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Child Care Expansion in Vermont: What Act 76 Means for Families and Employers

ByOwen Hartwell

A pile of wooden alphabet blocks. Photo: Bobjgalindo / Wikimedia Commons, CC BY 4.0.

For years, Vermont families have described child care as one of their biggest costs, often comparable to rent or a mortgage, and many have struggled to find a slot at all. Providers, meanwhile, said low pay made it hard to keep staff. In 2023, the Legislature passed Act 76, one of the largest expansions of child care funding of any state. It became law after lawmakers overrode Gov. Phil Scott’s veto.

Here’s what the law does, how it’s paid for, and how families can apply.

Expanded financial assistance

Vermont’s Child Care Financial Assistance Program (CCFAP) helps eligible families pay for care at regulated programs. Act 76 greatly expanded eligibility. As of October 2024, families earning up to 575% of the federal poverty level can qualify for some help, on a sliding scale. That reaches well into middle-income households: for a family of four, 575% of the poverty level is well over $150,000 a year.

Families with lower incomes receive more assistance, and the lowest-income families may pay nothing. Families pay the difference between the state’s payment and the program’s tuition, along with any family share set by the sliding scale.

Higher payments to providers

Act 76 also raised the rates the state pays child care programs for children in CCFAP, starting with a significant increase in 2024. The goal was to help programs raise wages, retain educators and open more slots. Providers enrolled in the program also take part in quality and data requirements.

Pre-K and the workforce

The law also addressed Vermont’s universal pre-kindergarten program and called for work on the state’s pre-K system, along with investments in the early childhood educator workforce, such as scholarships and loan repayment programs.

How it’s paid for: the Child Care Contribution

To fund the expansion, Act 76 created the Child Care Contribution, a payroll tax that began July 1, 2024, according to the Vermont Department of Taxes:

  • Employers pay 0.44% on wages paid to employees working in Vermont.
  • Employers may withhold up to 25% of that amount from employees’ wages, so workers pay up to 0.11% and employers at least 0.33%.
  • Self-employed people pay 0.11% on their self-employment income.

The contribution is reported and paid with Vermont income tax withholding. The state also put general fund money toward the first year.

The politics

Supporters, including child care advocates, many employers and the Democratic legislative majorities, argued that affordable child care helps parents work and helps employers recruit, addressing Vermont’s tight labor market. Gov. Scott supported more child care funding but vetoed the bill over the payroll tax, arguing it would hurt affordability. The Legislature overrode the veto in June 2023.

Results so far

State officials and advocates have reported increases in families receiving assistance and gains in provider wages since the expansion took effect. Shortages of slots persist in some areas, especially for infants and toddlers, and building enough capacity will take time.

How families apply

  1. Check eligibility using the Vermont Department for Children and Families (DCF), Child Development Division online tools.
  2. Find a regulated child care program using DCF’s Bright Futures information system, or through Vermont 2-1-1 or the regional child care resource and referral agency.
  3. Apply for CCFAP online or through a community child care support agency.

Frequently asked questions

Does the program pay for any child care? Assistance applies to care at regulated programs, licensed centers and registered family child care homes that participate in CCFAP. Some legally exempt care arrangements may qualify under specific rules.

Do employers have to withhold the employee share? No. Employers may withhold up to 25% of the 0.44% contribution from employees, but they can choose to pay the whole amount.

Does the payroll contribution apply to people who live in Vermont but work elsewhere? The contribution applies to wages for work performed in Vermont. Cross-border workers should check Department of Taxes guidance.

What if I’m over the income limit? Families above 575% of the federal poverty level don’t qualify for CCFAP, but they may benefit indirectly from higher provider payments that help programs stay open and add capacity.

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Sources

  • Vermont DCF, Child Development Division: https://dcf.vermont.gov/cdd
  • Vermont Department of Taxes, Child Care Contribution: https://tax.vermont.gov/business/child-care-contribution
  • 32 V.S.A. chapter 246, Child Care Contribution: https://legislature.vermont.gov/statutes/fullchapter/32/246
  • Let’s Grow Kids (advocacy organization), Act 76 resources: https://letsgrowkids.org/

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