Kids attending the Part 2 Kids child care hub at the Allen Brook School in Williston get a breakfast as they arrive at school in September 2020. A years-long campaign to overhaul Vermont’s beleaguered child care system may be coming to fruition this year. File photo by Glenn Russell/VTDigger

A yearslong campaign to overhaul Vermont’s beleaguered child care system may be coming to fruition this year as Democratic lawmakers, fortified by a historic supermajority, have pledged to place early childhood education at the top of the agenda in Montpelier this session.

But even as lawmakers have worked behind the scenes for months to draw up a blueprint for generational reform, a key variable has been largely unknown: the price.

Released Tuesday, a long-awaited 117-page report, commissioned by lawmakers in 2021 and developed by analysts at the RAND Corporation, now pegs the cost of expanding child care subsidies at $179 million to $279 million, depending on a range of options. 

The economics of early childhood education, in which all but the poorest families pay almost entirely out-of-pocket for the labor-intensive service, are fundamentally broken. Child care workers often make so little they qualify for public assistance, while families struggle to afford the cost of care, which can often eclipse the cost of college tuition.

In conducting their study, the consultants were given a two-fold mandate: Figure out how much it would cost to ensure that families receiving state help pay no more than 10% of their income toward child care — even as wages are raised such that child care workers earn salaries in line with their peers in public education.

Lower-end estimates included in the report would substantially beef up aid to families who make up to three-and-a-half times the federal poverty level, the current cut-off for state aid. That would cover about 60% of all young children, and allow child care programs to more fairly compensate their workers. Higher-end estimates would improve wages and expand aid to middle-income families making up to five times the federal poverty level, covering a little over 80% of all preschool aged kids.

To raise just shy of $200 million, according to the report, lawmakers could institute a 0.9% payroll tax, a two-percentage-point increase in the sales tax, a new limited services tax of 9.9%, or a new expanded services tax of 7.1%.

But expanding subsidies to middle-income families would increase individual tax rates beyond what’s levied in other states, according to the report. And given the size of the estimated funding gap the state will have to fill if it expands help beyond lower-income households, it would likely be necessary to mix and match different types of taxes.

Any reform on the scale contemplated by the RAND report is all but certain to require two-thirds majority support in the Legislature, enough to override a gubernatorial veto, since Gov. Phil Scott has consistently said he will not raise new revenues to pay for child care. 

“The Governor has made clear since his first day in office that investing in early care and learning is a top priority for his Administration,” Jason Maulucci, Scott’s press secretary, wrote in an email Tuesday. “However, he has also been clear that he is not willing to raise taxes on already overtaxed Vermonters.”

Republican Gov. Phil Scott speaks during a VTDigger gubernatorial debate in September 2022. Photo by Glenn Russell/VTDigger

Such taxes, however, would have “a small impact on household well-being,” RAND analysts wrote in their report, though the payroll tax would be more progressive and a sales tax regressive. And, according to the report, the overall impact to the economy would likely be positive, if modest. 

An expansion of subsidies into the upper range of incomes would have the potential to expand the state’s labor force in the range of 600 to 2,900 new workers — an increase of less than 1%, RAND analysts estimated. The annual gross state product could expand between $59 million and $283 million, depending on assumptions.

Aly Richards, the CEO of Let’s Grow Kids, Vermont’s leading child care advocacy organization, wrote in a statement that the study shows that a universal and affordable child care system where early childhood educators are fairly compensated “is well within reach.”

“We support the study’s funding estimate of $279 million in additional public investment so quality child care is accessible for Vermont’s children and families,” she added. “The public financing recommendations laid out in the study are fiscally responsible and will make our state more affordable.”

Though the RAND report was highly anticipated and its specific findings closely guarded until Tuesday, the big picture outlined in its pages largely mirrors prior estimates, and lawmakers and advocates alike did not express much surprise at its conclusions.

Theresa Wood. Courtesy photo

“We knew that this was going to be a big lift,” said Rep. Theresa Wood, D-Waterbury, who chairs the House Human Services Committee. “The magnitude is similar to what we have been expecting.”

Wood, alongside Rep. Jessica Brumsted, D-Shelburne; Sen. Ginny Lyons, D-Chittenden Southeast; and Sen. Ruth Hardy, D-Addison, has been at work throughout the summer crafting legislation to overhaul Vermont’s early education sector. The group has been holding on to the bill in order to plug in RAND’s findings, and is planning to formally unveil its proposal either by the end of the week or early next.

Wood declined to go into much detail about what the bill would or would not include, but she did suggest that lawmakers were likely to heed calls from advocates, and start out with a bill that expands subsidies for those making higher incomes.

“Our current program already focuses on people who make less. So our guidance on this is really addressing what I would call middle-income individuals,” she said.

VTDigger's political reporter.