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LEGISLATIVE COMMITTEE BLOG
It’s the time of year when the legislature plays chess. Sometimes it even plays speed chess, with programs, initiatives, and tax code changes flying in and out of bills as they move back and forth between chambers. Each chamber attempts to position its priorities to its best advantage, sometimes by holding the other chamber’s priorities as hostage.
A House committee may remove a section of a bill that its Senate counterpart spent months discussing. And vice versa. A committee may also attach one of these pieces to a different bill, using it as a “vehicle” to shore up its chances of survival. In non-COVID times, legislators play a version of three-dimensional chess, with players sitting on different floors in the Statehouse working their own individual chess boards.
When a bill goes to conference committee, the opponents finally sit across from each other and the gamesmanship gives way to final decisions.
Bill provisions that are of existential importance to an association or company can be deleted at the blink of an eye. What may seem like a callous disregard for the work that went into those bills – the days of testimony and hours of committee deliberation, the effect it has on individual lives and businesses – it is not personal. It’s likely just positioning in the game of legislative chess.
Energy & Technology
Unemployment insurance – The House Commerce and Economic Development Committee passed an unemployment insurance bill, S.10, on a vote of 8-2-1. The committee removed 2020 from the UI Trust Fund calculation and removed the Senate's proposed $50 dependency benefit. There is no rate freeze, so employers will pay UI taxes using Schedule 3 next year and Schedule 4 for two years.
Committee Chair Michael Marcotte, R-Coventry, summarized his committee's changes by saying that eliminating 2020 is not a benefit to employers. It is an adjustment to the UI Trust Fund formula due to the anomaly created by the pandemic. He added that the trust fund is in a $300 million hole, and this has to be repaid by employers. To dig a deeper hole by adding a dependency benefit is unwise at this time. He also felt that childcare issues are best considered by the House Human Services Committee.
Some still believe that employers are getting a better "deal." Employers who struggled through this pandemic are still responsible for replenishing this $300 million through no fault of theirs. Employers are not benefiting from this change. To say otherwise is disingenuous.
2021 PPP Taxability – Senate Finance has added language to H.436 in Section 25 that repeals taxes on 2021 forgiven PPP loans.
Guidelines for bridge grants for "gap" businesses – Among eligibility requirements for bridge grants for “gap businesses, a company will have had to show a tax loss in 2020. That loss will be the ceiling for the grant it may receive. Further guidelines can be found here.
Economic recovery grants – The Senate is poised to pass limiting language for further recovery grants for businesses in H.159. As with bridge grants for "gap" businesses, to be eligible a business will need to demonstrate a 2020 tax loss. The Senate Economic Development Committee considered the grant formula this week. Sen. Clarkson, D-Windsor, and Sen. Ram, D-Chittenden, wanted more targeted and increased funding for lodging, wedding and events businesses since they were the hardest hit. Sen. Sirotkin, D-Chittenden, said this could be considered in the conference committee.
There is more than $500 million in unmet need since the government's enforced curtailment of business activities, but the Senate has only allocated $20 million for recovery grants. The health of Vermont's hospitality sector now lies with decisions that the House will make.
Economic development – The Senate Economic Development, Housing and General Affairs Committee has given initial approval to H.159, an omnibus economic development bill. The bill has become this session’s Christmas tree for economic development provisions. Two significant additions were added this week: a Capital Investment Grants program and economic recovery grants for businesses. Capital Investment Grants are for projects intended to be “transformational” to a region. The $11 million program would be capped at $500,000 per project, prompting concerns from committee members that the awards would not be large enough to have the kind of impacts that are envisioned. Twenty-million dollars would be earmarked for economic recovery grants distributed by the Agency of Commerce and Community Development. As ACCD develops a model for grant eligibility, business groups have expressed concern that the tax-return-based formula will exclude many businesses still suffering due to COVID-19.
Municipal Bylaws Modernization – S.101 began as a bill to encourage housing development by incentivizing municipalities to update planning bylaws, extending a downtown and village center tax credit program to neighborhood development areas, and eliminating a requirement of duplicative and costly state wastewater connection permits. This week, citing the need for more testimony, the section on wastewater permits was removed by the House Natural Resources, Fish, and Wildlife Committee, and the House Ways and Means Committee abruptly removed language expanding the tax credit program. Language that currently exists in H.437 that is being considered by the Senate Committee on Finance – a new property transfer tax surcharge on home sales greater than $1 million and a manufactured home credit – was added to S.101 as an alternate path for the language in case the Senate committee does not approve H.437.
Contractor registry – A bill to create a contractor registry, H.157, has been taken up by the Senate Economic Development, Housing and General Affairs Committee. Passed by the House after contentious debate, the bill calls for the modest step of registration for the state’s currently-unregulated builder and contracting profession. Any contractor who performs a residential building or renovation project that will exceed $3,500 in time and materials must register with the state every two years. A written contract and maintenance of liability insurance are also required. Representatives of the Vermont Attorney General’s office, the Office of Professional Regulation and the Vermont Licensed Plumbers Association all testified in support of the legislation. The committee will continue taking testimony next week.
Tax increment financing districts – The House Ways and Means Committee continued consideration this week of S.33, a bill relating to tax increment financing districts. Advocates spoke in favor of giving TIF’s a three-year extension due to the effects of the pandemic. Development has been slowed by increased material expenses, a shortage of contractors, and potential changes in building use and design due to societal changes caused by the pandemic. The federal government recognized the need to allow time for project completion as reflected by the lengthy timeline for ARPA spending.
The committee has not yet decided whether TIF Districts will be able to use the proceeds of debt to pay for debt service interest payments for a period of up to five years.
A pilot for project-based TIFs that would have benefited smaller municipalities was previously stripped out by the House Commerce Committee.
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Revenue bill – The Senate Finance Committee continued consideration this week of H.437, the revenue bill, but pulled up short of voting the bill out on Friday. As passed by the House, the bill includes three changes: a 1.75% property transfer tax surcharge on properties worth more than $1 million, clarifications for the sales tax exemption on manufacturing machinery, and an affordable housing credit for manufactured homes. Fiscal Analyst Graham Campbell told the committee the bill is expected to increase overall state revenues by $950,000 in FY 2022, $600,000 in FY 2023 and $250,000 in FY 2024. This impact would be split between the General Fund and Education Fund. The committee paused on their consideration of the bill when they discovered that the House Ways and Means Committee had also added the property transfer tax and the manufactured home credit to S.101.
Miscellaneous tax bill – The Senate Finance Committee is ready to vote out H.436, the Miscellaneous Tax bill, tomorrow afternoon. With a straw poll, the committee agreed unanimously to repeal language that makes Paycheck Protection Loans taxable. With the change, Vermont would follow federal tax law. The committee also agreed to link up State law to federal tax changes that expand the Earned Income Tax Credit and Child and Dependent Care Credit. The Joint Fiscal Office suggested that the lost tax revenue from the federal linkups could be paid for by ARPA funds due to recent Treasury guidance.
Post-pandemic Statehouse procedures – The House Rules Committee reviewed a draft resolution to extend the state of emergency and approve remote voting through May 22, 2021 and any subsequent 2021 veto session. The resolution would authorize the committee to adopt procedures for the House to meet, debate, and vote remotely or in a hybrid manner as pandemic-related circumstances require. Members generally support the resolution’s intent and will continue to prioritize public health and safety as their top concerns as they consider next steps.
Pension reform – The Senate passed H.449, an act relating to the membership and duties of the Vermont Pension Investment Commission and the creation of the Pension Benefits, Design, and Funding Task Force, in concurrence with the latest House proposal of amendment on Thursday. The bill proposes governance changes and best practices to address the state’s $5.6 billion unfunded public pension liabilities that resulted from underfunding, inaccurate return projections, low fund performance, demographic shifts, and healthcare and other retirement costs.
Broadband deployment – The Senate Finance Committee unanimously supported a strike-all amendment to H.360, a bill to expand broadband deployment, on Wednesday evening. The committee amendment proposes to reorganize the House bill’s Vermont Community Broadband Authority as a three-member Board and expand grant program eligibility to include small communications carriers in addition to communications union districts. The Senate Appropriations Committee moved to strike the bill’s appropriations section—after confirming that the $100 million ARPA appropriation is included in Sec. G of H.439, the “Big Bill”—and voted unanimously in favor of the bill as amended.
Water infrastructure – Department of Environmental Conservation Commissioner Peter Walke presented an overview of the state’s $1.9 billion “universe of need for water infrastructure” to the Senate Natural Resources Committee this week. Walke distinguished two of the largest areas of need – wastewater repairs and upgrades ($490 million) and drinking water repairs and upgrades ($374 million) – as already having some existing funding sources and aligning with the anticipated guidelines for the pending American Jobs Act. Other identified areas, such as stormwater-impaired waterways, mobile home park water and wastewater repairs and work on state-owned and privately-owned dams, are, as of yet, unfunded and were included in the governor’s proposal for federal ARPA spending.
The estimated cost of complying with the state’s 3-acre stormwater regulations is $260 million based on 5,320 total acres and an average retrofit cost of $50,000 per acre. This includes a mix of public and private lands. The funds allocated in the governor’s ARPA proposal would provide engineering support for 3-acre sites to help landowners anticipate construction costs and design projects to meet DEC requirements.
Public tuition for religious schools – The thorny and complex issue of public tuition for religious schools returned to the Senate Education Committee this week. Legislative counsel Jim DesMarais walked legislators through legal principles and analysis of tuition for private religious schools, laying out the sometimes-conflicting case law and constitutional issues. A recent article drew lawmakers’ attention to the fact that Agency of Education guidance to school districts had been quietly rescinded, leaving a gray area. The guidance explained how districts may provide tuition for religious schools by requiring schools to submit certification that public funds were not used for religious instruction or worship. The committee was told that AOE had withdrawn the guidance at the request of the State Board of Education to help settle active litigation.
The Senate has asked for input from the attorney general on legal options, which may provide some clarity about next steps for legislation. On the other hand, committee chair Brian Campion D-Bennington, said the subject matter is so complex that the Judiciary Committee ought to look at it, and it might be better handled in a summer study committee.
Radon testing in schools – The Senate has approved H.426, a bill to address public school facilities and construction issues across the state. The bill appropriates $4 million to conduct an assessment of school facility needs and costs. An independent third-party contractor will help schools coordinate pandemic-related health and safety facilities improvements. One-million dollars is available to supplement funding needs for schools to undertake improvements. The Senate added a new requirement for schools to conduct radon testing and report results to employees and students. Senators said that timing for the unfunded mandate was right because schools are receiving federal funding through ESSER.
The bill contains a new grant program for renewable and efficient heating systems for public and approved independent schools, with the funding source to be decided during the 2022 session.
A controversial unemployment insurance bill that included expanded worker benefits was sent to the Senate floor several weeks ago. In response to strong opposition from Vermont’s business community, the bill was pulled back into the Senate Committee on Economic Development, Housing and General Affairs for revisions. The Committee’s amended bill passed the Senate on Tuesday by a vote of 18-12.
S.10 freezes employer UI tax rates at Schedule 1 (the lowest UI tax rate for businesses) and removes a proposed 20% increase in weekly UI claimant payments. A new $50 dependent benefit will take effect when the federal COVID UI aid ends and will sunset in 5 years.
The bill includes a confusing plan to "pay back" employers for their one-year rate freeze using UI trust funds. Since employers fully finance this fund, Sen. Randy Brock, R-Franklin continued to argue that this pay back is not a benefit.
The formula to calculate the necessary UI Trust Fund balance uses a 10-year average of UI rates. The business community sought to remove 2020 from the formula, arguing it is an anomaly and skews the calculations to require excessive employer contributions. Instead, S.10 includes a study to determine the appropriate balance.
Sen. Michael Sirotkin, D-Chittenden, intends to take up the issue next year. He said that any recommended UI tax decrease is an “employer benefit,” and therefore UI recipients will need to receive additional benefits as a quid pro quo.
S.10 now moves to the House Commerce and Economic Development Committee for further work.
Speaker of the House Jill Krowinski, D-Burlington announced this morning that she was abandoning the initial plan for pension reform that had been put forth by the House Committee on Government Operations. In response to overwhelming reaction from anxious teachers, state employees, and unions who have urged legislators to slow the process down, Krowinski acknowledged a need to engage with interested constituents before making any final pension plan changes.
The Speaker charged the Committee with establishing a task force to address revenue increases, plan design, benefit changes and employee contributions. The Committee’s proposed $150 million infusion into the system will be held in reserve until legislators are prepared to address healthcare benefits.
Committee Chair Sarah Copeland-Hanzas, D-Bradford, said that the legislature cannot “in good conscience commit the general fund” to future fund payments until the state puts the pension liabilities on a more sustainable path.
The Committee will continue its pension governance work using recommendations from State Treasurer Beth Pearce and Vermont Pension Investment Committee Chair Tom Golonka. Under those recommendations VPIC would assume sole responsibility for setting actuarial assumptions, including the investment rate of return, inflation rate, and the smoothing method used for calculating actuarial valuation of assets or returns. The recommendations focus on four fundamental principles: (1) VPIC continuity; (2) equal representation; (3) transparency; and (4) independence from the Treasurer’s office.
The so-called “expedited budget bill” took a route this week like a vehicle on a Vermont back road in mud season as it got deeply mired in conflict between the House, the Senate, and the Scott administration.
H.315, a bill intended to fast-track funds for COVID-related needs, passed the House with $62 million in appropriations, but left the Senate with a $128 million price tag and two additional funding sources – the federal American Rescue Plan Act (ARPA) and the Elementary and Secondary Emergency Education Relief (ESSER). In advance of receipt of the federal funds, the bill authorizes the Commissioner of Finance and Management to make anticipated receipt expenditures.
When the House Appropriations Committee took up the bill at the beginning of the week to begin working out the Senate and House differences, Commissioner of Finance and Management Adam Greshin told the Committee that the use of federal funds was very premature and risky without detailed guidance from the Department of Treasury.
Greshin added that the Senate’s use of ARPA funds was “a poke in the eye to the administration and to [him]” because the legislature has directly interfered with the administration’s authority to allocate and expend funds through the statutory excess receipts power. Nonetheless, the Committee agreed with the Senate’s use of ARPA funding where possible, stressing the need to preserve more flexible general fund dollars.
As the week went on, House policy committees wrestled with their Senate counterparts over differences in the bill, mostly offline and out of public view—in apparent violation of the state’s Open Meetings Law. By Friday afternoon, a draft strike-all amendment was reviewed and approved by the House Appropriations Committee on a vote of 10-1-0, after the Senate Finance and House Ways and Means committees came to an agreement on tax link-up language that exempts Paycheck Protection Program loans from tax deduction eligibility.
The behind-closed-doors discussions between the House and the Senate ensure that the House proposed strike-all amendment will be accepted by the Senate and a committee of conference will be unnecessary.
The slowdown of the “expedited budget bill,” H.315, is impacting one group in particular. The House approved the administration's request for $10 million in grants for businesses that missed out on previous federal and state recovery grants due to eligibility rules. Any funds remaining would be available for a second category of businesses that received de minimus amounts of federal aid.
The Senate removed assistance for the second group, which has left many Vermont small business owners without hope of a lifeline. Many are going deeper into debt as they await an announcement of Governor Scott's reopening plans.
The House and Senate are working out their differences based on a House amendment made behind the scenes that made it impossible for those affected to follow their discussions. COVID stress affects more than people's physical health, and it will take some people years to climb out of the economic hole the pandemic shutdown has created.
The Senate Economic Development, Housing and General Affairs Committee had its first look this week at H.313, a bill proposing miscellaneous changes to alcoholic beverage laws. Passed out of the House last week, the bill allows for the continued temporary sale of alcoholic beverages for delivery and curbside pickup.
Introducing the bill to committee, Rep. Matt Birong, D-Vergennes, addressed the issue of packaging for mixed drinks that do not come in a bottle with a cap or cork. When accompanied by a food order, restaurants and bars will be able to sell alcoholic beverages for delivery and curbside pickup that have a securely affixed tamper-evident seal, a label that states that the beverage contains alcohol, and a listing of the ingredients and serving size. The temporary measure would last for two years.
The bill also creates a new “stand-alone” third class license for establishments that only sell spirits and removes a prohibition on waitstaff sampling of alcoholic products while on duty for purposes of product familiarity.
Finally, the bill clarifies requirements for festival permits which are needed for any event that is open to the public for the purpose of serving alcoholic beverages. The bill includes different limits for malt and vinous beverages, fortified wines and spirits. A festival goer could be served up to five 12-ounce beers at an event and not more than a combined total of six U.S. standard drinks containing 3.6 fluid ounces or 84 grams of pure ethyl alcohol.
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The House Committee on Human Services is working through H.171, a bill that would create a comprehensive child care system governed and subsidized by the state. The system would take several years to establish. The work began in earnest last year.
There are two critical studies in the bill. The first is the creation of an Early Care and Education Systems and Administration Advisory Committee which would ultimately advise relevant state agencies regarding the delivery of appropriate services. This 20-member committee would include representatives of three business-related representatives: the Vermont Business Roundtable, the National Federation of Independent Businesses, and Vermont Businesses for Social Responsibility.
An Early Childhood Financing Study calls for the State Treasurer, Auditor, Joint Fiscal Office, Commissioner of Finance, and the Commissioner of Taxes to deliver a comprehensive report determining a reliable funding source to pay for the program.
The House Ways and Means Committee took up this portion of the bill this week and heard from the Auditor, who said he wasn't an appropriate person to participate. The Treasurer agreed to participate but couldn't lead the effort. Joint Fiscal Office said it would provide a critique but would not make decisions or recommendations, and the Commissioner of Finance agreed to participate. The committee discussed the scope of work for the study and expressed concerns about the group's ability to complete its charge in the given timeframe.
There is a March 19 deadline to move the bill to the Senate, and the legislature is on break next week. Clearly, there is a lot to do in the next two weeks.
Representatives from the Vermont Lodging Association, the Association of Wedding Professionals and events businesses met with the House Tourism Caucus last week. They expressed their frustration with the lack of reopening guidance from the Governor's office. Without this information, the hard-hit hospitality sector will lose its spring and summer business. They need to know by March 1 so they can begin scheduling events. The group has repeatedly told the legislature and governor’s office that they need lead time to schedule, prepare and hire staff. In the meantime, their clients are canceling plans and going to other states.
Legislators were very receptive and agreed to send a letter of support to the Governor. Hours later, the Secretary of the Agency of Commerce and Community Development sent a memo to hospitality companies stating that businesses can book summer events with a limited capacity of 75 people indoors and 100 people outdoors. While not a help for larger events, it is a start. Secretary Kurrle said the new rules could change if there is a spike in cases or if unforeseen problems arise with vaccinations.
In the meantime, Congress is finalizing its next and likely last relief bill that includes money the state can use for additional business grants, which continue to be desperately needed. Since last March, many hospitality businesses have been shut down, and their previous grants only helped to pay fixed costs through September. Businesses have struggled with mounting debt and cancelled reservations. COVID has impacted the mental and physical health of more people than those who contracted the virus.
In an unusual move, the House passed an expedited budget, aka CRF bill, aka COVID relief budget, aka pre-budget bill. For simplicity's sake, we will call it H.315, and highlights are here.
As its many names imply, the bill has drawn confusion in the legislature. It has been under consideration in multiple committees in the House and Senate, while only the House Appropriations Committee had possession of the bill. This is a unique and somewhat disorderly process, but COVID has created a unique and disorderly year. H.315 appropriates $48.9 million in one-time general funds and $13 million in Coronavirus Relief Funds, and reallocates $17.2 million in earlier CRF money.
Ten million dollars is provided in economic recovery grants for businesses that didn't qualify for state or federal pandemic aid among the earlier allocations. This line-item is being met with skepticism in the Senate, so work remains to ensure that these businesses receive the lifeline they need to survive the economic shutdown.
The next round of federal aid should arrive in Vermont in the next few weeks. The American Rescue Plan Act of 2021 is expected to deliver about $1 billion to Vermont and will be one more hurdle for the legislature that is still hoping to adjourn in May. Never has the state been challenged with spending so much money in so little time, all of it via Zoom. The post-COVID research on how the influx of spending affected the state will take years to compile.
Congressman Peter Welch addressed members of the Vermont House and Senate appropriations and revenue committees on Thursday to convey details of the new federal COVID relief bill. The U.S. House is expected to vote on the $1.9 trillion package on Friday. Welch said uses of the funds will be much more flexible than the CARES Act, although spending must still be tied to COVID. It will not require a date certain by which funds have to be spent–a big difference from prior COVID funding.
Many economists have said that when it comes to recovery spending it is best to err on the side of more, and the bill is intended to put states on the road to economic self-recovery once the country reaches herd immunity and states are ready to open up again.
Vermont is expected to receive $960 million in state and local aid. Provisions in the bill include:
Sen. Randy Brock, R-Franklin, who has long been a champion of broadband expansion, asked Welch if the new bill will allow for a more long-term spending approach that could foster financing options for building out broadband throughout the state. Brock expressed frustration that lawmakers were being given significant funds but their hands were tied by restrictions when they try to make meaningful long-term investments. Welch acknowledged the challenge but said the bill is COVID-focused. The Congressman said there would likely be an infrastructure bill coming that will contain funding for broadband buildout.
The Vermont Supreme Court recently upheld the constitutionality of the state’s ban on large capacity magazines, defined as ten rounds of ammunition for long guns and fifteen rounds for hand guns as part of Act 94 of 2018. That law also required background checks for private sales of firearms to close the so-called “gun show loophole.”
The Court found that the magazine ban does not violate Article 16 of the Vermont Constitution, which provides that “the people have a right to bear arms for the defence of themselves and the State.” According to the Court’s decision in Vermont v. Misch, “…the proper standard for Article 16 challenges is a reasonable-regulation test.… [W]e will uphold a statute implicating the right to bear arms provided it is a reasonable exercise of the State’s power to protect the public safety and welfare.”
This is the first time the court has defined the scope of the right to bear arms under Article 16 and set forth the standard to determine whether a law infringes on that right. Legislative counsel walked through the court’s decision with the House Judiciary Committee and its potential precedence for gun legislation.
Legislative counsel further told committee members that the decision is more deferential to state legislatures than the standards federal courts have used in analyzing Second Amendment challenges.
The House Committee on Energy and Technology voted unanimously this week to pass an accelerated community broadband deployment bill. The bill establishes the Vermont Community Broadband Authority to facilitate the formation and expansion of Communication Union Districts throughout the state, appropriates one-time money towards various broadband connectivity programs, and transfers state-owned fiber assets to the CUDs.
A key section of the bill involving lending from the Vermont Economic Development Authority was removed. As written, State Treasurer Beth Pearce and VEDA had trouble supporting the bill’s proposed program increase from $10.8 million to $36 million. VEDA is the lender under the current program, but the organization itself does not take deposits. Before moving forward, VEDA’s own primary lender, a private financial institution, requires further negotiations regarding ownership of the moral bonding and loan loss authority under those provisions.
Committee Chair Tim Briglin, D-Thetford Center, stressed that approval of the bill without language expanding the size and scope of the existing program is temporary. After the town meeting break the committee plans to take further testimony from VEDA and the Treasurer and may offer an amendment to restore increases to the broadband program.
The bill also establishes the VCBA’s board of directors, authorizing two public persons selected by the Vermont Communications Union District Association and one person appointed by the Governor. An eligible public member may not have a financial interest in, or be an employee or governing board member of, an Internet service provider or CUD to serve on the board.
The House Ways and Means Committee this week took up H.261, an act to eliminate the sales and use tax exemption for prewritten computer software accessed remotely, the so-called “cloud tax.” The committee has wrestled with the issue for years, and this week’s discussion highlighted the difficulty of defining the term “prewritten.”
“Vendor-hosted prewritten computer software” means prewritten computer software that is accessed through the Internet or a vendor-hosted server regardless of whether the access is permanent or temporary, and regardless of whether any downloading occurs.
A common example is Quickbooks: The bookkeeping software purchased at a store or downloaded from the Internet onto a computer is now a taxable transaction, but a modern version of Quickbooks hosted by the vendor online and accessed remotely–where there is no download–is exempt from sales tax.
Tax Commissioner Craig Bolio told the committee that the governor does not support repeal of the exemption, citing the difficulty in distinguishing prewritten from custom software. “When does software become custom enough that it would maintain the exemption?” asked Bolio. Abby Shepard from Legislative Counsel responded that custom software is designed and developed by the author to the custom specs of a specific purchaser.
The committee also discussed a way of defining certain custom software as a manufacturer’s exemption and an exemption for business-to-business transactions.
Graham Campbell from the Joint Fiscal Office estimated that removal of the exemption would bring in revenues of $9 million in FY 2022, up from a previous estimate of $5 million in 2019, highlighting the fast growth of software as a service.
The Senate Committee on Natural Resources and Energy released a draft weatherization bill on Thursday, while noting that modifications and additions are needed before it’s finalized. Committee Chair Chris Bray, D-Addison, said he is committed to the bill making the cross-over deadline, so committee members will continue to work on the draft over the Town Meeting break.
As currently drafted, the Vermonters’ Enhanced Energy Savings Act would set a goal of weatherizing 120,000 homes within ten years, establish a thermal energy efficiency charge, and create the Enhanced Energy Savings Study Committee to study the creation of a complete system of delivery for services to reduce the cost of heating homes and businesses while also reducing their greenhouse gas emissions.
The study committee would also be charged with examining how to develop and sustain a skilled and well-paid workforce sufficient to meet the State’s building efficiency and weatherization goals.
Various players in the state workforce development field testified before the committee that substantial effort must be made in recruiting and training in order to meet the upcoming need. Sarah Buxton, State Director of Workforce Development for the Department of Labor, said that career pathway development is key to recruiting and retaining the workforce in the weatherization sector. Buxton also suggested adding apprenticeships and stackable certifications.
The House Committee on Commerce and Economic Development took up an omnibus economic development bill that contains language from numerous other standalone bills on Thursday. The committee reviewed several key provisions including: creation of the Better Places Program, expansion of Downtown Village Tax Credits, creation of project-based tax increment financing districts - aka “mini-TIFs,” and changes to the Relocated Worker Program.
The Agency of Commerce and Community Development also pitched the creation of a Tourism Marketing and Promotion Fund. With the smallest tourism budget in New England, an increased investment will allow the Department of Tourism and Marketing to promote Vermont as a global tourism destination. The source of funds would come from a portion of any excess revenue between forecasted and actual rooms and meals tax receipts, and would be in addition to normal annual appropriations. If receipts failed to meet the forecast in any year, there would be no extra appropriation.
ACCD also proposed an International Business Attraction and Investment Program. The bill would appropriate $300 thousand for an office in Montreal. The agency reported that small and mid-sized businesses in Quebec have a natural inclination to explore Vermont as the site for expansion in the U.S. market. Increased investments in recruiting international businesses can lead to better wages, more attractive job opportunities, and broaden Vermont’s tax base.
The tourism department would also like to expand and continue the Buy Local Stimulus Program, a consumer purchase incentive program from 2020. The 2021 program would include restaurants, retail stores, entertainment businesses and attractions.
The Senate Committee on Economic Development, Housing and General Affairs is considering S.33, a bill that would allow more towns to apply for project-based tax increment financing. TIFs allow municipal governments to fund new private infrastructure projects through the anticipated tax revenue that results from the new projects.
S.33 would create a pilot program limited to six projects with a $1.5 million cap per application. This bill was considered last year with a higher limit but was lowered to get the support of the Senate Finance Committee chair. Witnesses testified this week in favor of increasing the cap to at least $4 million.
Legislators continue to grapple with the so-called “but for” qualifier – the requirement that the town demonstrate that the private investment would not have occurred “but for” the TIF financing. The legislature’s economist Tom Kavet and Auditor of Accounts Doug Hoffer expressed skepticism about the program, arguing that all redevelopment would have happened anyway. A fiscal analyst from the Joint Fiscal Office said that there is no way to make that determination.
The committee heard from the planning commissioner for the Town of Westford who said the TIF program could help finance a much-needed wastewater upgrade. Brian Carpenter, a Middlebury selectboard member, shared a redevelopment plan for the town center that would provide parking, housing, office space and a reconfigured traffic pattern. Carpenter said S.33 could help finance the redevelopment plan.
The committee will take more testimony, and the bill is expected to move to the Senate Finance Committee.
While the federal and state governments have provided substantial support for many businesses that have suffered financial losses due to the pandemic, some businesses have received no assistance due to eligibility requirements. These outliers include new and very small businesses, as well as some that chose an unfortunate time for expansion. The Agency of Commerce and Community Development has asked the legislature for $10 million to provide a lifeline for these businesses.
Under the proposal, businesses would be required to show that they were ineligible for PPP and EIDL grants and loans, that they did not receive state grants, and that they filed 2020 income taxes.
The House Committee on Commerce and Economic Development is currently considering this proposal as ACCD continues to gather information from individual businesses. Their stories provide reminders of the many challenges that businesses continue to face. There is no doubt that more financial aid is needed for many Vermont businesses if they are going to survive the pandemic.
The Senate Committee on Economic Development, Housing and General Affairs is closely monitoring a recent breach of data by the Vermont Department of Labor. As many as 44,800 1099G tax forms sent to Vermonters last week included the wrong person’s private information, including names, addresses and Social Security numbers.
In response, Governor Scott appointed a task force led by Deputy Chief of Staff Brittney Wilson, to work with Labor Commissioner Mike Harrington to address the issue. Wilson reported to the committee on Friday that they have identified the error, where it happened and how it occurred, but are “not going to give the specifics of that because (we) don’t want to start casting blame or get into the nitty gritty of how the data was jumbled.” She said steps have already been taken to improve quality control, including electronic verifications done by the Agency of Digital Services and the Tax Department and electronic and physical verification by Department of Labor staff of the data and the lists used to create the 1099G forms.
The labor department will mail out postage-paid, pre-addressed envelopes so that 1099Gs with the wrong information can be returned. The state is also procuring a firm to provide complete identity theft protection for those affected. The administration is estimating that the cost of the data breach remediation could be as much as $7 million but is examining what costs the state’s insurance policy will cover.
The governor also asked Vermont Auditor Doug Hoffer to investigate what went wrong. Hoffer told the committee on Friday that he is likely contracting with an outside firm that the state already works with to perform the review.
The Senate Economic Development Committee reviewed this week the Vermont Department of Labor’s recently released Unemployment Insurance Trust Fund Report. If there is no change to how the tax rate is determined, the historic payout of the trust fund this year and resulting 50 percent fund reduction will triple the tax rate for most employers by increasing the tax rate schedule from schedule 1 to schedule 5.
In order to prevent a rate hike during the pandemic, Governor Scott is proposing a one-year freeze on the rate schedule and base wage. If the proposal is enacted, the state would collect $110 million from employees, as opposed to $146 million under the current statutory framework. The administration argues that it would help the state’s economy if the $36 million foregone fund revenue remains in employers’ hands to enable them to bring employees back to work.
The committee will continue to take testimony on the issue, but Chair Mike Sirotkin, D-Chittenden, indicated that he would like relief not only for employers, but employees as well.
The Senate Education Committee heard from constitutional law scholar Peter Teachout this week that the longstanding practice of denying tuition to private religious schools may no longer stand.
Teachout testified that several recent state and federal rulings and an emergency injunction issued on January 22nd require that the state revisit policies regarding tuition to religious and other independent schools. He recommended that districts take immediate action to bring tuition reimbursement policies into compliance with the U.S. Supreme Court case of Espinoza v. Montana Department of Revenue, without violating the Compelled Support clause in the Vermont Constitution. Districts should announce that they will reimburse tuition upon receipt of a certification from the receiving school that the tuition will not “be used to support religious instruction, worship, other religious activity, or the propagation of religious views.”
The recent rulings suggest that requests for tuition reimbursement from all participating independent schools without regard to religious affiliation or status are valid as long as they can complete the certification. Teachout also said that the state’s dual enrollment program should not be withheld from students attending religious schools, as has been Vermont’s longstanding practice.
Committee members will consider whether to take legislative action or direct the Agency of Education to require districts to act. Legislators noted that there will surely be more court cases challenging any stopgap measures, and legislative counsel agreed.
In testimony to the Senate Committee on Natural Resources committee, Richard Faesy, Principal, Energy Futures Group, Inc. presented an overview of Act 62, which established working groups to make weatherization recommendations to the legislature. The Residential Building Energy Labelling Working Group sought to create an easy to understand way to convey the entire energy picture of a home, and recommended the use of the Vermont Home Energy Profile label for efficiency rating.
Faesy argued that energy labeling transparency benefits both the buyer and seller of a home, and that the real estate market values premium energy performance. Under the working group’s recommendation, energy rating information would be consolidated in the HELIX platform, a third-party database that automatically populates home efficiency information into MLS listings. Faesy said the intention of the label is to incentivize investments in energy efficiency, and doesn't believe that a poor rating would necessarily kill a real estate transaction.
Not everyone who served on the working group agrees. Peter Tucker, Director of Advocacy and Public Affairs, Vermont Association of Realtors, acknowledged the recommendations put forth by the group as a whole, but criticized HELIX’s automated model that uses assumptions to estimate energy ratings. “A poor rating will stigmatize a property and crush its value,” said Tucker. Sen. Chris Bray, D-Addison, questioned whether a bad rating would actually affect the sale price of a home. Tucker replied that last minute investments in a home rarely affect the sale price.
In his budget address, Governor Phil Scott outlined $25 million in one-time weatherization spending: $20 million to accelerate weatherization in low and moderate-income homes, and $5 million for the State Energy Management Program to help municipalities make efficiency upgrades.
As the state grapples with expanding broadband fiber to underserved and unserved areas of Vermont, the House Committee on Energy and Technology continues to hear testimony from existing private service providers and from newly established Communication Union Districts. The legislature authorized the creation of CUDs to help make high-speed broadband available in areas of the state that may not be financially viable for local for-profit service providers, the so-called “last mile” of customers.
Most of Vermont’s smaller telecommunications providers rely on a Broadband Expansion Loan Program through the Vermont Economic Development Authority. Loans of up to $4 million may be made and can cover up to 90 percent of project costs. A bill before the committee incentivizes cooperation between CUDs and existing providers by making the VEDA loan program only available to CUDs. If an existing provider needs access to VEDA capital, it must partner with a CUD.
F.X. Flinn, chair of the Vermont Communications Union Districts Association and ECFiber, testified about the problem facing CUDs: in order to borrow the millions of dollars necessary to complete projects, CUDs must first raise investment capital to show that they are viable. Bond markets often want to see two to three years of financial performance before loaning funds. Flinn said ECFiber struggled to raise $6-8 million in investments before it could get to the bond market. Access to the VEDA program will be necessary for many of the CUDs.
Addressing concerns from incumbent service providers, Rep. Heidi Scheuermann, R-Stowe, confronted a sense of dismissal of the concerns of existing companies. Scheuermann asked, “How can I assure these folks that a CUD isn't going to come in and compete with them using public dollars that they’re not able to get?” Scheuermann also took issue with any requirement that private businesses must disclose confidential financial information when partnering with a CUD.
Weatherization investment in the state
Treasurer Pearce discusses the troublesome state of pensions
Department of Labor data breach will result in an investigation
Biden’s call for a $15 dollar minimum wage stymied by some moderate democrats
Offensive comments made by Vermont “journalist” at Governor Scott’s press conference results in his ouster from the press call-in list
The Governor delivered a $6.8 billion budget proposal this week that keeps the base budget steady and uses $210 million in federal money for one-time investments. After months of well-deserved pessimism about the state’s economic picture, last week’s optimistic revenue forecast allowed the administration to go back to the budget drawing board and propose using federal one-time money for one-time projects and without having to tap that same windfall or state reserves for base spending. Some of the highlights include:
The Governor’s proposed budget also includes an additional $53 million in state IT projects. The list includes:
As legislators contemplate exempting certain new broadband infrastructure from property taxes as a last-mile buildout strategy, they are finding out it’s a complicated balancing act between ratepayers and property taxpayers. Washington Electric Coop requested an exemption on the value of future fiber buildout on their electric poles. WEC officials testified that exempting the new infrastructure could allow them to keep rates neutral, while providing financing, stringing poles and then partnering with Communication Union Districts acting as Internet service providers who would lease and bring fiber to homes.
WEC estimates that 75 percent of its customer base is unserved or underserved, and the project aims to reach all of those homes. House Energy and Technology’s draft bill contains such a provision.
Property tax statutes predate fiber buildout and do not contemplate a “broadband” tax exemption. Piecemeal legislation over the years addresses a patchwork of different regulated and unregulated entities that provide Internet and have different taxation schemes. The tax department suggested that those laws could use a rewrite. Another wrinkle is that property taxes rely on assumed growth, and “freezing” values in time could wreak havoc on the statewide education property tax.
A representative from the Public Utility Commission told the Senate Finance Committee that the WEC situation is likely to become a legal matter before it, and would not comment on specifics. The PUC wants to avoid a “cross-subsidy” in which electric ratepayers pick up the tab for buildout that is happening primarily to bring internet to people’s homes. Pointing to the growing convergence between the need for fiber and the need for effective electric service, she stated, there is an undeniable electric component to the buildout.
The Senate Committee on Economic Development, Housing and General Affairs reviewed legislation this week that addresses business unemployment experience ratings during COVID-19, although only for 2020. If an employer can show that it was unable to rehire staff before January 1, 2021 because it had not resumed full operations, the employer will be eligible for relief of charges for benefits paid in 2020. The employer will have to submit an application along with information to the Department of Labor before March 15, 2021 that includes a certification that the employer satisfies the requirements for each individual laid off during the Governor’s emergency order.
The Department of Labor does not have the capacity to investigate every business to confirm compliance, so it will accept a certificate of attestation that the business has either tried to rehire laid off employees, or it is still in a full or partial shutdown and not able to bring these employees back to work. The DOL is preparing a draft application and is on track to notify businesses in a timely manner.
Businesses may be audited and penalized later should they not be honest in reporting rehiring practices. The committee briefly discussed 2021 unemployment charges, but this clearly needed more attention.
The Senate Committee on Natural Resources voted unanimously to reject Governor Scott’s executive order to restructure the Act 250 Natural Resources Board. Scott had sought to create a new board made up of three full-time professionals who would assume the duties of the original board and rule on all major Act 250 permit applications. The reorganization would have shifted authority from the states nine district commissions to the new board.
State law provides that only one legislative chamber needs to disallow an executive order for it to become null and void. The resolution to disallow the executive order will now go before the full Senate. If the Senate votes to approve it, that action kills the executive order under the statute – it does not need to go to the House for a vote.
The governor’s general counsel believes the state statute is unconstitutional, and the executive order states that both chambers must vote to reject. The action taken today by the Senate committee may have set the stage for a legal challenge.
The COVID-19 pandemic has heightened socioeconomic disparities between connected and unconnected Vermonters. Acknowledging that many rural areas are still struggling without Internet access for remote schooling, work, and telehealth, the House Committee on Energy and Technology has drafted a bill related to accelerating community broadband deployment.
The bill proposes to create the Vermont Community Broadband Authority to coordinate partnerships and innovative financing strategies for Communication Union Districts. Much like the now-defunct Vermont Telecommunications Authority, VCBA is intended to alleviate the Department of Public Service’s perceived conflict as both a CUD resource and a regulatory body for providers in the marketplace. The bill limits financing opportunities to eligible CUDs.
In addition to administering the Connectivity Initiative that the legislature created two years ago, VCBA will administer a $60,000 Community Broadband Innovation Grant Program and a $36 million Broadband Expansion Loan Program to provide new CUDs with startup capital. Because these borrowers are generally high-risk, VCBA will make loans only to CUDs that demonstrate a promise of long-term viability in the business. VCBA will retain 50 percent of grant awards until recipients satisfy all Program requirements.
To finance VCBA efforts, the committee has proposed an increase in operational expenses from $120,000 to $240,000 and up to $27 million in state appropriations. Further, the bill proposes a one-time appropriation of $1.26 million to the Vermont Economic Development Authority for loan loss reserves and provide credit enhancements to help CUDs to secure private financing.
After years of data collection and analysis, the Vermont Tax Structure Commission published a draft final report on January 7, 2021. Chair Deb Brighton, Vice Chair Stephen Trenholm, and Member Brian Kleppner joined the Senate Finance Committee this week to testify about the Commission’s goal of creating a more simple, equitable, and sustainable State tax system.
The testimony focused on three of the eight recommendations included in the report. First, Brighton recommended restructuring the homestead education tax by eliminating the property tax credit and implementing a set education tax based on income. To calculate the new education tax rate, taxpayers would divide the amount of spending per pupil in a given school district by income yield. In effect, the education tax would increase income taxes for Vermont’s high-income bracket while decreasing their property taxes.
As part of this first recommendation, the report also suggests creating a renters’ credit for Vermonters who are currently paying property taxes through their rent. Restructuring the homestead education tax was the most contentious recommendation by the committee
Kleppner suggested broadening the sales tax base and using the gain to protect low-income Vermonters and reduce the sales tax rate to 3.6 percent. The report shows that a sales tax exemption for groceries is an ineffective means of supporting Vermont’s low-income households. While the State is foregoing $100 million of potential tax revenue by excluding groceries, the portion of that represented by low-income Vermonters is roughly $30 million. The Commission found no compelling reason to exclude any consumer transaction of goods or services except healthcare, casual sales, and business inputs.
Trenholm listed potential ways to modernize income tax features, most of which required further research.
Vermont Roundtable advocates for investment in early childcare
Weatherization trending in Montpelier
Courts weigh in on school vouchers for religious schools
The House Government Operations Committee met on Thursday to discuss Vermont's overwhelming pension-underfunding problem. Joint Fiscal Office staff member Chris Rupe presented a report that summarizes the state’s complex pension systems and outlines why they are in such bad condition.
Between FY21 and FY22, the unfunded liability for the Vermont State Employees' Retirement System increased by $225 million, and the determined employer contribution – the yearly contribution from the state – is projected to increase by $36 million. Moreover, the same projections increased by $379 million and $60.6 million respectively for the Vermont State Teachers' Retirement System. The two funds combine for an increase of $605 million in unfunded liabilities and a projected $96.6 million contribution from the state in FY22.
Recent changes in assumptions based on employee experience, investment performance, funding history, and demographic and economic forecasts resulted in the updated deficit projections. Despite the range of possible reduction options in the Treasurer’s report, the real challenge is finding one solution to eliminate underfunding increases entirely.
The committee discussed the possibility of the State filing for bankruptcy as a way of avoiding its unfunded obligation, but that prospect was not seriously considered. Federal law does not allow states to declare bankruptcy. Even if Congress provides a COVID-19 exception, bankruptcy would not eliminate the State’s existing unfunded liabilities.
The prospect of switching employees from defined benefit to defined contribution pension plans hit a nerve with many committee members. While the suggestion may be subject to further discussion, it seems unlikely to receive serious consideration.
The legislature passed a law last fall that was intended to make it easier to build more housing at greater density by prohibiting certain deed restrictions, specifically for accessory dwelling units (e.g., mother-in-law apartments) and small lots with access to water and sewer.
After the law was enacted, Vermont’s real estate community raised concerns about the breadth of the language, which was likely to invalidate many common deed restrictions, including those used by homeowner associations and those added as part of settlement agreements. The law could be interpreted to mean that other state statutes, such as environmental laws, could not limit any development that is otherwise allowed under local bylaws.
S.14 corrects and narrows the language in Act 179. It states that deed restrictions added after March 1, 2021 are invalid if they would prohibit ADU’s and development of existing small lots. Both were part of the original intent of Act 179 and both encourage infill development and increasing housing density. The bill also seeks to prevent private parties from overriding the intent of Act 179. It would take effect retroactively on January 1, 2021 in order to avoid invalidating any deed restriction under the prior language. The bill was reported on the Senate floor on Friday, and will be up for a final vote next Tuesday.
The House Committee on Natural Resources, Fish and Wildlife and the Senate Committee on Natural Resources met jointly this week to hear testimony on Executive Order No. 02-21, which makes significant changes to the makeup of the Act 250 Natural Resources Board. The current board—comprising a full-time chair and four citizen volunteers—coordinates the nine district commissions, provides legal and technical support and participates in Act 250 appeals.
The governor’s executive order gives more authority to the NRB by creating a new board made up of three full-time professionals who would assume the duties of the original board and rule on all major Act 250 permit applications. For each major permit application deliberation, the new board would be joined by two voting district commissioners from the district in which the permit originated.
Legislators had barely scratched the surface of the merits of the order when the conversation was sidelined by a constitutional question. State law provides that within 90 days, only one legislative chamber needs to object to an order for it to become null and void. However, the last paragraph of the governor’s order reads that it “shall take effect on April 15, 2021, unless disapproved by both houses of the General Assembly.”
Jaye Pershing-Johnson, General Counsel, Governor's Office, testified that she was “putting the legislature on notice” that she considers the state statute to be unconstitutional, and she cited U.S. Supreme Court case law invalidating a Congressional one-house veto.
Meanwhile, a lawsuit filed Wednesday on behalf of a Berlin environmental attorney makes a sweeping constitutional argument challenging the authority of executive orders to circumvent existing law. Committee members were advised by legislative council that although a challenge to the law has been filed, they should proceed under the law currently on the books. If that’s the case, there may be a straight up or down vote on the executive order from one or both houses of the legislature.
The governor’s $10 million Economic Recovery Grant proposal is not ready for inclusion in the Budget Adjustment Act quite yet, according to members of the House Commerce and Economic Development Committee. On Wednesday, the committee spent a majority of the day discussing the proposal with Department of Economic Development Commissioner Joan Goldstein, but reported to the House Appropriations Committee on Friday that they were not in agreement with the governor’s proposal at this time.
The proposal would use General Fund money to provide grants to businesses that were ineligible or received only partial funding from the Paycheck Protection Program or Economic Injury Disaster Loans. Commissioner Goldstein said that some businesses that are not eligible for the second draw of PPP because they didn’t suffer the required 25 percent revenue loss may have high fixed costs and COVID-related costs requiring financial help. The grant would also assist businesses established after February 15, 2020 that are ineligible for the federal aid programs. Goldstein reported that 430 new rooms and meal tax licenses were registered during the pandemic, only a portion of the new businesses that may require assistance over the next few months in order to survive.
The committee was concerned that the determination of need would be complicated and inaccurate. Committee Chair Mike Marcotte, R-Newport, suggested that Goldstein “flesh out” the proposal and wait until the BAA is sent to the Senate to propose it. There will be a public hearing on the BAA on Monday before the House Committee on Appropriations votes on the bill.
The Senate Committee on Economic Development, Housing and General Affairs continued work on S.10 this week, a bill that would extend COVID-related unemployment insurance changes that the legislature made in Act 91 of 2020.
Under Act 91, an employer’s experience rating and unemployment insurance tax rates can’t be adversely impacted by unemployment insurance benefits paid to employees who were laid off or quit because of COVID-19. For an employer to be relieved of UI charges, they are required to re-hire the employee or offer employment after a reasonable period of time. Due to the overwhelming number of UI claims filed, the Department of Labor requested that universal charge relief be extended for 2020, as the department did not have the capacity to investigate whether the re-hiring requirement was met for each claim. Labor Commissioner Michael Harrington told the committee that 95 percent of layoffs were COVID related, so inappropriate charge relief would be rare. Harrington also suggested that for 2021, employers could apply for charge relief with a short, five-question survey, with random audits enforcing the re-hiring requirement. The committee will continue work on the bill next week.
The legislature’s E-Board adopted an official state revenue forecast this week. Legislative economist Tom Kavet delivered good news to legislative money committees, saying that “sufficiently massive” federal spending has fended off a recession. Seven billion dollars in federal spending in Vermont ($5 billion from CARES I, PPP, and pandemic unemployment and an estimated $2 billion still to come from CARES II) have stimulated spending and economic activity, significantly boosting state revenues. Consumption taxes are particularly strong and e-commerce is booming.
Total revenues in all three major state funds – General, Education, and Transportation – have rebounded from more pessimistic August forecasts. The pessimism was warranted at the time. There is little historic basis on which to forecast predictions during a pandemic. The negative effects of the pandemic were well understood – unemployment and a cessation of many activities that drive the economy. But the positive effects of federal spending on personal and corporate spending required the benefit of time and tax receipts to better understand. Funds are now expected to fall only $20 million below pre-pandemic FY21 estimates and a total of $77 million above earlier FY22 estimates. These revenue numbers lay the foundation for the governor to propose the FY22 budget.
Property taxpayers heard instant relief. The December 1, 2020 Tax Commissioner letter that helps set property tax rates foretold a nine cent increase. But with very strong sales and use tax receipts, and higher purchase and use tax income, that estimate is now down to two cents.
Under Act 137, the Vermont Legislature appropriated $17.4 million of the State’s Coronavirus Relief Funds to broadband expansion programs. The Department of Public Service administered these programs and finished the year with an estimated $3.9 million unspent. Federal restrictions, time constraints, geographic limitations, and labor shortages are a few of the barriers that the DPS faced.
Vermont has experienced a considerable rise in startup Communications Union Districts due to growing frustration about the inaccessibility of broadband services. New CUDs require funding, information sharing, feasible business plans, and resources such as equipment and experienced laborers. To that end, State and community support, innovative partnerships, and workable finance models are critical to broadband expansion.
On January 15, the House Committee on Energy and Technology took testimony from Consolidated Communications Senior Director of Fiber Build Strategy Jeffrey Austin, who said the company was eager to work with new CUDs. The company has partnered with Searchlight Capital Partners to launch a major five-year accelerated fiber-to-the-premise program, expecting to reach 53,000 Vermont addresses with a 500-mile fiber build-out in 2021.
The Vermont Economic Development Authority’s Broadband Lending Program may provide a financing avenue for CUDs. Act 79 caps the program at $10.8 million with a maximum loan size of $4 million or up to 90 percent of project costs. VEDA, a non-profit organization, provides loan recommendations, overwriting, and servicing to borrowers.
Many uncertainties still surround Vermont’s connectivity challenge. Nevertheless, expanding fiber networks to unserved and underserved neighborhoods for remote education, work, and telehealth remains a top priority for the State.
COVID-19 Case Update:
Vaccination Acceptance Rates:
In response to a reporter’s question, Governor Scott said that neither he nor his team will receive vaccinations before their time. He emphasized that these doses are meant for older populations in order to save lives.
Expanded Vaccination Schedule:
Legislative Session 2020 started out like most sequels, with a feeling of déjà vu. It was Groundhog Day with a touch of “I Am Legend” thrown in for atmosphere. Nearly two months to the day after adjourning, legislators returned to Zoom and YouTube, logging dozens of hours a day of deliberations in order to take on the full-year budget and allocate the remaining Coronavirus Relief Funds of around $200 million.
Vermont received $1.25 billion in Coronavirus Relief Funds, a king’s ransom in any normal year. Any projects funded through this source must be spent by December 30 or be returned to the federal government. Of the $826 million appropriated in late June (Part 1, the Original), no one so far is clamoring to return unspent funds.
House Speaker Mitzi Johnson kicked off the session by referencing a legislative report on State House space and telling members they would not likely be meeting as usual in the State House this January. Instead, the General Assembly will likely spread out across three additional spaces in the Capitol Complex. Draft legislation enabling the use of alternate spaces mentions the basement and various stock rooms that will allow lawmakers to physical distance and “perform [their] constitutional legislative duties.”
If legislators didn’t miss the overcrowded, claustrophobic committee rooms before, they may truly be nostalgic for the busy and exchange-filled hallways of the State House in January.
Families and schools across Vermont are planning for re-openings too. Just a little over two weeks ago, Governor Phil Scott announced an entirely new program to support families of school-aged children in an environment of remote learning. Twelve million dollars in CRF funds will support opening and start-up costs for these childcare “hubs.” Dozens of sites across the state will serve an estimated 7,300 students (and possibly thousands more) in kindergarten through Grade 6 starting on or about September 8. “Real time” is putting it kindly. This is government at warp speed.
Like snowflakes, there are no two school reopening plans in the state that are the same. Each supervisory union and district has constructed a unique reopening plan. All involve some component of remote learning ranging from entirely remote to hybrid in-person approaches. Each school must be prepared to go “fully remote” if an outbreak occurs.
Three-hundred schools have applied for a CRF program to improve indoor air quality. The uptake for the program exceeded $6.5 million originally appropriated through Efficiency Vermont. Another $5 million is likely to be funneled towards the program. Schools’ COVID-related re-opening costs have also exceeded the June CRF allocations and the House Education Committee recommended another $30 million.
Vermont legislators have always taken pride in presenting a balanced budget even though it is not constitutionally required. The current FY 2021 budget process is relatively uncontentious and requires no deficit spending. A dismal forecast for FY 2022, and a shocking forecast of pension losses, foreshadow a very tough January for the General Assembly. And, sadly, they may be making those decisions by the dank light of a basement stockroom.
Treasurer announces “Very, very big increase” in unfunded liabilities
Vermont struggling businesses to receive additional grants
Committees focus on broadband expansion
Act 250 Falls Apart
Hubs program develops in record time
Vermont State Treasurer Beth Pearce appeared before the House Appropriations Committee this week and announced that the state would see a “very, very big increase” in the unfunded liabilities of the state employee and teacher retirement systems.
Before the announcement, Vermont already faced enormous unfunded liabilities in its public employee retirement plans—a total of $4.5 billion for pension payments and health care liabilities. Surprisingly, no committee members asked Pearce to estimate how much higher that liability is likely to go in 2020.
Although Pearce did not provide an estimate of the amount of increase in total pension fund liabilities, a document she shared with the committee showed an increase in unfunded health care payments of nearly $500 million for 2020. That is a staggering increase of 22% in only one year. Unfunded health benefits account for about half of the state’s $4.5 billion outstanding liability.
Pearce cited a variety of reasons for the higher liability, including Covid-related expenses, increased retirements and adverse investment experience.
Vermont’s pension boards estimate the rate of return on pension investments at 7.5%, which is among the highest in the country. The state’s actual investment returns have been far lower, which has significantly increased the amount of unfunded liability.
Pearce told the House Appropriations Committee that the estimated rate of return will have to be lowered, and she will advocate for it to go to the lowest end of a range provided by independent actuaries. She opposed efforts by the Vermont Business Roundtable during the past legislative session to lower the estimated rate of return.
Reducing the estimated rate of return will increase the minimum required state payments next year, which could significantly impact the budget in what is already expected to be a very challenging year.
The House Committee on Commerce and Economic Development passed a $100 million economic recovery bill on Thursday that includes $88 million in assistance to businesses. The Scott administration had requested $133 million in funds for this effort. That proposal would have allocated $50 million for the hospitality industry, $23 million for other types of businesses, $50 million for a consumer stimulus “gift card” program, and $10 million for tourism marketing.
The committee was given $100 million to spend by the House leadership. They reduced the marketing proposal to $4 million given the anomaly of spending money to attract visitors when the state is not fully open to out-of-state travel. The money was allocated to the Department of Travel and Tourism in the event that travel restrictions relax soon.
The $50 million “gift card” proposal was met with great skepticism, just as a $500,000 “gift card” pilot program kicks off on September 8. Ted Brady, Deputy Secretary Agency of Commerce and Community Development, fielded questions for a vacationing Commissioner of Tourism, Heather Pelham. The committee remained unconvinced of the value of the program, and their sentiments were encapsulated in comments shared by Rep. Kimbell, “I didn’t like this idea in June, I didn’t like it in August, and I don’t like it in September. This dog won’t hunt.”
The committee finalized the remaining distributions as follows: $5 million for ski areas (for COVID-19 compliance preparations), $3 million for workforce training to go to VTC and CCV, and combined business grants totaling $88 million. The Agency of Commerce and Community Development will continue to make eligibility decisions. The committee placed a $300,000 cap on all business grants and gave the Commissioner of ACCD the authority to request more funds on a case-by-case basis to the Joint Fiscal Committee. All funds must be spent before year-end. The committee also removed a requirement that a business show lost revenue of 50% and replaced it with a condition that the business have a “demonstrated need.”
While many of the grant parameters are vague, the amendment still has to go before the House Appropriations, Senate Economic Development, and Senate Appropriations committees so more changes are likely. The fact that Commissioner Goldstein, Deputy Secretary Brady, and ACCD Secretary Lindsay Kurrle have been given this much latitude is a testament to legislators’ confidence in their work. That is a laudable feat of nonpartisanship.
House and Senate committees spent many hours this week discussing the need for broadband expansion—no doubt reflecting constituent frustration with inadequate service in rural areas and greatly expanded Internet needs for work and school. But with limited funding, no leadership and no legislative proposals, little is expected to happen during the legislature’s brief September session.
Legislators increasingly have pinned their collective hopes on “communication union districts,” entities that are formed by two or more towns to issue bonds and build broadband infrastructure. In reality, the CUD’s have little funding and are run almost exclusively by volunteers. They have made little tangible progress to date.
Lawmakers appear loathe to work with existing telecommunications providers, which have the infrastructure, expertise, staff and access to capital markets to efficiently expand broadband capacity.
Gov. Scott has proposed $2 million in the FY 2021 budget for CUD operating expenses. The legislature may increase that somewhat, but the sums are negligible in the face of the hundreds of millions of dollars that are needed to fully build out broadband at the high speeds that lawmakers are demanding.
“This is not a ‘no’ vote, this is a ‘not yet’ vote.” With those words Sen. Chris Bray, D-New Haven adjourned Friday morning’s meeting of the Senate Natural Resources Committee, effectively ending any chance of sweeping changes to Vermont’s landmark land use law this legislative biennium. Bray had just introduced a strike-all amendment to the Act 250 bill, H.926.
Gone from the strike-all are exemptions from Act 250 jurisdiction for areas of enhanced designation: downtowns, neighborhood development areas and villages that have robust planning and permitting in place. Despite support for the exemptions – designed to prevent sprawl and encourage development in community centers – from many of the state’s environmental groups, several senators and vocal citizen groups rejected the premise that local regulations would offer sufficient protections to water quality.
What remains in the strike-all amendment is a provision for recreational trails that are under construction while the Agency of Natural Resources works on recommendations that will ultimately bring trails under Act 250 review. The strike-all also retains language to deter forest fragmentation by adding definitions for “connecting habitats” and “forest blocks.” The reintroduction of a 2,000-foot “road rule” that triggers review did not survive the scaled down bill.
H.926 will go to the Senate floor next week. It is likely that efforts to modernize Act 250 will begin anew in the 2021-2022 session.
The House Human Services and Senate Health and Welfare Committees heard from Vermont Afterschool and the Department of Children and Families on the rapidly changing landscape of the newly created school-aged childcare hubs programs.
Twenty hubs have been approved, and many of those will be ready to operate on September 8, the first day of school. Those 20 hubs will be operating in 65 different locations and are estimated to be able to serve about 5,000 children. Another 60 hubs are in the development pipeline.
The hub program, which was first announced a scant two weeks ago, is funded with $12 million in CRF funds. Vermont Afterschool is the lead community partner and is working with organizations and communities interested in establishing a hub to provide a safe and engaged learning environment for remote learning for kindergarten through Grade 6. The partners have been actively adapting the program as they better understand what the needs are across the state. Fees will vary in each program, but there is a cap of $200 per week. Some programs may be free for some families.
Legislators asked the department to solve an equity discrepancy. Some existing afterschool programs are expanding their hours significantly to serve students whose schools may close for the day as early as 11:30 am. Yet they are not eligible to access the funding. Committee members requested that the department consider ways to extend access to those programs.
The Perfect and the Good, at War
As the hardships that many Vermonters are enduring from the economic shutdown become clear, so too are some of the policy failures that are exacerbating the suffering. One of them is the state’s decades-long inability to provide broadband access to remote areas of Vermont, and that failure is having a disproportionate impact on Vermont’s children and low-income families.
The challenge is not, as they say, rocket science. Reaching the remote corners of the state – the last mile, in telecom parlance – would require significant state and federal funding, as well as partnerships with existing providers and reasonable goals as to what qualifies for adequate service. Although the state has spent millions on broadband, it has not come close to meeting its goals.
The state set up the now-defunct Vermont Telecommunications Authority in 2007 with a goal of solving the problem by 2010. The VTA inexplicably spent millions of dollars on so-called “middle mile” fiber to schools and other institutions, rather than homes, to compete with existing providers. It failed to expand access for rural residents.
At the same time, a dogma took hold in the legislature that only investments in fiber optic cable (rather than copper lines, which serve the furthest reaches of the state) are worthwhile. Existing telecom providers cannot afford to invest in high-priced fiber in remote areas with few customers, so the legislature has pinned its hopes on small, thinly-capitalized and often volunteer-run organizations to build out fiber-to-the-home. Those organizations, not surprisingly, have made barely a dent in reaching unserved Vermonters.
Acting on the view that only lightning-fast speeds are worthy of state money, the legislature has significantly ratcheted up the minimum required broadband speeds for companies to receive state funding. Under legislation passed last year, the minimum required speed is now 25/3 Mbps – a speed higher than most consumers are willing to pay for. To receive funds under a new loan program operated by the Vermont Economic Development Authority, the legislature required speeds of 100 Mpbs symmetrical – in essence, the speed of fiber. The legislature also has adopted a policy goal that all Vermonters have access to 100 Mbps by 2024. That would cost an estimated $1 billion. For comparison purposes, this article is being written with an Internet speed of 10/1 Mpbs over, gasp, wireline service, with three adults working on-line simultaneously.
There are about 20,000 residences in Vermont that still have inadequate broadband service, meaning 4/1 speeds or less. (Many with only dial-up service). Most of those households would likely be thrilled to have broadband speeds that are a fraction of the state’s fiber goal. For now though, the children in those homes are facing months without any meaningful access to education, while their parents have little or no ability to work remotely.
Prior to the COVID-19 pandemic, the legislature’s cult-like focus on fiber-to-the-home was merely puzzling. Vermonters are now experiencing real hardship as a result of a policy that sets a gold standard for all, rather than an affordable and workable standard for those who need state help. The pursuit of perfect Internet access has been the enemy of the good, with failure a close ally of perfection.
Warren Buffet famously said, “You only find out who is swimming naked when the tide goes out.“ The legislature has been swimming naked, with the public largely unable to see the hardships that were growing due to the failure to expand broadband coverage. The COVID-19 pandemic has brought the tide out and laid bare those hardships for all to see.
House has rocky start to historic remote voting session
The House took historic action on Thursday, approving a rule change to allow legislators to vote remotely. The legislators are now using an app, Everbridge, to cast their votes from their living rooms, bedrooms, kitchen tables, and porches.
Here is the link to the pdf that this was an excerpt from.
The construction sector may operate limited in-person operations in accordance with the April 17th guidance, including restricting work crews to two people per location/job and following mandatory health safety recommendations. Only construction needed to support the COVID-19 response, maintain critical infrastructure, or for the safety, sanitation and operations of residences or businesses is allowed to operate beyond this scope. As an example, replacing a failing roof, failed electrical system, or broken waterline would be acceptable. Additionally, jobsites should be left in a safe and secure manner before ceasing in-person construction. Providing services to a hospital or healthcare facility would be acceptable.
Construction crews returning to work under the Work Safe provisions of Addendum 10 and the April 17th guidance must remember that the intent of the new guidance is to reduce the density of workers at construction sites and reduce gatherings at construction sites. Construction companies must not return to “normal” operations. The April 17th guidance allows construction to occur with no more than 2 people per location/job. A location/job may be a single property, a single house, a floor of a large multi-story property, or a distinct separate physical location on a larger construction property. In instances where more than 2 people are working on a large project (for instance, 2 people on floor one and 2 people on floor 3), those individuals must not come into contact. Start times must be staggered to avoid gatherings, breaks should be staggered, and job meetings exceeding 2 people must not occur.
The Agency interprets unoccupied to mean uninhabited properties. Indoor construction should not occur in occupied properties, whether the homeowner is present or not.
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Order extension brings expected and dreaded consequences
Gov. Phil Scott’s announcement today that his Stay Home Stay Safe Order will remain in place until at least May 15 brought a collective sigh of exasperation from those who were hoping to return to employment as well as those who are merely inconvenienced by the mandate to work from home.
But there is also the quiet despair that is occurring in the remote corners of Vermont, and no one really knows the depth of the growing hardship.
Educational leaders told the Senate Finance Committee on Thursday about the unknown impact that COVID isolation is having on Vermont’s children as they are untethered from the child care facilities and schools that have increasingly become their primary sources of support beyond education: mental health, nutrition and physical activity.
Jay Nichols, Executive Director of the Vermont Principals’ Association, said many principals have not been able to reach fully half of their students. Jeff Fannon, Executive Director of the Vermont NEA, told the committee about a teacher in Springfield who has been unable to reach her most at-risk student for four weeks and wonders if she should contact law enforcement.
The poignant anecdotes personalized the abstract but massive and growing financial challenge the COVID-19 pandemic is creating. According to the legislature’s Joint Fiscal Office, the state’s education fund is already $40 million short for FY 2020, even after the state has used up $49 million in reserves. That problem is certain to get worse as many of the fund’s revenue sources dry up.
Right now, the state’s response to the COVID-19 crisis is an administrative challenge and not a legislative one. The two branches have embraced their respective roles. Gov. Scott – like so many governors nationally – has exuded confidence daily as the administration responds forcefully, backed by evolving scientific and medical judgment, with increasingly tighter restrictions.
Not surprisingly, given the enormity of the crisis, the response has been bumpy at times. Many companies, for example, have struggled to understand whether they are “Essential Businesses” and able to continue operating. Conflicting statements from administration staff have contributed to the confusion. At least one industry – golf courses – has mounted a public relations campaign to reverse the order.
But the administration’s strictures are making a difference. The growth rate of COVID-19 cases has fallen every day except one since March 21. Vermont is now at the low end of projections for bed needs, ICU beds and ventilators, with forecasts showing the state will remain mostly within its capacity.
In the meantime, the General Assembly is moving incrementally to prepare for the longer-term legislative challenges. For the first time in history, the Senate met and voted remotely on Friday to pass a series of non-controversial, COVID-related bills.
A paradox of this new virtual legislative environment is that the legislature is both more transparent and less accessible. It is easier than ever for the public to watch live legislative proceedings, but far more difficult – for the public and lobbyists alike – to influence them. As committees move to more controversial topics, the difficulties of legislating remotely are likely to become more apparent.
Working remotely, Senate passes four bills
In an historic session, the Senate convened remotely Friday morning to unanimously pass four COVID-19 related bills.
Administration decisions driven by science and data
Governor Scott is deliberate when he refers to “science and data” when he addresses the public. So it was with intention that Mike Pieciak, Commissioner of the Department of Financial Regulation, spent the week reviewing COVID-19 Modeling Data for the public. All evidence suggests that social distancing sacrifices are making a difference in saving lives and reducing hospital resource need.
Treasurer asks for expanded interfund borrowing
Over the past week, the tax and spending committees in the House and Senate have digested the latest revenue numbers from the legislature’s economists, and the picture isn’t pretty. While the General Fund downgrade is less than it had been two weeks earlier, the Education Fund is significantly more in trouble than originally thought.
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