Page 15

www.prenatal5fiscal.org 13 acDviDes, the fiscal impact of these could be esDmated using the cost model. Many states are currently updaDng their Quality RaDng and Improvement Systems. With a cost model tool in place, they could esDmate the cost per child impact of changes to the quality standards. These cost model outputs would then be available to inform the overall cost increase that a state would face based on its QRIS revisions. This informaDon is useful in planning for the rollout of changes in quality standards and understanding the addiDonal resourcing that may be necessary to maintain the child care system.

Family Contribu=ons Under CCDF rules, states are required to establish a sliding-fee scale to determine the contribuDons made by eligible families towards the cost of care. These contribuDons are intended to be set at a level that does not create a barrier for families to receive support under this program, with federal guidelines recommending an upper benchmark of seven percent of a family’s income.xxxvii States are able to waive co-payment requirements under certain circumstances, including for those at or below the poverty level. Across the country, states have taken different approaches to determining co-payment rates which has led to significant variaDons in how much subsidy-eligible families are expected to contribute to cover the cost of child care.xxxviii Although around half of states set family co-payments at or below the seven percent benchmark, significant variaDon exists across the country, ranging from 0 percent in New Jersey and New Mexico to 27 percent in Ohio.xxxix

In Vermont, co-payments under CCFAP are waived for families below 150 percent of federal poverty, with those above this income level making a contribuDon based on family income and family size. This family share ranges from $25 per week for families between 150 and 175 percent of federal poverty, up to $200 per week for families at 350 percent of the federal poverty level.xl The family share covers all children in the family, rather than being calculated on a per-child basis. This approach provides certainty for families, with their contribuDon not linked to the number of children enrolled or the private pay rates charged by providers or the CCFAP reimbursement rate.

At the federal level, President Biden’s Build Back BeFer proposal and the Child Care for Working Families Act both called for family co-payments capped at seven percent of family income, with a graduated decrease below that.xli These proposals use state median income (SMI) as the family income calculaDon, rather than the federal poverty level (FPL) to ensure affordability benchmarks reflect the significant variaDon in median incomes between states.xlii CCDF sets maximum income eligibility at 85 percent of SMI, which is equivalent to annual income of $94,062 for a family of four in Vermont, which aligns with around 314 percent of FPLxliii

Under the approach proposed by Build Back BeFer and the Child Care for Working Families Act, families earning under 75 percent of SMI would pay no co-pay, and those earning between 150 and 250 percent of SMI would pay 7 percent of their income as their co-payments with graduated steps in between. This approach focuses on families contribuDng what they can afford, with affordability aligned with federal recommendaDons for what porDon of their income families should expend on child care. With private tuiDon rates o1en requiring families to pay 20 percent or more of their income on child care, a 7 percent cap represents a significant decrease in out-of-pocket costs for many families.xliv To maintain affordability, this cap does not change with family size, so families never pay more than 7 percent of their income regardless of the number of children they have. In this way, the approach can be challenging for states to make budget forecasts. Because the family contribuDon will vary depending on the family size of the eligible child, the resulDng state payment will also vary, requiring states to project not only the income level of eligible families but also the family size.