Vermont Legislative Update Quick Links
Federal windfalls in Governor’s proposed budget
Tax exemption proposed for broadband buildout, but it’s complicated
Employers will have to take steps to defend unemployment practices during Covid-19
Senate committee rejects governor’s Act 250 executive order
Committee proposes new broadband authority
Tax Structure Commission issues final report
Federal windfalls in Governor’s proposed budget
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:
- $25 million for brownfield reclamation.
- $20 million to Vermont State Colleges.
- $20 million broadband package.
- $23 million to build new housing and for rehab investments.
- $10 million to bring clean energy to those with low and moderate incomes.
- $25 million for weatherization.
- $20 million to accelerate weatherization in low- and moderate-income homes;
- $5 million for the State Energy Management Program to help towns make efficiency upgrades.
The Governor’s proposed budget also includes an additional $53 million in state IT projects. The list includes:
- $15 million for the first phase of a new Department of Motor Vehicles IT system
- $12.75 million for a Human Capital Management Enterprise Resource Planning upgrade.
- $3.5 million for Department of Labor Unemployment Insurance modernization, $2 million for DOL financial account and reporting system and $1 million for DOL Joblink replacement.
- $1.5 million for Agency of Digital Services cybersecurity.
- $1 million to ACCD for Salesforce grant management system.
- $9.5 million towards Agency of Human Services Integrated Eligibility project.
Tax exemption proposed for broadband buildout, but it’s complicated
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.
Employers will have to take steps to defend unemployment practices during COVID-19
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.
Senate committee rejects governor’s Act 250 executive order
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.
Committee proposes new broadband authority
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.
Tax Structure Commission issues final report
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.
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