Appropriations committee urges automatic childcare reimbursement increase, sets aside funds to meet 7% co-pay cap

A subcommittee of the Vermont House Appropriations Committee on Human Services on Feb. 12 recommended establishing an automatic annual reimbursement increase for child-care providers, setting aside one-time funds to comply with a new 7% family co-pay cap, and adding modest base increases for Building Bright Futures and Children's Integrated Services.

The recommendations were presented as part of the committee's review of the governor's budget; the governor's proposal included $3.5 million in caseload savings for the Child Care Financial Assistance Program and a $19 million base adjustment related to the payroll tax contribution for childcare. Committee members said those items did not address some priorities they consider critical to preserve provider capacity and workforce stability.

The committee's top priority for the Child Development Division (CDD) is adding language this year to make automatic, index-based reimbursement-rate increases mandatory rather than discretionary. A committee member said increasing reimbursement rates "puts money directly in the pockets of programs that they can use to increase wages, recruit better, offer benefits, [and] have substitutes," and argued an automatic adjustment would help retention and avoid programs becoming underfunded again after earlier reforms in Act 76.

Committee members said CDD is working with the Joint Fiscal Office (JFO) to calculate the fiscal impact of making the index-based increase automatic; no final dollar figure was available at the Feb. 12 meeting.

The panel also flagged a federal Office of Child Care rule that caps a family's co-pay contribution at 7% of income. The committee was told Vermont's current distribution of co-pays runs around 12.5% for some families after Act 76. The department is modeling financial impacts and plans to come into compliance in FY27; the committee recommended putting money aside to ensure compliance, using a placeholder figure of $5 million while awaiting the department's detailed estimate.

Other CDD items the committee recommended or discussed:

- Building Bright Futures: a proposed $322,000 increase to base funding to sustain statewide advisory and monitoring functions, including two staff positions and support for regional councils, to replace expiring grant-funded roles tied to the Preschool Development Grant (PDG).

- Children's Integrated Services (CIS): committee members cited a prior cost study that found the per-family reimbursement should be higher than the current $650 per family per month; they recommended raising the rate by $25 to $675 per family per month and adding $450,000 to the base.

- Workforce supports: a recommended $500,000 increase for a student loan repayment program for childcare employees, and funding to clear the wait list for a youth apprenticeship program that currently serves 25 students and has a waiting list. Committee members said the apprenticeship program provides stipends and mentorship to help high-school students enter the early-childhood workforce.

- Information technology: the committee heard that the CDD's second phase of a new IT system is funded with one-time and CCDF dollars (about $3 million GF one-time and $670,000 ongoing CCDF); members agreed the department appears to have sufficient funds to proceed to the next development phase and did not prioritize additional base funding for IT at this time.

Committee members emphasized they are prioritizing investments that directly support workforce recruitment and retention and urged the department to provide additional cost details to finalize recommendations.