, showed there’s support for the concept.

But the hearing also showed where some state officials and lawmakers have concerns about costs and unintended consequences.

While the bill, H. 171, does provide for studies to determine financial impact of the ambitious plan, Department of Children and Families Commissioner Sean Brown said he would like to see that study before policy decisions are made, rather than after.

Cost estimates of the proposal vary. According to Brown, the price tag is between $300 million and $500 million, and he advised that the Legislature study the funding picture before diving into policy changes.

Brown said his agency agrees with the legislative intent and supports it as a broad concept.

“We also agree on a lot of the goals. That being said we do have some concerns about the way the bill is structured and moves things forward,” he said.

Those details include setting a rate floor at 10 percent of gross household income — which Brown said could have “a significant impact on middle income families” — and a change in reimbursement rates reflecting the cost of services rather than how they’ve been priced.

But Let’s Grow Kids CEO Aly Richards, whose advocacy organization has pushed for affordable, quality child care for all Vermont children by 2025, said the cost is closer to the $206 million gap identified by the Blue Ribbon Commission on Financing High Quality, Affordable Child Care in 2016.

The bill is a priority for Legislative leaders, who have said the COVID-19 pandemic has shown child care to be an educational and economic necessity. It has tri-partisan support among its 95 co-sponsors.

One of the keys in the funding mechanism envisioned by the bill, and questioned by the administration, is changing how the state Child Care Financial Aid Program reimburses eligible families. The state is in the third year of a five-year makeover of that system.

The Scott administration proposes a reimbursement rate set at the 50th percentile of a market survey of what families are paying for child care. The bill would change that to a “cost of care calculation” — the actual cost of providing the services, through a yet-to-be-determined formula.

That change alone, Brown said, would increase the state’s obligation from $57 million to $228 million. Moving to that model would eliminate the state’s ability to cap rates, Brown said.

“Maybe [the prices] are depressed .. that’s why we say let’s study this,” Brown told the committee. “Moving into cost of care really uncaps those rates. It doesn’t allow us the ability the regulate or set those rates.”

But the problem, Richards and Let’s Grow Kids senior policy director Sarah Kenney said, is that the market survey reflects artificially depressed prices. “There’s no money in the system and parents cannot pay more. You can’t squeeze blood from a stone,” Richards said.

Brown also told the committee that moving away from the market survey to a cost of care model might run afoul of federal block grant requirements. Richards later said that under federal guidelines, states are free to establish their own eligibility for use of state dollars.

The larger reimbursements would allow providers to pay and retain educated and trained educators what they’re worth, Richards and Kenney said. They noted that early child care pays about half what public kindergarten teachers earn, often without any employment benefits such as health insurance.

“We have a huge problem being able to retain people in this field. A big part of that is wages,” Kenney said.

Kenney told the committee that Let’s Grow Kids is in agreement with the administration on expanding the threshold for 100 percent cost reimbursement from 100 percent of the federal poverty limit to 150 percent; with expanding income eligibility for the program from 300 percent of the federal poverty level to 350 percent, and changing how family contributions are structured from a per-child payment to a family payment.

Several committee members, including Democrat Rep. Theresa Wood and Republican Reps. Francis McFaun and Carl Rosenquist, focused on the public-private partnership aspect of the bill, and whether that might have unintended consequences for single-home private providers.

Licensing requirements passed into law a few years ago had the effect of closing a number of child care businesses, Wood said.

“We need options for people. I have worries about how this impacts different kinds of providers,” she said.

Richards said Let’s Grow Kids shares that concern, but is convinced from conversations with providers that increasing funding would “change the conversation” for private providers who otherwise might shy away from meeting the standards of a state system.

“Why this doesn’t drive home-based providers out of business is because the funding follows the minimum standard. It’s not a unfunded mandate,” Richards said. “You couldn’t raise the minimum wage standard without funding.”

That would also allow home-based programs to pay themselves what they’re worth without worrying about pricing out families, Richards said.

“We have an artificially depressed market rate because there’s not enough money in the system. That’s why this is different,” she said. “We’re saying let’s break out of an artificially depressed rate ... and look at true cost of care.”

Wood also raised concerns about whether the bill would require reimbursements based on enrollment rather than attendance.

During the early days of the pandemic, the state paid reimbursements based on enrollment, a move that kept some child care facilities from going out of business. Brown warned that standard would add cost, and added that the state has done its best to be flexible with families.

An attendance-based reimbursement plan means parents that can afford to pay for absences can hold their child or children’s slot — and those who cannot afford to do so can lose their place in the program.

McFaun said it’s important to define how the state would determine the cost of care “so we know where we are. We do that with the school system with per pupil cost ... that’s a conversation that has to come out with an answer so we know how we’re going to fund this thing.”

While it’s very early in a lengthy process, Human Services Committee member and bill co-sponsor Rep. Dane Whitman, D-Bennington 2-1, said he hopes for action in the short term rather than another study.

“We already know that there are significant gaps in funding for child care. That’s why this bill was introduced: to start increasing access and affordability for families and providers,” he said. “My hope is that we can agree on a short-term solution and build from there, rather than postpone this work two more years to complete another study.”

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