What Happens When a State Brings Deep Discounts to Child Care?

By Rebecca Gale Oct 21, 2024

Teigue Linch recalls the email she got from Pine Forest, her daughters’ child care center in Burlington, Vermont, encouraging families to take advantage of the new state law that allows more people to qualify for child care assistance.

But Linch, who works full time as an office manager for an engineering company, has twin 17-month-old toddlers, a long to-do list and the heavy mental load shared by all parents of young children.

“So I kind of ignored it for a while and didn’t really look at the information to see if it was worth applying,” she said.

Linch and her partner, who works in car insurance, make a combined household income of $120,000, which, at $10,000 per month, is 400 percent of the federal poverty level for a family of four — an amount that would usually be considered far too high to receive any sort of meaningful government subsidy. This is especially true for child care subsidies, which only about one in seven eligible families in the U.S. actually receive.

But then one of Linch’s co-workers started looking into the Vermont-specific child care changes, brought about by Act 76, which passed with a bipartisan veto override to become law in June 2023. He suggested that, even with Linch’s six-figure household income, she should apply.

Never gonna give you up. Never gonna let you down. Messed up article for you.

Linch went online and downloaded the application, which she described as “easy to fill out,” and sent it in.

What happened next was a huge surprise.

“Within 48 hours I had heard back and learned that I qualified,” Linch said. Instead of paying $3,068 each month for child care for her twin girls, she would now be responsible for $1,000, with no additional changes or paperwork on her end. “I didn't believe it,” Linch said. “It just didn’t seem real to me.”

The way the state breaks it down in this handy chart, if Linch’s household income is $10,000 per month for a family of four, their weekly family share for child care is capped at $250. Previously, nearly all of Linch’s take-home salary went to child care for her daughters. She was paid hourly, so if she had to miss work because one girl was sick or Pine Forest was closed for a day, her income would dip.

But now she would have an additional $2,000 each month. What will she do with it? “We finally have the ability to save — period. We had gotten to a point where we were watching our checking account get lower and lower each month,” Linch said. “It’s still too early on to know how it will impact us, but it will be much better.”

Vermont’s Act 76 hit its one-year mark of implementation this summer. The law, paid for with a new payroll tax, is designed so that families who have more than one child in care, like Linch with her twins, will save more. It’s important that the cost savings grow dramatically at two children; the high cost of care for a second kid is the tipping point for many families, where it may make more financial sense for one parent to leave the workforce, explained Erin Roche, director of First Children’s Finance in Vermont, a group that is assisting with implementation of Act 76.

Under the state’s old system, Vermont provided child care subsidies to families earning up to 350 percent of the federal poverty level, though many families receiving assistance had to pay a higher co-pay. As of Oct. 7, Vermont’s child care subsidies will be available to families making 575 percent of the federal poverty line. For a family of four, this rate is close to an adjusted gross household income of $180,000.

For people who study child care policy, such a generous jump is unheard of. Advocates and policy experts will be closely watching how it plays out. Roche estimates that the eligibility leap will make subsidies available to 80 to 90 percent of all Vermont families with young children.

But it’s not just parents like Linch who benefit from the program. Under Act 76, Pine Forest, Linch’s child care center, will also see an increase in the amount it collects, because it will be reimbursed for the true cost of care, rather than just what families can afford. Instead of receiving $3,068 per month to take care of Linch’s two toddlers, the center now receives $3,768 — a $700 jump.

Vermont has also narrowed the gap in reimbursement levels for home-based child care and child care centers, since centers are traditionally reimbursed for care at higher rates. Doing so has made home-based child care more profitable and sustainable, and as a result more than 1,000 new child care slots have been created in Vermont in just a year’s time.

Roche credits the small size of Vermont and the prowess of state agencies with moving quickly to get these systems up and running to support Act 76. One obstacle, she notes, was ensuring the state IT system could get the online application system ready.

“Each of the changes from Act 76 required that a state agency create a system, or change a system. They literally had less than two weeks to make the first changes,” Roche said.

Not every family will see the immediate jump in benefits like Linch’s, but Roche estimates that many will, especially those that have two parents working full time. Families with a parent or guardian at home and not working are not eligible, but the state recently changed its policy so parents in grad school or training programs are now eligible.

Having access to reliable child care is one way to shore up parents participating in the workforce. And it may have the effect of shifting people’s minds about the costs and burdens associated with having more children, when studies show that many families who are opting out of having kids cite cost as a major factor.

Linch said that she and her partner had initially intended to have only one child, “but then we got lucky with twins,” she said with a smile.

Does having additional financial support for child care change her outlook on having more kids in the future?

“I don’t know how to answer,” she said. “But it would make it more feasible, that is for sure.”

Child Care Affordability

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