Vermont’s child care providers have new hope after Act 76, but worries remain

For Tammie Hazlett, it seems like yesterday that the outlook for Vermont’s child care industry was grim: Established programs like hers were closing faster than new ones could open; providers left the field feeling overworked and underpaid; and the already high cost of care rose past what families could afford as directors attempted to retain what staff remained.

Though reforms are underway in the state’s child care subsidy program, it seems like yesterday that Hazlett couldn’t commit to giving herself a salary to run her Thetford home-based daycare — she simply “took whatever was left over,” she said, after all the bills were paid.

The truth is, Hazlett said earlier this month, it was literally yesterday that she worried about the future of Tammie’s Early Care & Education and other child care programs across the state.

Although she said she is thankful for the many improvements funded by Vermont’s landmark Act 76 since the law was passed in June 2023, she’s hesitant to wholeheartedly celebrate its successes when the challenges of the child care industry are still fresh in her mind — and still just as capable of sinking her business of 22 years.

But “overall, I’m feeling positive,” Hazlett said, because the state is starting to address the sacrifices that child care providers have made for years to keep the industry afloat.

“We, the educators, have subsidized this early education system for years at the expense of our own wages and our own well being,” she said. “Act 76 is making it so that eventually — when this is all said and done — that we won’t have to do that anymore.”

The Vermont Department for Children and Families has rolled out a mountain of changes over the past year as a part of Act 76, legislation that commits $125 million to the child care sector annually through a .44% payroll tax. Specifically, more families are now eligible to receive financial assistance for child care than ever before, and the state is paying programs at higher weekly rates to provide that care.

Gov. Phil Scott vetoed the legislation due to its inclusion of the payroll tax in early June 2023, but the legislature overrode the decision to secure the new avenue of funding.

The positive change resulting from that investment is tangible, said Aly Richards, chief executive officer of Let’s Grow Kids , a nonprofit that advocates for accessible child care in Vermont. More child care programs opened than closed in the first quarter of 2024 — a first since 2018, she said.

Between 2013 and 2020, 1,389 of Vermont’s state-regulated child care programs closed and only 910 new programs became licensed, according to data from a 2020 DCF report . Vermont families are still reeling from those closures: about 8,700 child care slots are still needed to meet the current demand in the state, according to a report from Let’s Grow Kids .

Act 76 should help to close that gap in care, Richards said, by giving providers the financial foundation they need to expand their programs — and pay the staff who will run them.

‘Undervalued and underpaid’

Prior to Act 76, staffing challenges among the state’s child care providers were widespread, with 86% of programs experiencing a shortage in 2022, according to a report from the Vermont Association for the Education of Young Children . As a result, 80% of programs were enrolling fewer children than desired — which means they weren’t bringing in enough money to make ends meet, Richards said.

Vermont’s child care providers aren’t alone. According to a 2022 Bureau of Labor Statistics report , about 153,000 openings for child care workers are projected each year from 2022 to 2032. And there’s little financial incentive to enter the industry: Vermont’s average hourly wage for child care workers is $16.34, according to the BLS.

“This is a workforce that has been underpaid for so long, and benefits haven’t even been part of the discussion,” Richards said. “These educators deserve to be paid for the important work that they do.”

Child care providers interviewed by VTDigger said increasing staff compensation was one of their first priorities when they began receiving increased funding from the state.

Nicole Walker, director of Apple Tree Learning Centers in Stowe, said hiring has always been her “biggest fear” as her program has grown to accommodate its more than 200 students.

She said she used a grant received through Act 76 to give all 31 of Apple Tree’s educators a 6% pay increase. As more money comes in from the state, Walker said, she hopes to expand the benefits staff already receive, which include medical, dental, vision and disability coverage. That’s the key to retaining staff once they’re hired, she said.

“We take really good care of our staff, and I feel like that’s part of the reason why I’m not faced with a lot of turnover. It really means something to them — who would probably be undervalued and underpaid at other places.”

A total of $21 million has been distributed to 800 programs, including Walker’s, through the Act 76 Readiness Payment Program, said Janet McLaughlin, deputy commissioner of the child development division within Vermont’s Department for Children and Families. The grants — given to providers over seven monthly payments starting in September — were awarded to providers based on a range of factors, including how many children they served. The average grant was about $26,000, but some programs received as much as $180,000, she said.

Richards said many educators put the funding toward staff wages and bonuses, while others concentrated on opening new classroom spaces and investing in new supplies.

Some, like Hazlett, found a way to do both. She said she used her initial readiness grants to buy a new refrigerator so she could continue serving meals to her students. She tucked the last two payments away to cover her own salary.

But even with better wages, Richards said, “the child care sector is absolutely not immune” from the challenges that come with Vermont’s aging workforce.

‘The true cost of quality care’

In addition to funding readiness grants, Act 76 put the payroll tax in place to finance the restructuring of the state’s child care subsidy program — expanding the number of families eligible to receive financial assistance and paying providers more on behalf of those families.

Before the legislation was passed, McLaughlin said, the rates the state paid providers per child were based on market surveys of the rates providers charged clients. The main problem with that method, she said, was that child care programs weren’t charging “the true cost of quality care,” but rather “what they think families are able to afford.”

Now, the state’s rates are based on “cost of care” surveys that accurately reflect the resources that go into early education programs, McLaughlin said. If that rate is higher than what programs charge families, program directors can keep the extra change — something that didn’t happen in the previous subsidy system, she added.

The new methodology led to a 35% increase in state rates for all programs in December, and an additional increase for home-based child care providers on June 30.

Families enrolled in the financial assistance program who make 175% of the federal poverty level or less don’t pay anything to receive child care at programs that meet state criteria — the state covers the entire rate on their behalf, McLaughlin said.

Other families that have household incomes below different thresholds pay up to $250 a week in what’s called a “family share” of the rate, according to the DCF’s income guidelines released in April. That’s still “significantly less” than the full cost of care, McLaughlin said.

Under Act 76’s new guidelines, families who make up to 400% of the federal poverty level are now eligible to receive child care subsidies — that’s a yearly income of about $124,000 for a family of four. Before, the cut off was at 350%, McLaughlin said. In October, the program will be widened again to include families making up to 575% of the federal poverty level, or $172,500 for a family of four, she added.

Savannah McKenzie, Director of Kid Savvy Childcare in Hyde Park, said 15% of her families used to qualify for the state subsidies, but now, 90% do.

The expansion came at the perfect time for her, she said. This winter, she moved her program from her home into a larger center and hired four staff members to teach in the new space. The growth is exciting, she said, but not sustainable if parents can’t keep up with their payments. With guaranteed state funding for the majority of her clients, McKenzie said she can be more confident that she can keep the lights on, and maybe have a little money left over to invest in new supplies.

“This guarantees that I’m getting paid, and that my staff is getting paid,” she said. “But it also gives parents a sense of relief knowing that they can work and send their kids to a high quality child care program and still be able to afford other things.”

McKenzie said she still has a long waitlist for her program, though, and she worries that the state subsidies will not provide enough funding for her to expand again to meet demand.

‘Slipping through the cracks’

McKenzie said that, because the state’s subsidy system is more generous to families now, she feels more comfortable raising her prices to reflect the true cost of care — rather than maintaining the reduced prices she adopted out of necessity to keep families enrolled in past years.

But some providers worry that, while price increases may be healthy for the industry as a whole, they could hurt families who aren’t eligible for state aid.

Julie Koehler, program director of Beaver Brook Children’s School in Wilmington, said she’s seeing some families “slipping through the cracks” of the subsidy system — including her own.

Koehler said her family doesn’t currently qualify for child care subsidies. But even with her staff discount at Beaver Brook, she said her family is spending 10% of their monthly income on child care for her one-year-old son.

In 2021, legislators set the goal that families would not pay more than 10% of their household income on child care. Even so, Koehler said, it’s been a “big struggle” to pay that much for care, especially because she’s still recovering from past medical expenses —  she didn’t have health insurance to cover the birth or get a paid maternity leave.

“I don’t consider us to be a high income household or anything like that. With a $1,400 a month mortgage payment, and food, and just the cost of living in general, we don’t have extra money to spend on child care,” she said.

While Koehler feels the squeeze in her own family, she also sees it in her center.

“Act 76 has been really, really great for so many programs, but it hasn’t really affected us here,” she said. “Many of our families don’t qualify for subsidies, but that doesn’t mean our families have an easy time affording this.”

But Koehler said she’s thankful for the readiness grants that helped her center increase its minimum wage. And even if gaps still exist, she said, Act 76 was a crucial step forward for the child care industry.

Read the story on VTDigger here: Vermont’s child care providers have new hope after Act 76, but worries remain .