Lawmakers struck a last-minute deal on Thursday over how to fund a $130 million infusion into the state’s ailing childcare system.

House and Senate leaders agree that massive investments are needed to strengthen childcare, but for weeks they'd been at odds over how to pay for it.

House leaders preferred a combination of higher corporate and personal income taxes, while senators viewed an increase in payroll taxes as a fairer solution. House leaders had hoped to hold off on a payroll tax increase until next year, when they might have sought to use it to fund a universal paid family and medical leave program. In the end, senators prevailed.



“It is with a great sigh of relief that we have reached this point,” Sen. Jane Kitchel (D-Caledonia) said.

Senators praised negotiators for having delivered a deal on one of the most consequential pieces of legislation this session.

"This bill was extremely important to so many people in our state,” Sen. Ruth Hardy (D-Addison) said. “This is a huge, historic step forward in the way that we fund and support childcare and early childhood education in our state.”Senate President Pro Tempore Phil Baruth (D/P-Chittenden-Central) acknowledged earlier this week that the two sides had reached an impasse, one that left the budget talks in limbo and the end of the session in doubt.

“It is never an easy thing to have two highly intelligent teams work toward the same goal, stuck on one piece, and that’s where we were for a while,” Baruth said from the Senate floor.
Sen. Ann Cummings (D-Washington), chair of the Senate Finance Committee, called the compromise “hard fought” and said the two sides had been negotiating until 8 p.m. the night before.

Cummings said she considered the income tax to be an overly broad means to fund a narrow benefit for businesses and workers.

“We held tight to our position that this was the appropriate tax,” Cummings said.The payroll tax would increase 0.44 percent under the bill, with employers paying 75 percent and workers 25 percent of the increase. That would raise more than $80 million annually, while the state General Fund would contribute another $50 million.

That would allow the state to increase direct payments to childcare providers to help them increase workers’ salaries and expand and improve their programs. Childcare workers make an average of $14 per hour with no benefits, said Aly Richards, CEO of Let’s Grow Kids, which has been lobbying for better childcare for a decade.
In addition, the number of families that qualify for subsidies would be expanded under the bill, to those making up to 575 percent of the federal poverty line. That means a family of four making up to $172,500 annually would still qualify for childcare subsidies. Richards said that hundreds of childcare providers in the state would have closed had lawmakers not acted.

“This is huge,” Richards said. “Literally, Vermonters could not afford for us to leave the session without a bill.”

The House is expected to take up the measure on Friday.