Vermont Legislative Update 04-23-2021
An analysis from DRM's Government & Public Affairs Team
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Senate committee budget vote delayed until next week
As the end of the week approached, the Senate Appropriations Committee was still finalizing FY 2022 budget details, and a planned Friday vote was pushed until Monday. On Wednesday, Committee Chair Jane Kitchel, D-Caledonia, expressed repeated frustration that she was still receiving bills and specific appropriation requests from committees, including H.171 (a child care bill) and H.360 (a broadband bill). Those attempting to follow the budget deliberations were likewise frustrated by the lack of documents and transparency in the process.
Some of the delay in the always-complex legislative budget process is due to the influx of federal funding coming to Vermont from the American Rescue Plan, and disagreements between the administration and the legislature on how and when ARPA money should be spent. The House-passed budget included $650 million of ARPA dollars, and the administration immediately opposed what they viewed was a premature allocation of the funds due to a lack of federal guidance. Governor Scott issued his own plan for the funds weeks after the House passed its budget. In a nod towards transparency and a request that all ARPA spending be in one place, Kitchel is placing in the budget all of the legislatures proposed ARPA expenditures.
Secretary of Administration Susanne Young sent a letter to Sen. Kitchel referencing the governor’s plan and pointing out several areas of concern in the House-passed budget, including a proposal to substitute ARPA funds for meals and rooms taxes to pay for the Clean Water Fund. The House removed the meals and rooms tax contribution to the CWF for the next four fiscal years and added $100 million of ARPA funds in its place. Part of the freed up General Fund was put into a pension reserve. When Young testified about her concerns about a loss of designated revenue and the potential credit risk to the state, Kitchel responded that her committee was working to modify the current swap-out language to have more of “a ramp up and a ramp down.” Final language is not yet available.
Climate spending added to budget bill
The Senate Appropriations Committee added $31 million in climate-related spending to the budget bill this week. The allocation is intended to increase weatherization of homes, add weatherization jobs, and make renewable energy more affordable. The proposals originated in the Senate Natural Resources Committee in S.109. It was unclear whether Appropriations would include an aspirational goal of weatherizing 120,000 homes by 2031 with an estimated cost of $1.2 billion.
The Vermont Housing Finance Agency would be entrusted to become the state’s leading entity for weatherization financing and would receive $9 million in capital. Four million dollars would flow to the Weatherization Assistance Program, serving families under 80% of area median income. Nine million dollars would be provided for affordable community-scale renewable energy programs, such as offsite solar PV for renters as well as homeowners located in areas that are unsuitable for solar. Five million dollars would be provided to Efficiency Vermont for homeowner weatherization incentives and $2 million for workforce development initiatives. Community action agencies would receive $1.5 million to develop counseling that encompasses energy-related issues and asset coaching.
A municipal energy revolving loan program of $4 million was omitted due to anticipated ARPA money targeted to local governmental entities.
There is no dispute between the legislature and the administration over whether the climate spending should happen, but the funding source has yet to be settled. Before ARPA and its anticipated $2.7 billion package of aid for Vermont, the governor in January proposed $40 million in climate spending out of a budget surplus. The governor’s new ARPA spending plan lays out $200 million to be spent over three years. One-hundred million dollars would be targeted for the Global Warming Solutions Act Climate Action Plan to be completed in December, 2021.
House approves pension reform bill
The House today passed H. 449, a bill to revise the membership and duties of the Vermont Pension Investment Commission and to create a Pension Benefits, Design, and Funding Task Force.
The House agreed to an Appropriations Committee amendment calling for the Task Force to model and estimate the cost of not changing retirement benefits for members within five and ten years of the current retirement age. The amendment also prohibits the Task Force from recommending changes to retirement benefits for current retirees or employees within five years of retirement age.
Representative Heidi Scheuermann, R-Stowe, proposed to strike language that would allow an individual to serve on the VPIC board if that individual’s spouse, parent, child, sibling, or in-law is a beneficiary of a pension plan, provided the individual files an annual disclosure report to the Commission. The House Government Operations Committee agreed that the bill’s disclosure requirement was not enough to avoid potential conflicts and negative public perception, and the amendment was approved by the House.
The Senate Government Operations Committee is expected to propose an amendment to the bill today.
Broadband buildout – who gets the money?
The Senate Finance Committee continued its consideration this week of H.360, the broadband expansion bill. The committee has taken considerable time discussing eligibility for the $150-200 million in American Rescue Plan funds for broadband buildout.
With an unprecedented opportunity to achieve universal broadband access, the bill as passed the House puts the effort in the hands of communication union districts – municipal entities that pool the resources of multiple towns to guide the expansion of communication infrastructure. Existing Internet service providers are excluded from direct eligibility for ARPA funds.
The Scott Administration has said it would like to allow established Internet providers to access funds separate from any CUD arrangement. Members of the Finance Committee seem to agree. “If Consolidated Communications is already building [in an area], it makes sense to give them a grant to finish the town,” said Sen. Ann Cummings, D-Montpelier. There is consensus within the committee that only entities that commit to universal coverage in an area will have access to public funds.
The committee also debated whether or not access and affordability were separate issues. Sen. Chris Pearson, P/D-Burlington, contended that the immediate goal should be access – running fiber down streets for accessibility. Whether or not a home can afford to hook up should be addressed separately. Opposing views argued that the question should be how to get people connected, and affordability must be considered at the same time as access.
The committee still has many sections of H.360 to discuss but is under pressure to deliver a dollar figure to the Senate Appropriations Committee.
School Construction – A bill to address longstanding facility needs in public schools is caught between short-term fixes and long-term approaches. The House version of H.426 included a statewide conditions assessment of all public school facilities. A task force of school administrators, including superintendents, school custodians, and representatives from industries that support school facilities work, that has been meeting since 2018 advocated for the bill. Education Secretary Dan French, speaking to the Senate Education Committee, argued that ESSER funds allocated towards the House’s multimillion dollar proposal must be COVID-focused. French argued for a shorter-term, less-expensive baseline inventory that would prioritize quick fixes in accordance with federal guidelines. The committee has indicated that it will vote out a bill that combines the short-term inventory and the long-term assessment. The statewide school construction program was tabled in 2007, and Vermont is the only state without one.
Payroll Protection Plan taxability – Senate Finance took testimony from CPAs and business advocates this week who explained the complexities that would result from taxing 2021 federal PPP grants. Some committee members reacted defensively, saying they haven't made any decisions about taxing the grants. The legislature passed a bill exempting 2020 PPP grants from state taxes but failed to include 2021. If legislators are annoyed with what they perceive as misplaced angst, they could alleviate the situation by addressing the issue. That has yet to be done.
UI Trust Fund – The House Commerce & Economic Development Committee is considering a Senate-added provision to S.10 that purports to give employers $66 million in decreased UI payments in exchange for a $50 dependent benefit for UI recipients. Committee members confirmed what the business community has been saying: the $66 million is not actual savings. They also heard there is a workforce shortage, but many individuals are on UI due to inadequate childcare. Committee Chair Michael Marcotte, R-Coventry, acknowledged that the hard-hit business sector has not asked that benefits for UI recipients be decreased, but that their UI Trust Fund taxes be adjusted to account for anomalies related to COVID-19.
Cloud Tax – Senate Finance Committee Chair Ann Cummings, D-Washington County, said this week that her committee will not consider a cloud tax this year. The House passed the proposal to offset the lost revenue from tax reductions, including corporate taxes, in S.53. The bill may carry over to the next session, which seems to be the biennial outcome of every House-proposed cloud tax.
Economic Recovery Grants – Businesses impacted by COVID-19 shutdowns are anxious to know the formula for allocating the next round of grants. The Senate Economic Development Committee may be privately considering this formula, but the issue hasn’t been discussed in public committee hearings, and the committee hasn’t accepted a request from businesses to testify. They did take testimony from State Auditor Doug Hoffer, who criticized the grant allocations as unnecessary. Small business owners in the hospitality sector hope to be able to counter Mr. Hoffer’s statements next week. The Governor has proposed $50 million in new grants – drastically less than the reported $500 million in unmet need. The Senate is considering less than $40 million for this support.
Municipal Bylaws Modernization – S.101 attempts to encourage housing development by incentivizing municipalities to update planning bylaws, ridding them of zoning regulations that stifle greater density in housing development. Mandatory parking minimums, minimum lot sizes, under-utilized infrastructure capacity, density restrictions and prohibitions on multi-family housing all contribute to putting construction costs out of reach of many middle-income Vermont families. The Senate proposed to authorize $500,000 in grants to assist municipalities with technical help in updating zoning bylaws. That appropriation was stripped from the bill by the Senate before passage, leaving the House Committee on Natural Resources, Fish, and Wildlife to question the effectiveness of the bill. The House committee continues to consider other sections of the bill, including an expansion of a tax credit program to neighborhood development areas and the removal of duplication of state and municipal water/wastewater connection permitting.
Community and Economic Development – The Senate Economic Development, Housing and General Affairs Committee is considering a House-passed bill, H.159, that uses ARPA funds for workforce development, grant application assistance for technology-based businesses, an international business development program, a Better Places program for Vermont’s downtowns and villages, tourism and marketing and additional money for an existing Entrepreneurs’ Seed Capital Fund. Of the $2.5 million in the bill for tourism and marketing, the committee questioned its use for out-of-state marketing efforts, rather than directing it to regional chambers and other local organizations. Heather Pelham, Commissioner of the Department of Tourism & Marketing, defended the plan, arguing that the state is in a unique position to execute the broad marketing needed to attract people to Vermont. The committee will continue markup of the bill next week.
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