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.

Vermont Legislative Update Quick Links

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

Treasurer announces “Very, very big increase” in unfunded liabilities

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.

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Vermont struggling businesses to receive additional grants

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.

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Committees focus on broadband expansion

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.

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Act 250 Falls Apart

“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.

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Hubs program develops in record time

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.