MONTPELIER — The state is investing $2.5 million more in child care in the upcoming fiscal year, but advocates say an additional $9 million would be needed to ensure providers who serve low-income families are paid market rates.
Child care providers say the current funding situation is not sustainable and it is likely programs will close at a time when the state needs to expand options for families.
In Vermont, nearly 80 percent of children likely to need care don't have access to it because there aren't enough providers, according to Robyn Freedner-Maguire, campaign director for Let's Grow Kids, a statewide advocacy effort for more high-quality, affordable child care.
"It is a system that is really underfunded," she said.
The budget for the fiscal year starting July 1 includes a new $2.2 million grant program. The money will go to providers who work with the state's subsidy program for low-income families and who participate in the STARS quality rating program.
The budget also adds around $300,000 to bring the subsidy in line with 2016 and 2017 federal poverty guidelines. This will make more families eligible.
But neither of the new investments changes the fact that the state pays outdated rates to providers on behalf of families eligible for assistance, according to Freedner-Maguire. "In order to bring those rates up to current market levels, we'd need an additional investment of approximately $9 million," Freedner-Maguire said.
The state payments are based on what it cost to run child care programs in 2008. The state surveys providers every two years to find out what they charge the general public, but the numbers collected are different from what it costs to run their programs, according to Freedner-Maguire. And the subsidies continue to be based on the old numbers.
"It is true we are behind on the rates," said Reeva Sullivan Murphy, deputy commissioner at the state Department for Children and Families. "If we get more money I'll pay more."
Murphy said the department proposes increasing the rates every year when it puts the budget together, but without any new revenue sources it is hard for the administration and the Legislature to come up with additional funding.
Many providers, in an effort to keep care affordable, report rates that do not cover their actual costs. "Even what we base the rate on is a depressed market rate," Freedner-Maguire said.
The Child Care Financial Assistance Program, as the subsidy is known, helps low-income families pay for care for infants to 13-year-olds. The program, administered by the Child Development Division at the Department for Children and Families, is funded with state and federal dollars.
In fiscal 2016, $47.5 million helped more than 12,000 children take advantage of child care, preschool and after-school programs. The subsidies range from 10 percent to 100 percent of the state-established rate, based on household income. The income limit for a family of three to be eligible is $39,576.
The last survey of child care rates was in 2015, when providers said they charged an average of $221 for a week of infant care at a licensed center. The subsidy program rate is $150.
The U.S. Department of Health and Human Services recommends that states set their rates to cover the market price charged by 75 percent of child care providers. The federal government also requires the survey to be conducted every two years.
It costs the YMCA in Chittenden County more than $400 a week to take care of an infant, according to Marsha Faryniarz, vice president at the YMCA. The organization charges more than $300 but gets reimbursed less than $200, including a boost because it is a five-star program. "It doesn't come close to covering the cost of providing the care," she said.
Families can choose any provider that accepts payments from the state.
Some providers don't charge families for any difference between the state subsidy and their rates.
Michelle Prouty runs three child care programs in Bennington with four stars under the rating system. She said if a family is on 100 percent subsidy it is hard to ask them to pay another $30 a week, so she takes the hit. "At 100 percent they are eligible for 100 percent, and it is hard to charge a copay. The families on that don't have the $28 a week," she said.
Prouty said she has been forced to choose between charging families a copay or taking it out of her budget. She has waited to buy needed equipment, pulled out hammer and paintbrush to take care of maintenance herself, and pulled out her own pocketbook to avoid charging low-income families the true cost of child care, she said.
"It is important to all providers to give the young children everything they need. We are teachers," she said.
Vermont families with two children — a baby and a preschooler — will spend between a quarter and half of median income on child care, according to the state's Blue Ribbon Commission on Financing High Quality, Affordable Child Care.
The Burlington YMCA serves hundreds of infants and toddlers in Chittenden County at several locations and annually raises a quarter of a million dollars for scholarships to help make up some of the difference between what the state pays and what the organization charges.
"The current funding mechanism isn't something we can continue with and successfully grow child care where we want it to be. That is the challenge," said Faryniarz. "How do we help families access and afford high-quality care while allowing the centers providing it to stay in business and cover costs of what it truly costs?"
Chris Nelson, a five-star home-based child care operator in North Troy, said she has been in the business 23 years and has seen the rates change once.
"It changed in 2008 and that was the only time it changed, but the requirements to maintain a star status and the regulatory requirements changed and increased the amount we have to put in," she said. About half her clients use the state subsidies. Nelson said she has to work additional jobs to pay her mortgage and household expenses because any money the child care makes goes right back into it.
Prouty said she hasn't been able to give her staff a raise since 2006, but she pays workers $16 to $18 an hour if they have a college degree. "They can go to Walmart and make that as a manager. McDonald's pays $13 an hour, so it is a lot to ask for these smaller programs," she said.
The blue ribbon commission in 2016 recommended increasing funding for the Child Care Financial Assistance Program by more than $43 million. That would pay providers what they need to charge for child care. It would also expand eligibility to extend some subsidy to those making 350 percent of the 2017 federal poverty level — around $77,000 for a family of four — and pay full freight for families of four making $49,000 or less.
"There are a lot of good providers closing — they can't do it," said Prouty, who said in Bennington 60 kids need slots. "They can't do it financially, and they can't keep up with the state regulations requiring them to take more money out of their pockets. I think there will be a shortage."
There is already a shortage in Orleans, according to Nelson. Rural areas of the state have more home-based child care than centers, and those are the ones that are closing their doors in the face of rising costs and more regulations.
"Child care needs to be accessible in every corner of our state, for every family. In Orleans County we only have one child care center right now, and that is on a resort. If they are focused on centers, you just lost Orleans County," Nelson said.
The $43 million represents what the state would need to inject into the system immediately in order to have an impact for young children and families, according to Freedner-Maguire. It would take an additional $200 million a year to get to a place where high-quality child care is available to everyone, she said.
"The reality is child care providers are not passing onto parents what the true cost of providing care is. They are charging less money than what they are putting out in human resources, program materials, space, and the reason is they know families can't pay what it would actually cost to support quality care," she said.