Vermont Legislative Update 03-26-2021
An analysis from DRM's Government & Public Affairs Team
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House passes budget, directs federal relief money
The House gave unanimous final approval on Friday to a $7 billion state budget that includes a general framework for spending a large portion of the $1.3 billion Coronavirus Relief Fund dollars headed to Vermont through the American Rescue Plan Act of 2021.
The ARPA funds would be directed at numerous state initiatives, including $150 million for statewide broadband access, $100 million for the Clean Water Fund, $50 million for workforce training and development, and $100 million for state information technology systems. The administration has said that decisions on ARPA spending are premature in advance of receipt of the funds and clear guidance on allowable expenditures, although Gov. Phil Scott intends to put forth his own ARPA spending plan in the next few weeks.
In addition to creating a broad framework for spending $650 million of ARPA dollars and appropriating the full base budget for FY22, H.439 makes direct appropriations of other ARPA funding, including money to the Vermont State Colleges for workforce training and $2 million for micro-business community grants.
Use of ARPA funds has freed up portions of the General Fund that the House has proposed to use for affordable housing initiatives ($40 million) and the state’s pension fund and retiree health care benefits ($150 million). The pension spending would begin to pay down the state’s ballooning unfunded obligation in advance of an anticipated revamping of the system.
Unemployment insurance bill battle wages on
A bill that increases unemployment benefits but fails to address an overpayment glitch in the unemployment insurance trust fund formula (S.10) was poised for a vote by the full Senate today when severe weather caused a power outage in the State House dramatically delaying the proceedings until Tuesday.
After a protracted struggle between the business community and Senate Economic Development, Housing, and General Affairs Committee Chair Michael Sirotkin, D-Chittenden, and after all thirty Senators were barraged with 11th-hour pleas from constituents, the committee amended its bill.
The good: They removed a proposed 20 percent increase in UI benefits and changed a new $50 dependent benefit to a 5-year program beginning when federal COVID aid ends.
The bad: The committee failed to adjust the UI formula, which—due to an anomaly in 2020—will result in an historically-high fund balance of $1 billion. That is double the size of the fund’s pre-pandemic balance. The business community sought to remove 2020 from the UI formula but the committee refused, even though they agreed that the estimated fund balance is too high. The committee agreed to work off-session on a new bill to reduce the fund balance, but Sirotkin said the bill will have to benefit UI recipients.
The ugly: The amended bill engages in legislative sleight of hand to make an accounting adjustment look like a business tax reduction. The underlying bill freezes insurance rates for one year, thereby delaying payments of $66 million that employers would eventually be required to pay under existing law. Because those payments will not be needed (due to the enormous estimated size of the fund balance), the committee concocted a scheme in which the reduction of $66 million in overpayments is considered to be “paid back” to the UI Trust Fund over ten years through a reduction in employer premiums. These are payments that will never be needed and never paid, but for unknown reasons will be included in employer calculations. Sen. Randy Brock, R-Franklin, said emphatically that this was simply a “reduction in future overpayments, not a savings to businesses.”
House endorses buildout of electric vehicles and charging stations
The House-passed transportation bill contains $3.25 million in one-time funds for buyer incentives towards the purchase or lease of new plug-in electric vehicles, with another $600,000 directed towards the MileageSmart program, which allows low-income individuals to purchase used electric or high-efficiency vehicles.
The bill provides $1.5 million for a new “Replace Your Ride” program for income-qualified individuals. This is intended to incentivize the scrapping of older, fuel-inefficient, internal-combustion vehicles in favor of more fuel-efficient modes of transportation such as EVs, e-bikes, car-sharing, or public transportation.
The legislation directs one million dollars towards a pilot program to foster the buildout of EV charging stations for multifamily housing such as condominiums and apartment buildings. Grant awards will consider geographic distribution and service models addressing a range of parking options, including public and private-only, so that multiple strategies are explored.
H.433 proposes to use federal funds to create free public transit for eligible urban and rural providers in FY22. It instructs the Agency of Transportation to prepare a long-range plan outlining the costs, timeline, and other considerations of moving to a fully electrified public transportation fleet.
Electric utilities will be required to implement special EV charging rates for public and private charging no later than 2024. Special EV charging rates are considered integral to smoothing the increased load that electrification of transportation will place on the electric grid. Vermont currently has 4,000 EVs on the road.
House passes broad economic development package
An economic development bill, H.159 (House Journal p.648), began the session as a bill to create a Better Places Program that would invest in public spaces. As passed by the House this week, it included a host of one-time appropriations, including funding for tourism and marketing, technology-based economic development, a foreign trade representative, and seed capital funding for entrepreneurs.
The bill appropriates a one-time $2.5 million from anticipated ARPA funds to the Department of Tourism and Marketing to attract visitors and stimulate visitor spending throughout the state. One million dollars from ARPA is devoted to the design and implement a technology-based economic development program, and another million dollars to a fund that provides early-stage seed money to companies that have experienced disruption due to COVID-19.
The Better Places Program is appropriated $5 million in ARPA money to create a “crowd granting” funding mechanism with matching grant eligibility requirements. Communities may apply for grants ranging from $5,000 to $50,000 to revitalize village greens, squares, parks, community centers, town halls, libraries, and other publicly accessible buildings.
H.159 appropriates $300,000 for an International Business Attraction and Investment Program to attract investment from Canada-based businesses. Language in the bill to expand a downtown tax credit program was removed but is expected to be added later to another bill.
New pension proposals create anxiety for unions
Representatives Sarah Copeland Hanzas and John Gannon initiated two new pension reform proposals in the House Committee on Government Operations this week to address the State's projected $3 billion pension problem. One proposal recommends pension governance changes, and the other, the committee’s initial pension proposal, makes structural changes to the Vermont state employee and teacher retirement systems.
The governance changes would create a new Vermont Retirement Commission to oversee investments and manage all three of the State's pension systems. Following the New Hampshire model, the 15-member VRC would assume the Vermont Pension Investment Committee's powers and duties and establish an investment committee comprising members with institutional, investment, financial, or actuarial experience. The new governance structure would maintain the three existing boards of trustees with power to nominate VRC members. The VRC would have final decision-making and administrative authority, taking into account the trustee boards' non-binding recommendations.
The initial pension proposal includes strategies to reduce future liabilities, increase pension system assets, and relieve budgetary pressures. This proposal recommends dedicating $150 million of one-time monies to paying down unfunded pension liabilities. Other proposed strategies, particularly those involving unexpected changes to retirement benefits, created much anxiety for union members this week.
Committee members will spend a significant amount of time on the proposals in the days ahead. The bottom line for now is that the proposed changes would largely eliminate increases to the Actuarially Determined Employer Contribution (ADEC) from FY21 to FY22 ($36 million increase for Vermont State Employees Retirement System and $60.6 million increase for the Vermont State Teachers Retirement System) and reduce projected increases in unfunded liabilities by more than $500 million.
$200 million community broadband bill passes House
On Wednesday, the House approved H.360, the House Committee on Energy and Technology's accelerated community broadband deployment bill. The committee's primary objectives for the bill, according to Rep. Laura Sibilia, are “universality” and “accountability.”
The legislation is intended to provide broadband access to all Vermonters, including those in hard-to-reach rural areas, and to require Internet service providers and utilities to work in partnership with communications union districts to obtain public funds. The legislature views CUDs as having the role of holding Internet service providers and utilities accountable for fulfilling their broadband obligations.
The bill establishes the Vermont Community Broadband Authority, a revised version of the former Vermont Telecommunications Authority, to serve as the broadband program administrator geared toward supporting startup CUDs. The bill appropriates $200 million from incoming federal stimulus money, including $40 million for the Community Broadband Preconstruction Grant Program and $160 million for the Construction Grant and Subordinated Debt Program.
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