Big Questions, Few Answers as Usual Adjournment Date Approaches

When the legislature moved from the State House to the cloud eight weeks ago, it was anyone’s guess as to how that would work. The answer, it turns out, was about as well as one could expect. Small committees have functioned better than large ones; the 30-member Senate has worked vastly better than the 150-member House; and legislators have similar (or greater) technical challenges as the rest of us who are working remotely.

Lawmakers now have two enormous tasks ahead of them, and it’s not at all clear how they will accomplish them in this strange virtual environment:

1. Determine how to spend more than $1 billion in federal Coronavirus Relief Funds within the restrictive (but vague) confines of the law; and
2. Close a massive state budget deficit (without using much of #1).

Those decisions are largely being put off until late summer. In the short term—between now and mid-June—lawmakers will pass an FY 2020 budget adjustment to accommodate changes in the current fiscal year. That reconciliation has turned out to be surprisingly straightforward. And they will pass a so-called “skinny budget” which will appropriate money for the first three months of FY 2021.

The real work will happen when lawmakers “return” in late August from a summer recess to accomplish tasks #1 and 2. That will almost certainly be a virtual return, with the State House likely closed for large gatherings until next year.

Thus far, all legislative decisions have been made by consensus, which has been easy to do in light of the immediate public health and financial crisis. But tasks #1 and 2 will necessitate major policy choices, some of which will naturally become partisan.

In a wide-ranging interview yesterday on Vermont Public Radio, House Speaker Mitzi Johnson and Senate President Pro Tem Tim Ashe gave little indication of how those choices will be made. We are left now with mostly questions:

• How will the legislature respond if the federal government refuses to backfill state budget deficits?
• What will Gov. Phil Scott’s and the legislature’s appetite be for budget cuts and tax increases?
• How will committees function as they grapple with complex policy and program choices?
• Will committees even matter, or will decision making, by necessity, be consolidated?
• How will the bodies—and most significantly the House—manage to debate controversial issues?
• Will committees take up non-COVID-19 legislation?
• How will outside interests and the public be heard?

This is the time of year when we would normally put our weekly Legislative Update on hiatus until the legislature adjourns for the year. In this anything-but-normal session, we will continue to publish periodic Legislative Updates, but our publication schedule will be driven by legislative news and not our usual Friday deadline.

We will continue to keep our clients informed on the details of committee hearings, floor proceedings, caucus meetings and other relevant activities.

Vermont Legislative Update Quick Links

With no relief in sight, lawmakers ponder new taxes for education

Budget discussions continue all week

Childcare centers, summer camps, and the next school year

Businesses look towards May 11 restart

With no relief in sight, lawmakers ponder new taxes for education

Recent guidance from the U.S. Treasury threw a curveball to one plan for funding education in the wake of anticipated enormous revenue losses for the state’s Education Fund. The House Ways and Means Committee spent weeks working on a conceptual proposal to provide a tax credit to property tax payers using Coronavirus Relief Fund money in order to compensate for revenue losses in FY 2021. But the new guidance specifies that CRF funds cannot be used to provide property tax relief. The news led one representative to say, “Who does the CARES Act care about?”

Though deflated by the news, the committee turned its attention to whether CRF funds could go directly to schools through grants administered by the Agency of Education. Analysts from the Joint Fiscal Office said that such grants would need to address expenses directly resulting from the repercussions of COVID-19, would come with extensive administrative burdens, and be subject to claw backs if the money were erroneously allocated: not an obvious or appealing option.

In the absence of federal money to go directly to the education fund, to taxpayers, or to schools, committee members threw together a laundry list of tax ideas—some recent, some resurrected—and instructed their fiscal analysts to put together new revenue estimates for what each would raise. Among the revenue sources named were taxes on cloud transactions, candy, sugar-sweetened beverages, luxury clothing items, tobacco, beer, and alcohol. A COVID “surcharge” (additional point) on the sales tax for a limited period of time was another option with a potentially large payoff.

Members were noncommittal and unsure about raising new taxes in this economic climate but committee chair Ancel, D-Calais, summed up their dilemma saying, “We cannot let schools fail and property taxpayers cannot afford a 22-cent tax rate increase.”

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Budget discussions continue all week

The House Committee on Appropriations met every day this week for budget discussions, focusing largely on the FY 2020 Supplemental Budget Adjustment Act (BAA2).

Department of Finance & Management Commissioner Adam Greshin proposed a plan to offset the general fund FY 2020 deficit of $194.50 million by using $56.07 million saved from various adjustments. The remainder of the deficit would be addressed with state reserves.

The administration has proposed using the deferred tax payments from FY 2020 that will be collected in July to replenish the reserves. Instead of using the reserves, State Treasurer Beth Pearce proposed to keep FY 2020 open and change Vermont’s accounting basis to allow the FY 2020 deferred revenue collected in July to be counted as FY 2020 revenue. The committee may include language in the BAA2 to allow for either option.

The committee learned the administration has spent around $179 million on COVID-19 needs that could be included in the BAA2. It is likely to move forward with most of the proposal.

On Friday, the committee voted partially in favor of Greshin’s request for administration authority to transfer funds across state government to balance the budget. Under current law, transfers cannot exceed $50,000 and generally must be within the same agency, department, or unit. The committee voted to keep the administration’s transfer authority as is but increased the amount that can be transferred to $250,000. It hopes to wrap up BAA2 discussions next week. Greshin anticipates the FY 2021 first quarter budget should also be ready for review next week.

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Childcare centers, summer camps, and the next school year

Governor Scott released new guidance for opening childcare centers and summer camps at his Friday press conference.

All childcare centers may begin training staff and setting up facilities on May 18 with reopening dates of June 1. They must adhere to the Department of Health’s guidance if they choose to reopen.

Guidance for childcare centers and summer camps (including overnight camps) will be out next week and will include a 10-person congregation limit. Camps will have to decide if they can reopen, and their ability to operate will be determined by the activities they offer, the space they have in which to work, and how many children they need to serve to remain financially viable.

Restart grant funding of $6 million will be available to cover the cost of making these programs safer and healthier. Expanded testing and tracing protocol will be in place for those working with children in camps and childcare centers.

Also this week, Education Secretary Dan French spoke to the Senate Education Committee about the next school session. He said schools can either use the summer to provide remedial education in consideration of the last few months or use this time to prepare for September.

French believes the time will be better spent readying for the fall. Schools won’t look the same, and it will be important for them to prepare for things like additional remote learning, increased needs for student emotional well-being, new hygiene protocol, professional development, and imminent financial constraints. French anticipates there will be a clearer picture of what guidance will look like towards the end of June.

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Businesses look towards May 11 restart

As the number of workers that can be assembled at the same jobsite increases, so do the safety requirements for businesses under Governor Scott’s phased restart of Vermont’s economy.

First two, then five, then ten workers were allowed at the same location, all while following the strict social distancing rules that have become de rigeur, and only after every employee has completed self-guided online training through the Vermont Occupational Safety and Health Administration. Phase 3 of the restart plan begins on Monday, May 11, and limits on crew size will be removed. Manufacturing, construction, and distribution operations that ceased operations for more than seven days during the state of emergency may restart with “as few employees as necessary” to permit full operations, while maintaining compliance with the mandatory health and safety requirements.

Business with ten or fewer employees at a single location can continue to operate under the current guidelines for health and safety, including the designation of an on-site health and safety officer to ensure compliance. Businesses with crews of more than ten, however, are required to adopt an industry-specific detailed reopening and training plan. Industry associations are rushing to furnish templates for their business members to customize for their own use, including manufacturing, distribution and warehousing, construction, and golf courses.

Jim Bradley, President of the Vermont Builders and Remodelers Association said the organization has been busy interpreting the rapidly changing rules, and making sure association members follow the guidelines for the health and safety of workers. Also, says Bradley in a video to VBRA members, any future work restrictions will be determined by how the industry as a whole conducts themselves now. “You don’t have to 100 percent agree or be on board with every measure,” says Bradley, “but with people being called upon to report bad practices, we’re asking you to comply.”

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