Thank you to this week’s sponsor of our Advocacy Update:
January 21, 2021
What does the third week of the legislature look like? A little bit of everything and a whole lot of nothing done. If the legislature is a hose, then the third week is about priming a pump that will push water through that hose. Committees are taking testimony, grappling with difficult issues, and better understanding what is feasible.
In this week’s update
- Join us for our legislative breakfast series in 10 days
- Governor delivers proposed budget
- Budget adjustment act passed by House
- LCC testifies on workforce challenges
- Burlington charter changes receive an initial walkthrough
- Medical monitoring bill returns
- Reimbursable employers and small nonprofits come under scrutiny
- The Laundry List
Join us for our (Virtual) Legislative Breakfast Series – First Breakfast in 10 days!
We are pleased to announce more details on our upcoming legislative breakfasts. Be sure to register today to reserve your space!
Monday, January 31st – 8:00 – 9:15 a.m.
Join legislators from our region for networking and conversation about their efforts as they cap off their first month back in session.
Monday, February 14th (Valentines Day) – 8:00 – 9:15 a.m.
Good intentions don’t always make good policy, and a potential increase in income meant to push some to prosperity isn’t always met with a proportional policy impact; we call this situation a “cliff.” Join LCC, leadership from the Leap Fund, and analysts from the Atlanta Federal Reserve to discuss addressing benefits cliffs. Read more about this work in the New York Times.
Monday, March 14th – 8:00 – 9:15 a.m.
As the legislature enters the home stretch, check-in with the Governor, Speaker of the House, and Senate President Pro Tem about how they see the session going and what they want to see done before the legislature adjourns.
Special thanks to the sponsor of our Legislative Breakfast Series:
Governor Delivers Proposed Budget
This week, the Governor proposed his budget to the legislature, reflecting a massive cash infusion into the Vermont economy. The bill included about $400 million in additional revenues, some of which the Governor is counting on for years to come. The Administration and their economists believe that the revenues won’t collapse, but the rate of growth might slow, so they think they can make some long-term commitments. In addition, the Governor is looking to broaden the stabilization reserve to bring it to over $400 million for a potential rainy day. Finally, about $111 million in one-time expenditures are built into base revenue to buttress against a contraction in revenues in future years.
Among the sweeping changes are some massive changes to Vermont’s social infrastructure. Some of this we covered quickly in our update last week related to H.527. To start, the Governor proposed a $12 million increase to the Child Care Financial Assistance Program (CCFAP), which would bring us to about $60 million in funding. The Governor is also proposing increasing the Earned Income Tax Credit state match from 36% to 45% as the most generous fully refundable EITC in the nation, second to only California. Additionally, the Child and Dependent Care Credit state match would be increased from 24% to 65% (priced at about $7 million). The Federal CDCC can be up to $4,000 per child for households under $125,000, and the state matches that at 24% with a nonrefundable credit; this proposal increases that to 65% and makes it fully refundable, meaning households could be given up to $2,600 per child.
A longtime LCC priority, a State and Local Tax (SALT) deduction cap workaround for pass-through entities, was included in the budget as well. Vermont has been behind in adopting what about 20 states have already done and about a dozen other states are working on. The workaround would allow a federal tax cut to Vermonters at no cost to the state and is widely understood in most high-tax blue states as a way to be competitive with other states with low taxes that do not offer as many services. This would be a monumental step to build back to a place of competitiveness taken away by the Trump Administration’s “Tax Cuts and Jobs Act,” which capped SALT as a punitive measure to blue states. It was hoped that this could be settled in the Biden Administration’s proposed Build Back Better legislation, however, this has been imperiled for some time now.
Another longtime LCC priority is included in the proposed budget: student loan assistance. The proposed budget includes a student loans interest deduction at the Vermont state level. LCC has been advocating for this for years after our Burlington Young Professionals Survey showed student loan debt as a major impediment to Vermont attracting and retaining young professionals. Much of this work was pushed to the back burner during the pandemic. While this already exists at the federal level, there is a cap of $2,500 and it’s only available to single filers under $70,000 or joint filers under $120,000 and doesn’t cover those married filing separately, which many couples with student loans do to lower their income-driven repayments. In short, this would help those who already are maxing out the federal deduction, those who are outside federal income thresholds, and those married filing separately.
There is plenty more to like in the proposed budget.
- It pursues tax credits for nurses and childcare workers that would, on average, wipe out the entire tax liability of those workers.
- Expands the Downtown Tax Credit by adding more funding and expanding the definition of what qualifies.
- Exempt military retirement income and survivors benefits as we’re one of the few states that taxes these which puts us at a disadvantage when attracting skilled workers.
- Envisions $20 million in PPP-style loans for Vermont businesses.
Committees spent some of this week combing through the proposals and hearing from the relevant members of the Administration.
BAA Passed by the House
Last night, the House passed for the first of two times the Budget Adjustment Act. Some highlights of the act include:
- Almost $400 million in additional spending.
- An additional $200 million mostly from swapping initial ARPA dollars for general fund dollars to take advantage of federal funds that require a match from the state general fund.
- About $70 million in retention efforts with state mental health employees, corrections, and designated social service agencies employees.
- About $6 million in retention payments for the childcare workforce.
- $10 million for up to two free classes in a calendar year at UVM or state colleges for VT residents seeking a transition to a new career or to enhance job skills.
- In total, about $75 million for housing. The Vermont Housing and Conservation Board will receive about $55 million to build about 250 units of housing for those exiting homelessness. The Vermont Housing Improvement Program, which enabling legislation for was vetoed yet was created by the Administration and took advantage of the appropriated money last session, will receive $20 million to restore rundown and blighted residential properties. The House declined to provide funding at this time to the VHFA ‘Missing Middle’ home builder program as many legislators liked the program, but did not feel that it was ironed out enough to make it work.
- $200 million for pension liabilities from the General Fund as agreed upon by labor and the Democratic Legislative leadership.
More was spent from ARPA than the Governor proposed in his BAA and less from the general fund because the House wanted $85 million leftover in general fund dollars to use for matching the federal infrastructure bill. Additionally, the Governor has yet to weigh in publicly on the current pension deal included in the BAA. The bill will need to be passed by the House one more time today before being sent to the Senate where there might be some differences.
LCC Testifies on Workforce Challenges
This week, LCC’s Government Affairs Manager joined the House Committee on Commerce and Economic Development to discuss issues affecting our state’s workforce. He highlighted demographic issues related to our state’s age and low birth rate and a restrictive low supply and high cost of both childcare and housing as the longstanding economic impediments to the Vermont economy that LCC was sounding the alarm on before the pandemic and have since been exacerbated over the last two years. LCC’s testimony focussed on some items under consideration by the Committee, housing efforts, and items in the Governor’s proposed budget.
Burlington Charter Changes
House Government Operations took its first look at H.448, a bill that would make four changes to the Charter of the City of Burlington. As background, Vermont is what is known as a Dillon Rule state, which means that local governments govern by charter, and for many larger policies they must seek approval of the State Legislature to enact them. The four policies in H.448 are:
- Just Cause Eviction
- Carbon Impact Fee
- Ranked Choice Voting
- Adding a Burlington and Winooski resident to the Airport Commission
Carbon Impact Fee: The Committee spent their time discussing the carbon impact fee and just cause eviction. The Committee heard from the Burlington Electric Department that despite the broadly written language, the intent of the City is to only apply the carbon impact fee to new construction, something a proceeding witness called into question, as the enabling language might suit the intent of a different mayor or city council who may want to go further in years to come. The Committee also heard from a representative from VGS that they would prefer the City not take such steps on its own and instead pursue more regional solutions, such as the proposed Clean Heat Standard. They pointed out that a patchwork of local control makes it very difficult for the company to model and best serve their customers.
Just Cause Eviction: This component is an attempt at a laudable goal of creating some stability for renters, however, the unintended consequences might be choosier landlords and degradation of property rights. Under the proposal, the only few remaining reasons a tenant can be removed would be: if a tenant does not pay rent, violates terms of their lease, or breaks one of the state’s tenant laws. This treatment extends to the renewal of leases, forcing a landlord to renew. A few concerns might be that selling a property might not be considered just cause, which might stick a person with a sunken asset. Also of concern is that a rent increase might be considered unfair when a landlord has a perfectly viable reason to do so. LCC is concerned that this change could reduce housing options for renters.
The House Government Operations Committee has a lot on its plate this year with legislative reapportionment, pension reform, and other large ticket items even without this massive, unprecedented list of projects Burlington’s City Council has sent to them.
Medical Monitoring Bill Returns
The Senate Judiciary Committee heard initial testimony on S.113 this week. The bill would seek medical monitoring for those affected by contamination and would draw much of its language from the Crawford decision written for the Sullivan vs. Saint-Gobain case stemming from PFOA exposure in Bennington. Those who have followed our newsletter will remember that the decision is more closely aligned with LCC’s counter-position than the proposal from the legislature. The language presented in S.113 goes beyond the proximate cause under the Crawford decision, which is problematic. More details about the bill can be found here.
Reimbursable Employers and Small Nonprofits Come Under Scrutiny
The House Commerce Committee began a discussion around H.29, a bill that would make changes to nonprofit options around unemployment insurance. To understand this legislation better, it helps to have a little background. If this isn’t needed, skip to the section “what does H.29 do?”
There are two types of employers in the context of the unemployment insurance (UI) system; reimbursable employers and contributing employers.
- A contributing employer: one that pays a tax on wages to the Department of Labor (VDOL) which administers the UI trust fund, each quarter up to a taxable wage base. If they have an instance in which an employee is separated from employment and qualifies for benefits, then the employer will have a benefit ratio calculated that results in a new rate class for that employer and a different tax rate for the employer.
- A reimbursable employer: one that does not pay tax to VDOL each quarter, however, they still need to pay benefits back at a dollar-for-dollar basis to reimburse the UI trust fund. Only nonprofit entities are eligible to have this type of arrangement.
There is a third door here, in which a nonprofit under four employees can choose to not offer UI either way. This is enabled under federal statute.
The decision point for reimbursable nonprofits broadly: if they decide to be a contributing employer, and are contributing to the UI trust fund, there could be many years in which they just contribute taxes but never have employees draw a benefit. If they go the reimbursable route, they could have a bad year and need to pay for the entirety of benefits. In short, reimbursable employers carry higher liability, and contributing employers have a carrying cost. Where benefits become more difficult to understand is when looking at the effect of the benefit ratio.
So, what does H.29 do? Two things. This bill as originally drafted, creates a notice requirement for nonprofits under four employees that are not required to offer UI, to employees that they do not qualify for UI in the event of separation. The bill also, (as redrafted by the Committee) contemplates bonding requirements to ensure the solvency of the trust fund. Any reimbursable nonprofit would need to provide a surety bond or deposit with the Commissioner of VDOL or another form of security approved by the Commissioner.
This provision is very vague, as it would need to go through rulemaking, so it is unclear how much this would cost a nonprofit and might degrade the benefits of being a reimbursable employer. LCC was also disappointed to not see issues around subsequent employers included in this work, in which an employer does not cause a separation from employment, yet has to pay the majority of a UI claim.
The Laundry List:
- Read last week’s update here
- The Senate Committee on Economic Development, Housing, and General Affairs has started compiling a housing omnibus bill. Trust us, we’ll share more as it develops, however, for now they are in the process of compiling past work, new ideas, and understanding the life expectancy of items after they pass their committee, as some of the good work they’ve done on housing in the past was gutted upon leaving. The delicate dance is always around Act 250. For now, two bills that make up the main substance of the draft are S.511 and S.226.
- This week, the Senate President Pro Tem said there is no path forward for a statewide mask mandate, effectually ending efforts to pursue such legislation in the Vermont State House.
- H.320, which prohibits agreements that prevent an employee from working for the employer following the settlement of a discrimination claim, will likely be passed about the time you receive this. A recent amendment to the bill clarifies that an employer does not need to rehire the employee, however, the employer cannot prevent them from re-applying to the company.
- LCC’s Government Affairs team was asked to testify next week on H.329, an employment discrimination bill we covered last week. Send input to [email protected].
- Town meetings and local elections can now proceed with COVID precautions after Governer Scott signed two bills this week;
- S.172 allows mail-in ballots in lieu of town meeting.
- S.233 suspends requirements for local candidates to file petitions to place their name on March 2022 municipal ballots.
- S.222 enables municipalities to hold online meetings.
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