Vermont officials report progress implementing Act 76 childcare changes, warn federal CCDF rules will require more work

Deputy Commissioner Janet McLaughlin of the Department for Children and Families told the House Human Services Committee on Tuesday that Vermont has implemented most of the key changes in Act 76 to the Child Care Financial Assistance Program (CCFAP), including expanded eligibility and large increases in payments to programs, while cautioning federal policy changes will require additional policy and IT work.

"As of October 6, families can be eligible for childcare financial assistance with incomes up to 575% of the federal poverty level for a family of 4, that could be about $180,000 in gross income for the family," McLaughlin said, describing what she called "the most financially inclusive childcare financial assistance program in the nation." She and department staff also highlighted an online application launched Sept. 7, which McLaughlin said had processed "over 1,500 applications and it's about 1 third of the applications" through the portal so far.

Why this matters: Act 76 broadened who may receive aid, increased the state share of provider payments and established new incentives and grants intended to expand capacity and quality. Those changes are intended to lower family costs and increase infant- and toddler-care availability, but they also raise budget and operational questions as federal CCDF rules take effect.

What DCF reported

McLaughlin said the state has enacted the major rate and program changes required by Act 76. "All of the rate changes that were in Act 76 have been implemented. They were all implemented on time," she said, and described program-level increases that in some cases raised payments to providers by 35% to 150%, depending on program type.

The department reported a sequence of implementation steps and supports: expansion of income eligibility (effective Oct. 6), a $0 weekly family share expanded from a lower threshold, a new online parent portal and a revision of 17 of 28 CCFAP policies to clarify eligibility and operations. DCF added roughly $2 million annually for eligibility specialists hosted at community childcare support agencies and completed $21 million in "readiness payments" distributed to programs between September 2023 and April 2024 to stabilize operations, McLaughlin said.

DCF also described incentives and workforce supports: increased payments to programs that advance in the state STARS quality system; larger credentialing bonuses for educators (for example, increases for bachelor's-level incentives); a quality-and-capacity incentive program that includes technical assistance; and partnership with Community College of Vermont’s Northern Lights hub to deliver training and process credentialing-related incentive payments.

Capacity and demand

McLaughlin showed department data indicating higher CCFAP participation and a 42% year-over-year increase in children receiving assistance in recent quarters, with the greatest growth among infants and toddlers. But she cautioned that licensed capacity has not risen at the same pace and that the state’s licensing and data systems lack detail on whether licensed slots are staffed and available.

"We can't update [the licensing] system," McLaughlin said, describing constraints in the technology that records licensed capacity and "desired enrollment." DCF plans guidance and system changes to collect cleaner data about open classrooms, staffing and vacancies.

Special accommodation grants and other targeted supports

McLaughlin said DCF relaunched its special accommodation grant program in August and has approved 71 children for grants, with an average award of about $22,000 per child to cover individualized staffing and supports. She described ongoing work on a policy for self-employment verification by May 1 and said the department has redesigned applications to be shorter and more usable for families.

Federal rule changes and next steps

McLaughlin told lawmakers that a new federal CCDF rule announced in March 2024 and effective in April requires states to make several substantive changes. "This is a new rule that was announced in March 2024, and it went into effect April," she said. DCF has requested a waiver for some elements through August 2026 while it makes needed changes.

Key federal requirements DCF flagged include: paying providers prospectively (payment by enrollment rather than attendance), using federal definitions for enrollment that will require IT and policy updates, directing some grant funds to expand infant/toddler care and services for children with disabilities or in underserved areas, and a 7% cap on parents’ share of child-care costs for families eligible for federal CCDF support (roughly those under 300% of the federal poverty level). McLaughlin said the department has begun drafting legislative changes (cited as H.248 in testimony), preparing an RFP to hire a vendor for detailed options analysis, and seeking temporary federal funding to support implementation.

Budget and timing concerns

Committee Chair Teresa Wood cautioned against reducing the current program base before implementation is complete. "It doesn't make sense to me to reduce a budget that you then have to ask for an increase in next year because you already have the money this year," Wood said, urging caution given outstanding federal rules and unfinished state technical work.

McLaughlin and DCF financial staff said they are working on modeling options — including whether future rate adjustments could be age- or program-specific — and that some work (for example, reprogramming payment rules in IT systems) will require both staff time and possible one-time resources.

What remains unresolved

Among the items DCF flagged as unfinished or in active development: a self‑employment verification policy targeted for May 1, refining the online application user flow and help for families, further policy updates tied to the federal CCDF definition of enrollment and prospective payments, development of an annual incentive payment formula tied to priority populations and quality, and a vendor-supported analysis of the funding implications of federal rules (including the 7% parent-share cap).

The department asked for time to finish modeling and to coordinate budget decisions so the legislature can weigh one-time versus base funding needs while federal rules and supply-demand analysis continue to evolve.

Ending

Lawmakers on the committee said they would review DCF’s forthcoming analyses and possible draft language (cited for H.248) before making budget changes. DCF said it will continue implementation work, pursue federal waivers and use a vendor and research partners to fill data gaps needed to estimate the long‑term cost and impact of the federal rule changes and remaining Act 76 obligations.