State legislative sessions are wrapping up around the country and many legislatures made significant investments in children and youth services this year. Thanks to unexpectedly large budget surpluses in many states over the past several years, state legislatures had a unique opportunity to invest in child care, preschool, home visiting, after-school, and summer learning programs and services that have been chronically underfunded. Yet, even as many states used these surpluses to make down payments on programs to support children and families, legislatures should explore ways to raise revenue to expand their original investments and to make them sustainable for years to come.

Minnesota and Vermont led the country this year in the size and scope of the investments that states made for children. Minnesota passed several historic pieces of legislation that total hundreds of millions of dollars in investments in a wide range of programs that support infants, toddlers, and young children. The state legislature passed $750 million in new revenue for child care and early learning programs that will add thousands of additional child care and pre-K seats, increase reimbursement rates for early learning providers, reduce copayments for families, and increase wages for child care workers. The state also made significant progress in improving health equity throughout the state. The legislature expanded Medicaid coverage for children up to 6 years old, increased doula Medicaid reimbursements rates from some of the lowest rates in the country to the highest, and made important investments in home visiting programs. As advocates discuss their next steps, they should explore options to raise revenue to ensure the state can sustain its investments for years to come.

In Vermont, the legislature passed critical legislation that will make child care significantly more affordable for families. While Gov. Phil Scott vetoed the legislation, leaders in the legislature overrode the governor’s veto. The $125 million annual investment will expand subsidies for families that earn 175% of the federal poverty level or less. That means families of four earning $52,000 a year or less will pay nothing out of pocket for child care. Furthermore, the legislation will expand subsidies for families earning up to 575% of the federal poverty level, giving Vermont the most inclusive child care subsidy eligibility in the country. This means that a family of four making $172,000 or less annually will qualify for child care subsidies. The legislation also raises reimbursement rates for child care providers by 35%. The state will partially pay for the child care investments with a modest .44% payroll tax. Employers will pay for 75% of the tax and employees will cover the remaining 25%. The new payroll tax will raise approximately $80 million a year. The state will cover the remaining costs of the new child care initiatives by drawing on $50 million from the state’s general fund.

Several other states made important investments in their child care and early learning systems. In North Dakota, the legislature passed a $65 million investment to expand access to child care for low-income families. The new law will expand assistance for families earning less than 75% of the state’s median income (or about $80,000 a year for a family of four). It also will fund child care slots for an estimated 1,800 children, provide a match of $5 million to employers who help with their employees’ child care costs, and provide $15 million to incentivize child care providers to enroll more infants and toddlers (who tend to be more costly to care for than 4- and 5-year-olds). The state will also cover all child care costs for families making less than 30% of the state median income (or about $32,000 a year for a family of four).

In Washington, the state supreme court announced a historic decision to uphold a 2021 law that will levy a 7% capital gains tax on the sale of financial assets (like stocks or bonds) when the profit from the sale exceeds $250,000. The revenue from the tax will total about $500 million a year and will fund child care, K-12 education, and higher education. In addition to providing critical support to children and families, the victory is a major step toward creating a fairer tax system in the state of Washington, which is ranked as having the most unequal tax system in the country. Currently, in Washington, the burden of state and local taxes falls more heavily on low-income families relative to high-income families than any other state tax system in the country.

In Illinois, the legislature passed a budget that includes nearly $300 million in investments for child care, preschool, home visiting, and early intervention programs. Meanwhile, the Alabama legislature approved a $42 million increase in the state’s budget to give an additional 1,800 4-year-olds high-quality pre-K slots and to make important investments in expanding high-quality child care options for Alabamian families.

In Louisiana, the legislature passed a budget with an increase of $44 million for its Child Care Assistance Program, the single largest investment in the program in over a decade. The Governor further expanded this investment to more than $51 million using his line-item veto. The funding will help save the child care seats of more than 3,520 children. Unfortunately, however, at the last minute legislative leaders removed $13 million for the Louisiana Early Childhood Education Fund, which incentivizes localities to invest in children by matching investments that cities and parishes make in programs for children from birth to age 3. The fund will have enough money to match localities’ investments through 2024, although it will be critical for the legislature to replenish the fund so the state can make good on its promises to localities for years to come. And finally, in New Mexico, the legislature appropriated a significant investment of $20 million for after-school, summer learning, and tutoring programs, which will give 20,000 children access to out-of-school programming.

Josh Weinstock is a senior policy associate at Children’s Funding Project.