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ARPA spending complicates budget conference
Negotiations over the FY 2022 state budget moved to conference committee on Monday, which hopes to reach agreement in time for the legislature to meet its appointed May 22 adjournment date.
The committee was immediately confronted with complications caused by the Treasury Department’s newly released Interim Final Rule for ARPA spending. Initial reviews indicated that some of the budget’s ARPA spending, including funding for housing, higher education and child care, might not be allowable. As of Friday, the conferees had not yet received final determinations from the legislature’s Joint Fiscal Office on what ARPA spending in the bill is allowable.
The guidance has further intensified the power struggle between the administration and the legislature over ARPA decision-making. The administration testified Friday morning again in favor of removing ARPA spending from the budget in order to dedicate it to the governor’s long range “transformational” infrastructure plan. The governor proposed using excess revenue to replace ARPA spending, increasing the Economic Grant Recovery Program appropriation from $20 million to $50 million, and using the expected future revenue upgrade to fund the pension reserve. After the administration’s testimony, the conferees moved forward with negotiations without discussion of the proposal.
The House has conceded to the Senate’s position in many areas, but House Conferee Mary Hooper, D-Montpelier, took a firm stand today against inclusion of provisions from S.109 (a major weatherization funding bill). The Senate conferees have not yet responded. (See list of positions as of May 13 here.)
Despite the delay in ARPA spending decision-making, Senate Appropriations Committee Chair Jane Kitchel, D-Caledonia, said that the goal is to have a budget approved by the conference committee by Tuesday evening.
Unemployment Trust Fund saga continues
The formula that determines the Unemployment Insurance Trust Fund balance and the rates businesses pay to feed the fund is complicated and doesn’t autocorrect for anomalies, such as massive pandemic-induced unemployment. It will take legislation to reconfigure the calculation so more money isn’t raised by employers than is needed in the fund.
The formula to calculate the UI Fund balance uses a 10-year average of UI rates. Pre-Covid, there was $500 million in the Fund – a balance so healthy that employers were down to a Schedule 1 rate, which meant they were paying the lowest tax rate (Schedule 5 is the highest).
The fund balance fell by $300 million in 2020, with business owners responsible for repayment. As the formula now stands, with 2020 in the calculations, the statute calls for a $1 billion fund balance. By all accounts, this is too much money.
To correct this Covid glitch, businesses, the administration, and the House Commerce Committee wanted to remove 2020 from the averaging. This would mean the fund will need about $600 million, not $1 billion. The replenishment gap that businesses need to fill would be $400 million, as the fund currently has a $200 million balance. Without this change, the total needed would be $800 million.
Senator Sirotkin, D-Chittenden, claims that this calculation correction is a benefit to businesses since they would face a $400 million tax burden, and not an $800 million obligation. As a quid pro quo, he wants UI recipients to also receive a benefit. The fact that pandemic-beleaguered business owners, through no fault of their own, still have a new $400 million deficit to contend with doesn’t seem to matter.
Sen. Sirotkin informed the House Commerce Committee that he would not negotiate and insisted that the committee add $100 million in new benefits for UI recipients over the next ten years. The committee was stuck. If they added these benefits and removed 2020 from the formula, businesses would be at a Schedule 3 rate for one year, a Schedule 4 rate for the next two years, and lower schedules after that. If they didn’t concede to Sen. Sirotkin, 2020 would remain in the formula, $1 billion would need to be raised, and business owners would pay at a Schedule 5 rate.
House Commerce Committee Chair Rep. Michael Marcotte, R-Coventry, made it clear he didn’t support Sirotkin’s position. But he understood that without adding this $100 million the bill would die and businesses would face $400 million in additional taxes. His committee unanimously agreed to add $100 million in new benefits and remove 2020 from the fund balance formula. The bill has a few other committee stops before it goes to the full House for a vote.
The business community is positioned between bad and worse alternatives. If there were a time in which the Senate’s economic development committee might have supported the business community, one would have thought a pandemic-induced economic slowdown would have been it.
House approves mandatory radon testing in schools
The House approved a school construction and facilities bill that requires all public and approved independent schools to test for radon by June 2023. The Senate tacked on the radon requirement, late in the game, during a third-reading floor amendment, and informed the House that unless the radon provision was kept in, the bill would die.
Schools will incur the costs associated with testing and remediation, but legislators have justified the timing of the unfunded mandate by saying that public schools will be flush in federal ESSER dollars. The Agency of Education has countered that radon testing and remediation may not be an allowable use for ESSER. Independent schools do not receive ESSER and will be fully responsible for the costs.
Schools will need to test for radon every five years. The estimated cost statewide for the initial round of testing is $1.3 million, according to the Joint Fiscal Office. Remediation costs, however, are entirely unknown as each building has specific protocols unique to the soils underneath it as well as its construction.
Given a scarcity of radon testing contractors, the length of time to complete radon testing, and the necessity of conducting testing in winter, legislators have acknowledged that they may need to revisit the proposed deadline of 2023 and make adjustments next session. Schools that are currently undergoing indoor air quality projects have an extra year so that testing can be done after the work is complete.
Contractor Registry – The Senate Commerce Committee voted 4-1 to approve H.157, the contractor registry bill. As passed by the House, any contractor who performs a residential building or renovation project that exceeds $3,500 in time and materials will be required to register with the Office of Professional Regulation. Citing testimony from OPR that the majority of fraud complaints involve smaller jobs, the Senate committee lowered the threshold to $2,500. A written contract and maintenance of liability insurance are also required. The committee took further testimony in support of the registry from the Vermont Builders and Remodelers Association, which believes it will promote professionalism within the building trades industry. The bill will make more stops in the Senate Finance and Appropriations committees before going to the Senate floor.
Low Alcohol Spirits – The House General, Housing, and Military Affairs Committee continues to work on H.313, a bill that would allow for the continued temporary sale of alcoholic beverages by delivery and curbside pickup, create a new “stand-alone” third class license for establishments that only sell spirits, and clarify requirements for festival permits which are needed for any event that is open to the public. The committee is considering amendments to the bill, including one that would place low-alcohol spirit beverages in the “vinous beverage category” for sales purposes. The committee is debating the maximum alcohol-by-volume limits for this new category. Committee members have endorsed maximum ABV levels ranging from eight to 16 percent, with some members settling on a middle ground of 12 percent. Another amendment allowing for direct-to-consumer sales of spirits is also being considered.
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