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www.prenatal5fiscal.org 14 An alternate approach is to set a specific dollar amount for the co-payment. BriDsh Columbia ran a successful campaign to increase public funding for child care with a promise that families would pay not more than $10 per day for child care.xlv This approach offered appeal for its simplicity and was a powerful communicaDons tool. For budgeDng purposes, this approach makes it simple to determine what the family contribuDon will be and therefore how much money the state will need to contribute to support access to child care. However, the co-payment does not vary based on family income, so all eligible families pay the same $10 a day, regardless of their income.

Vermont’s current approach, using the $200 maximum weekly co-payment at the highest income eligibility level, represents between 7.5 percent and 12 percent of family income, depending on family size. In this way, the co-payment is only slightly higher than the federally recommended 7 percent of income. Using a specific dollar amount rather than a percentage of income makes the family share easy to calculate and understand. However, family size has an impact on the equivalent percentage of income the family share represents, with larger families paying a smaller share of their income on child care when compared with smaller families, as shown in Table 2 below. Table 2: Family Share as Percentage of Income, at 350 percent of FPL Source: Vermont Department for Children and Families, Child Development Division, Child Care Financial Assistance Income Guidelines. Available at: hEps://outside.vermont.gov/dept/DCF/Shared%20Documents/Benefits /CCFAP-Income-Guidelines.pdf

To ensure the amount that families contribute to the cost of care is updated over Dme Vermont could calculate the family share as a percentage of income rather than a set dollar amount. In this way, as incomes change, so too would the amount of the family contribuDon. For example, the state could cap family share at 10 percent of income, as recommended by the legislature through Act 45, with the associated dollar amount changing as income increases (or decreases). Changes could be implemented at the same Dme subsidy rates change, either annually or every three years aligned with the CCDF plan cycle. Graduated percentages could be assigned on a sliding scale for those below the income eligibility cap so that families on lower incomes would contribute a lower percentage of their income, as modeled in the Vermont Financing Study, and proposed under the federal Child Care for Working Families Act.xlvi

It is important to consider the implementaDon burden and complexity of any approach to family payment calculaDon, to ensure that addiDonal barriers to parDcipaDon in the subsidy system are not unintenDonally created for families or providers. Families need to readily understand what their co- payment will be and to ensure that small changes in income do not negaDvely impact their ability to afford child care, and the system needs an efficient way to track and monitor family income to ensure the correct co-payment amount is set. Examples of Cost-based Approach to Rate SeAng As of December 2023, three CCDF lead agencies use an alternaDve methodology, the cost-based approach, for rate senng, as opposed to a market rate survey. These are described in detail below. Family Size Gross Monthly Income (350% FPL) Weekly Family Share Percentage of income Family of 3 $7,251 $200 11.95% Family of 4 $8,750 $200 9.90% Family of 5 $10,249 $200 8.46% Family of 6 $11,748 $200 7.38%