Vermont Legislative Update Quick Links
Vermont’s business community unites in opposition to unemployment insurance bill
Vermont business groups joined together this week in strong opposition to an unemployment insurance bill, S.10, that was approved last Friday by the Senate Committee on Economic Development, Housing and General Affairs. The opposition resulted in a delay in the bill’s consideration by the Senate, but the bill is expected to pass next week.
The state’s Unemployment Insurance Trust Fund has been depleted by more than fifty percent due to the COVID-19 pandemic. Facing a fund deficit of more than $300 million, businesses are responsible for its replenishment. S.10 would spread out tax payments to prevent rate shock.
The Economic Development Committee deemed the payment extensions to be a form of business tax relief, and therefore decided to provide a benefit increase to UI recipients. They dismissed the fact that the federal government was already sending increased aid to these beneficiaries. The committee increased weekly payments by 20 percent (at a cost of $35 million) and added a last-minute amendment proposed by Sen. Kesha Ram, D-Chittenden, which will provide a new benefit of $50 per week to UI recipients with dependents, costing the UI Trust Fund $14-21 million a year.
The committee refused to allow testimony on the Ram amendment and voted the bill out in less than 24 hours. Given the magnitude of the expense and the unusual legislative process, word quickly spread among the business community. Adding an additional burden of at least $50 million, on top of the $300 million that businesses will have to pay, seemed patently unfair to many.
Small business owners have reached out to their senators, and these senators are now asking tough questions of the bill’s supporters. Businesses are grateful that their concerns are being considered but are disappointed that job creators have to work this hard to be heard, especially during this challenging time.
S.10 Part II – Unemployment insurance amendment under consideration
The Senate Economic Development, Housing and General Affairs is considering making a significant adjustment to the formula that determines the amount that businesses are required to pay into the Unemployment Insurance Trust Fund.
Businesses pay into the UI trust fund based on a 10-year average. In 2019, the fund was considered healthy at $530 million. Since 2020 was such a uniquely bad year, when entered into the formula, the UI fund will not be considered stable until businesses pay a total of $1 billion. A consensus seems to exist that the formula should be adjusted. The committee will look at new calculations next week but some members believe that any decrease in this figure is additional “rate relief”.
That characterization is not accurate, as the change under consideration isn’t a payoff to business owners but a correction in a calculation. The committee is taking more testimony next week. The crossover deadline will be extended for S.10 as senators continue to hear from their local businesses.
Government Operations Committee dives deep on pensions
The House Government Operations Committee spent many hours this week gathering facts about the state’s employee and teacher pension systems. The system has $4.7 billion in unfunded liabilities due to historic underfunding and underperforming investment performance. In a recent memo, State Treasurer Beth Pearce laid out recommendations for the legislature and administration to fully fund the two retirement and health care systems and make necessary benefit changes. She characterized some of the recommendations as “painful” but necessary for the preservation of state employee and teacher pensions.
John Pelletier, Director of the Center for Financial Literacy at Champlain College, testified on behalf of the Vermont Business Roundtable and addressed two policies that would strengthen the system: regular stress testing and cost-sharing policies. A cost-sharing policy would automatically lower benefits or increase employee contributions in response to all future market downturns. He pointed out that a 2009 legislative report included cost-sharing policy recommendations that were never implemented. The Treasurer’s recommendations do not go far enough, he said, but they are a step in the right direction.
Governor Scott has urged the legislature to act on structural pension reform this session and has framed it as a necessary prerequisite for prefunding the pension and other post-employment benefit liabilities. Legislative leadership has committed publicly to trying to pass reforms. The federal American Rescue Plan explicitly bars funds being used for state pension programs. But the influx of one-time federal money has inspired “creativity” about its uses. Legislative budgeters are proposing to use those one-time funds for ongoing programs and free up General Fund dollars to pay for pensions.
Energy bill proposes regulation of energy storage and aggregation
The Vermont House gave preliminary approval today to H.431, a bill that defines energy storage, energy storage aggregation, and third party energy storage aggregators, which would provide important structure for the burgeoning field. It directs the Public Utility Commission to undertake rulemaking to govern the installation and operation of energy storage facilities of all sizes, the interconnection of storage facilities, and standards for interoperability.
The House Energy and Technology Committee has been working on the issue of storage for years and approved a similar bill last session that stalled due to the pandemic. The approval of Federal Energy Regulatory Commission Order 2222, enabling distributed energy resource aggregators to participate in regional wholesale electric markets, brings a new level of urgency for legislation.
Systems under 500 kw are now entirely unregulated. Under H.431, the PUC would create a simplified application process for energy storage facilities of up to 1 MW.
Renewable energy advocates pushed for a lower threshold of regulation for systems up to 500 kw. Regulators pushed back, saying that interconnected storage between 100 and 500 kw creates fire safety, interoperability, and other concerns requiring at least a registration-type process to avoid damage to the grid. Storage can electrify lines that could potentially hurt workers and damage the grid during a power outage. A certificate of public good would be required for an energy storage facility with a capacity greater than 1 megawatt.
Legislature prepares for massive federal funding for broadband expansion
The House Committee on Energy and Technology proposed to amend H.360, an act relating to accelerated community broadband deployment, in response to the recently-passed federal stimulus bill. The bill aims to solve ongoing broadband connectivity problems that have disproportionately impacted Vermont’s rural communities during COVID-19.
Between a new Subordinated Loan Program and Community Broadband Preconstruction Grant Program, the bill appropriated $30 million to support broadband expansion efforts—50 percent more than the Governor’s broadband budget request. The amendment proposes to increase the bill’s appropriation to $200 million, allocating $40 million to the Community Broadband Preconstruction Grant Program and $160 million to the Construction Grant and Subordinated Debt Program.
To contextualize the $200 million request, the amendment adds intent language stating the estimated $1 billion cost of providing 100 Mbps symmetrical service to the estimated 254,000 locations (82 percent of Vermont) that currently lack this service. Committee chair Tim Briglin, D-Norwich, said the federal stimulus money will provide a once-in-a-lifetime opportunity to fix the State’s broadband infrastructure problem and “hop into the twenty-first century.”
The federal government has not yet provided guidance on how states can distribute dollars. The amendment reflects the need for flexibility while the State waits for more information. In the meantime, communication union districts can apply for loans from the existing Vermont Economic Development Authority Broadband Expansion Loan Program, or grants from the Connectivity Initiative administered by the Department of Public Service, for shovel-ready projects.
Contractor registry advances
H.157, a bill calling for a registry of the state’s residential contractors, advanced out of the House Committee on Ways and Means this week on a 7-4 vote. The bill requires any contractor who performs a building or renovating project to register with the state every two years. It also requires a written contract between the contractor and client and the maintenance of liability insurance.
Rep. Caleb Elder, D-Starksboro, citing a desire to protect “small-time” operators from burdensome fees, offered a successful amendment to raise the threshold that would trigger registration from $2,500 to $3,500 in materials and labor. The amendment also exempts from registration any contractor whose work is regulated by the Public Utility Commission.
Elder expressed his hope that if the bill passes the House, future committees consider separating material costs from labor costs, giving more leeway to smaller contractors with a lower threshold for registration.
The bill enjoys the support of the Vermont Builders and Remodelers Association, which views a registry as the first step in professionalizing Vermont’s building industry. H.157 now heads to the full House.
Administration’s Act 250 proposals get review in Senate committee
The Senate Committee on Natural Resources and Energy was introduced this week to S.112, a bill introduced by Sen. Brian Collamore, R-Rutland, which incorporates the administration’s proposals to modernize Act 250. The bill reorganizes the Natural Resources Board into a new, three-member professional board that would hear all major permit applications. The board would be joined by two district commissioners from the region in which the permit originated. Earlier in the year, Gov. Scott attempted to make this change through Executive Order. That effort was rejected by the legislature.
The bill also provides exemptions from Act 250 jurisdiction for Designated Downtowns, Village Centers and Neighborhood Development Areas provided they meet the higher standards of Act 250 review in their permits.
Committee Chair Chris Bray, D-Addison, said he wanted to accommodate the administration’s desire to pass Act 250 reforms, but given the difficulty of taking up complicated legislation via remote telecommunication, expressed doubt about the committee’s ability to engage in a full review of Act 250 this year.
Senate committee already spending federal relief funds
The Senate gave preliminary approval to H.315, the so-called “expedited COVID budget bill,” on Friday after dramatically increasing the amount appropriated, from $42 million in the House-passed bill to $104.7 million. A summary of the latest version of H.315 can be found here.
The majority of the spending increase resulted from the Senate Committee on Appropriation’s controversial decision to appropriate funds from the American Rescue Plan Act of 2021 (ARPA) before they are received. The committee also swapped out the funding source for many of the bill’s expenditures from the General Fund or Coronavirus Relief Fund to anticipated ARPA funding. Over the objections of Commissioner of Finance and Management Adam Greshin, the committee added language directing Greshin to make expenditures before receipt of the ARPA funding with excess revenue receipts. Greshin said that would “put the excess receipts program on steroids” and could require him to pay out 7-8 percent of revenues anticipated due to the delayed receipt of ARPA funds.
After the committee passed the bill inclusive of the ARPA funding, Administration Secretary Susanne Young sent a letter of protest to the committee, saying that the appropriation of $70 million of ARPA funds not yet in hand was “unexpected,” especially before the state has received detailed guidance from federal agencies on allowable expenditures. Young noted the remarkable amount of funding coming to Vermont from the federal bill but said that appropriating a large piece of discretionary ARPA funding before the legislature and the administration could work together on a framework to achieve state goals was premature. Committee Chair Jane Kitchel, D-Caledonia, had noted in committee that the swap for ARPA funds was made to free up General Funds for use on non-permissible ARPA expenditures, such as the state pension fund.
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