Legislature Struggles to Approve Federal Relief Funds

Vermont has largely escaped the physical devastation of the COVID-19 pandemic, with the vast majority of cities and towns reporting zero to five cases. But the economic toll has been immense, and the scope of financial losses and business closures is likely to be massive in the months ahead.

Nonetheless, three months after the COVID-19 lockdown began, the legislature has approved only $93 million of the nearly $1 billion in federal CARES Act funds it was allocated. Of that amount, $70 million is for small business relief – barely one-third of the amount requested by Gov. Scott.

Despite the legislature’s timid pace, the governor has largely refrained from criticism, choosing instead to maintain a sense of unity among the state’s leaders. At his press conference today, he prodded the legislature to act more quickly, but left his staff to deliver a more pointed message.

Although they haven’t acted quickly, the legislature has become more adept at working remotely. But that fluency has come at a cost to the public. As one observer noted, there is a difference between observation and participation. For Vermont citizens, it is difficult to follow legislative proceedings in the best of times, but they can almost always participate. The virtual meeting environment has made public participation virtually impossible. As a result, it is extraordinarily difficult to parse the decisions that are being made, much less offer any input.

Compounding the opaqueness is the absence of meaningful media coverage. COVID-19 has advanced the steady demise of the media and its ability to scrutinize the legislature’s actions, even as lawmakers make decisions on a massive and unprecedented scale. Legislative spending discretion usually occurs in six- or seven-digit figures; it is now working in increments that are a hundred times those amounts.

The brave new environment has consolidated decision making power in the hands of a few lawmakers – mostly House and Senate leaders and committee chairs. Most legislators have little or no input on the decisions that are being made and often seem overwhelmed and confused at the issues before them. The House Appropriations Committee blazed through its consideration of hundreds of millions of dollars of various committee proposals this week, barely making any alterations, despite its mandate to oversee state spending. Those decisions seemed to have been fully baked before they reached the committee.

Even as the legislature lumbers to appropriate an almost inconceivable sum of money over the next few weeks, it has entirely avoided addressing the looming revenue shortfall it faces in FY 2020 – now estimated at $350 million. That decision, too, has happened almost entirely without public awareness.

The legislature seems to have substituted hope for a plan in addressing the budget shortfall. It approved a preliminary budget for FY 2020 that not only fully funds most state programs for the first quarter of the year, but fully funds the education system for the entire year.

Legislative leaders have reserved $400 million in CRF funds in the hope that Congress will reverse itself and allow the money to be used to backfill state budget deficits. If that doesn’t happen, the General Assembly will return in August to find itself having to dig out of two massive holes: First, a massive budget deficit, with only three-quarters of a year in which to recover the funds through tax increases or budget cuts; and second, a deadline of less than four months for the money to be allocated, appropriated and spent to avoid having it return to the federal government.

The opaque legislative process is perhaps unavoidable given the inherent limits of meeting remotely and the need to move large sums of money in a short period of time. But the basic decisions being made highlight a few fundamental values that are driving leadership decisions:

• Lawmakers are struggling to comprehend the need to provide immediate relief to businesses that are at risk of failing by the thousands by this fall;

• Legislative leaders place a higher priority on avoiding budget reductions or raising taxes next year than shoring up the economy now.

When the legislature returns to the Statehouse, one hopes that at least the value of transparent and open deliberations returns.

Vermont Legislative Update Text Grid

* Tier 1 is the amount of CRF funds that legislative leaders have authorized in the initial round of appropriations that will be completed this month. Tier 2 is the amount held in reserve with the hope that Congress will allow it to be used to replace state revenue.

Vermont Legislative Update Quick Links

Legislature drastically cuts proposed aid to Vermont’s small businesses

House Committee approves broadband investments

Act 250 rises from the ashes

“C-R-F” Spells (Some) Relief for Education

Legislature drastically cuts proposed aid to Vermont’s small businesses

The Governor’s Economic Recovery Proposal allocated $200 million in grants and loans for businesses with a 50% revenue loss in any one month between March 1, 2020 and June 1, 2020. As the Senate and House Commerce committees considered the Governor’s proposal, new federal guidance regarding loans became available. This updated information made grants a more attractive option, as loan repayments would have to be returned to the federal Treasury. The committees could have used the loan allocation towards additional grants as that was in keeping with the intention of the Governor’s proposed aid for small businesses. They chose not to do that. Instead, the Vermont House will soon pass S.350 which will provide a lesser $70 million in grants to businesses that have experienced a 75% revenue loss.

The legislature may consider additional grant funding of $60 million next week, although that has not been confirmed. Even with an additional $60 million, however, this is a small fraction of the $200 million in small business aid the administration has now requested.

The legislature has granted the Agency of Commerce and Community Development complete discretion in determining which businesses receive grants and how to calculate awards. Although no one knows which businesses will receive grants, it is certain that applications will far exceed the funds available for these struggling businesses.

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House Committee approves broadband investments

The House Energy and Telecommunications Committee has approved a package of initiatives that would use $43 million in CRF money to finance broadband investments:

• COVID-Response Connected Community Resilience Program

o Purpose: Support to accelerate of the work of the volunteer communications union districts that have been set up around the State.

This work is a continuation of the support the legislature provided to CUDs last year through Act 79.

o Proposed budget: $800,000

Approximately $100,000 to each of the State’s eight CUDs (five active, three in the process of being established).

• Line Extension Customer Assistance Program

o Purpose: funding for consumers (residents or small businesses) to extend fiber or cable lines to home or business.

Program intended to extend broadband access to discrete locations, not whole unserved or underserved populations.

o Priority recipients:

Homes where students live that lack remote learning capabilities.

Homes whose residents include immune-compromised patients who need telehealth services.

Homes where public workers reside.

o Proposed budget: $2 million (consistent with the Governor’s proposal)

Businesses and homeowners drive disbursements of funds by indicating their need for a line extension.

Rep. Briglin: We will rely on providers who have a stake in line extension to advertise this program to potential eligible recipients.

o CUDs have to sign off on line extension proposals.

• Get Vermonters Connected Now Initiative

o Purpose: Support line extension and fixed wireless broadband connectivity.

o Priority recipients:

Low income households.

Households with remote learning and telehealth needs.

Households with public workers.

o Proposed budget: $11 million

o CUDs will have a say in where money from this program is spent.

• COVID-Response Telecommunications Recovery Plan.

o Purpose: Develop a plan to reassess the State’s critical connectivity needs in light of the COVID-19 public health emergency.

o Proposed budget: $500,000

Funding would be additional to the $300,000 the Committee proposed in February for a similar planning initiative (totaling $800,000, which is the amount the Senate proposes and could bridge the gap between chambers).

o Section also changes the due date to produce a 10-year telecommunications plan for the State from December 2020 to June 2021.

• COVID-Response Telehealth Connectivity Program

o Purpose: Support a Vermont Program for Quality in Health Care pilot program to assist 160 telehealth patients across the state by extending and improving the quality of telehealth services.

o Proposed budget: $800,000

Would cover equipment purchases such as tablets, medical peripherals and the provision of services including translation services and digital literacy training.

o One-time program through the end of 2020. Includes reporting on pilot program results to inform planning of future related initiatives.

• Financial Assistance for Ratepayer Arrearages

o Purpose: Provide financial support to utility providers who are facing $8-9 million in arrearages resulting from a Public Utility Commission Rule prohibiting utility providers from shutting off services to customers who cannot pay for them (a prohibition that lasts through the end of July 2020).

Would take bad debt of the books of utilities, alleviate financial hardships of individual residential and commercial customers, and prevent utilities from increasing rates.

o Proposed Budget: $20 million

The committee also has proposed funding for public access television stations, investments in state and municipal cybersecurity, modernization of the Department of Labor’s unemployment insurance system, Enhanced 911 services, and funding to the Agency of Education for unbudgeted and unplanned public educational programming.

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Act 250 rises from the ashes

Just two weeks before the legislature vacated the State House due to COVID-19, the House passed H.926, a bill aimed at modernizing Act 250, Vermont’s 50-year-old landmark land use law. As the awkwardness and inadequacy of remote teleconferencing technology appeared to preclude any meaningful debate and testimony, any hope the bill would be taken up in the Senate seemed doomed for the complicated bill. Both chambers of the legislature claimed they would focus solely on COVID-19 related “must pass” laws.

Now, after a relatively short two weeks of testimony, the Senate Committee on Natural Resources and Energy is poised to move portions of Act 250 reforms out of committee, bundled together as an amendment to be attached to housing bill S.237. On Friday, the committee reviewed a draft of the amendment.

Included in the amendment are exemptions for Downtown Development Districts and Neighborhood Development Areas from Act 250 review. In order to take part in Vermont’s Designated Programs, towns, villages and neighborhood development areas must go through a process of adopting stringent zoning and planning.

Development groups and municipal planners have long argued that the permitting process in designated areas live up to the environmental protections called for in Act 250. Requiring a second level of Act 250 review, many argue, is costly, time consuming and redundant. The proposed language also allows existing Act 250 permits in these designated areas to be extinguished.

The amendment also addresses the state’s trails systems. Act 250 as it exist makes no mention of trail, and trail projects have been subject to the same level of trigger review as traditional development proposals: projects that impact more than one acre of land, or ten acres in a town with land use zoning, require Act 250 review.

The Agency of Natural Resources is undertaking a thorough review of trails in the state and is expected to take up to 18 months. The draft language establishes a definition of trails that can be recognized as a Vermont Trail System trail, and therefore subject to allowable permitting in the interim.

The amendment further requires rulemaking that addresses, avoids and minimizes the impacts on large contiguous forest blocks, and reestablishes a “road rule” that triggers Act 250 review for the construction of roads and associated driveways over 2,000 feet.

The Senate committee expects to see a final draft of the amendment on Monday. Stripping out key portions of Act 250 leaves the fate of the rest of H.926 uncertain.

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“C-R-F” Spells (Some) Relief for Education

The announcement this week that schools will reopen for in-person education in the fall is welcome news, but questions about how to fund it remain large. Legislative committees in the House are busy allocating Coronavirus Relief Funds as fast as they can and the House Education Committee requested $45 million for preK-12 schools.

CRF funds are allowed to be used for unbudgeted, COVID-related expenses and not to replace foregone state revenue. Any surpluses carried by public schools due to reduced spending as a result of closures will be reduced from their education fund payments. The legislature’s proposal is part of an effort to avoid these restrictions and use CRF money to help plug substantial deficits to the education fund from reduced consumption taxes.

Recently revised revenue estimates show marked improvement from prior estimates to the overall picture while still projecting giant holes to fill. Education fund shortfalls are now estimated at $31 million for FY 2020 and $75 million in FY 2021. An equal amount of CRF funds, in addition to the $45 million described above, will be held back by the legislature in the hopes that federal guidelines will change so those funds can fill the gap. The House-passed education property tax bill raises revenue sufficient to fund school budgets that were passed prior to the pandemic, and with no mandate to reduce spending. Educators say that returning students will need supports that they cannot even quantify yet and it is going to cost money. Lawmakers, in turn, have prioritized providing certainty to schools and holding property taxpayers harmless so that schools have sufficient resources.

Vermont’s chronically underfunded and structurally insecure childcare system, so crucial to the returning workforce, has quickly run through $6 million in restart grants that were spread across early care, afterschool and summer programs. The House Human Services Committee is proposing to use CRF for an additional $9 million in restart grants, of which $6 million would be reserved for early childcare. Childcare advocates have identified $30 million in CRF-eligible uses, including $13 million in hazard pay for early educators.

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