JFO tells Vermont lawmakers pre-K, child-care subsidies overlap and create incentives that shape family and district choices

The Legislative Joint Fiscal Office presented its long-awaited Act 73 report on Feb. 24, telling the House Human Services and House Education committees that universal pre-K (UPK), Head Start and the Child Care Financial Assistance Program (CCFAP) are highly interconnected and create financial incentives that can affect families' enrollment choices and district budgets.

"We are not experts in the outcomes of the current early child care system," said Emily Byrne, deputy fiscal officer for the Legislative Joint Fiscal Office, who led the presentation. The report, Byrne said, focuses on how the programs are financed and how those financing rules shape behavior rather than on child-development outcomes.

The report analyzed three main programs: Head Start (a federal program that requires a nonfederal match), CCFAP (a state–federal subsidy program supported largely by the payroll tax and some general-fund and federal dollars) and UPK (a statewide program that guarantees a minimum of 10 hours per week for 35 weeks to eligible 3-, 4- and 5-year-olds not yet in kindergarten). JFO found that the programs frequently overlap — for example, Head Start sites often use UPK or CCFAP dollars as part of local matches — and that those overlaps complicate straightforward fiscal comparisons.

Ted Barnett, senior fiscal analyst at JFO, described one central family-level incentive: "The incentive to enroll in CCFAP depends ultimately on what the estimated weekly family share is for the family under CCFAP compared to the market rate tuition for a provider." In practical terms, JFO showed how UPK payments can reduce a family's CCFAP hours and therefore their subsidy level; that reduction can, at the margin, make families weigh the benefit of enrolling in UPK against keeping a larger CCFAP certificate.

JFO highlighted specific fiscal parameters lawmakers should consider. Under current law the UPK weight is negative 0.54 (effectively adding 0.46 to a district's long-term weighted ADM), and using FY25 assumptions that change corresponds to roughly $7,000 per pre-K student if the weight is implemented as currently drafted. JFO also cited a FY25 UPK tuition rate near $3,800 and showed that CCFAP eligibility extends to families up to 575% of federal poverty (JFO used a family-of-four example at about $185,000/year to illustrate the calculation of family share).

Presenters repeatedly flagged a lack of statewide, program-level data: AOE and other sources report aggregate UPK counts and long-term ADM but do not consistently track which districts operate which hours, where children actually receive services, or how many hours each enrolled child receives. That lack of granular data, JFO said, makes it difficult to forecast the education-fund impact of policy changes.

At the provider level, JFO said staffing requirements and classroom ratios affect program finances: preschool classrooms can accommodate more children per teacher than infant rooms, so reimbursement differences across ages alter center revenue and business models. JFO also noted that UPK participation requires hiring teachers with AOE early-childhood endorsements and additional administrative capacity — constraints that can limit private providers' ability to participate.

The office presented three broad policy options: tweak the weight and make limited alignment changes; maintain the current system until broader education transformation occurs; or pursue comprehensive redesign of program definitions and funding streams. Narrower proposals included implementing a ‘‘money-follows-the-student’’ tuition approach, prorating weights by hours provided, or changing how UPK hours are counted in CCFAP certificates.

Committee members asked for more detail on implementation, hours accounting and fiscal trade-offs. Byrne and Barnett said the JFO could not resolve those questions without more local data and additional policy decisions from lawmakers. The committees agreed to take further testimony, including work with Ways and Means and Education, before making final policy choices.

Next procedural step: committees will take more testimony and evaluate options during follow-up hearings; JFO recommended additional data collection to better estimate fiscal impacts.