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Legislative Update – Week 14

This week’s Legislative Update is sponsored by:

April 17, 2020

LCRCC’s advocacy team has been bucketing its thoughts and actions around COVID-19 as response, retention, or recovery. Much of the work the last month has been response and retention, with the LCRCC team reaching out to every single member business as this has unfolded and working tirelessly to advocate for tools to help retain businesses and employees on business payrolls. This week, some state and federal movement has turned sharply towards recovery with the President wanting to basically flip the switch on the economy back to on and Governors vowing a more measured approach. 

Today, Governor Scott announced major, promising news on re-opening the economy and on Wednesday, Governor Scott announced that Vermont joined a group of states – New York, Massachusetts, New Jersey, Connecticut, Pennsylvania, Delaware, and Rhode Island – to better understand how to re-open the states’ economies in a regional coordinated way.  At the federal level, Congressman Peter Welch and colleagues released a plan that would send federal aid to states as they try to balance re-opening their economies and slowing the spread of the coronavirus. 

In this Week’s Update; 

The Challenges and Opportunities for our Recovery 

As we look to the recovery phase, and re-opening our economy, taking an accounting of the challenges and opportunities will better help build the solutions. 

The challenges: 

To start, Vermont will likely, without major intervention, take some time to climb out of this economic depression (yes, depression) we are about to face. Looking back, Vermont has still not fully recovered from the 2008 recession. According to a recent Oxford study, Vermont is the third most economically vulnerable state in the country.

graph of U.S. states structural economy vulnerability scores

Everyone is understandably anxious.  Vermont small businesses are taking a beating in a state that doesn’t have a strong reputation for business friendliness. Furthermore, we face critical shortages in affordable housing and issues with infrastructure in a state in which the Bank of England found it is as hard to build in Burlington as it is in San Francisco. 

Furthermore, we’ve all discussed for the last decade the demographic challenges we face. Before this crisis, LCRCC was advocating for bridging the “opportunity chasm” that existed for young professionals in the region due to a lack of affordable housing, childcare, middle-level career opportunities, and student debt. 

While these are all daunting challenges, acknowledging them upfront means we can make our recovery about more than just going back to normal, it can be about building a resilient Vermont economy that supports our small businesses. 

After this, we can expect increased costs everywhere:

Things will not go back to normal for a long time. Prices will increase across the board and you should plan accordingly. 

  • Healthcare and health insurance – while the last three rounds of federal stabilization have funneled needed dollars to hospitals, the outlook is not good for many Vermont hospitals. About half of Vermont’s smaller hospitals were in the red going into this, having to forgo elective (yet still necessary) procedures that make the hospitals the bulk of their revenue has been detrimental to the Vermont hospital landscape. 
  • Property taxes – we should brace for increases in property taxes as towns will need to abate payments for Vermonters facing economic hardship and shortfalls in consumer spending and travel result in less income for our state’s education fund. 
  • In general, expect increases in taxes and fees – while the biggest issue for state budgeting has been a delay of funds coming in, we can also expect shortfalls once everything re-opens. Tourism, a major revenue generator for the state, has taken a major hit and it is unclear when people will be allowed to or will want to start traveling again. 
  • Unemployment taxes – while your individual experience rating will not increase for actions taken as a result of COVID-19, the overall taxation level likely will need to cope with the depletion of our state’s unemployment insurance trust fund. Estimates put the fund running out of dollars in about 17 weeks.  After that, the state will need to borrow money from the federal government. 

The opportunities:

Now is the time for Vermont to make its case to potential employees who were lost in the rural-to-urban “brain drain” of the last decade. Somewhere in New York City or Boston, there is a young professional, trade worker, or entrepreneur who is realizing that their experience would be much different in a rural environment. People all around the country are cooped up at home, longing for the country and outdoor recreation. We can do more to build on the success of our worker relocation programs in a targeted effort to entice these workers to come here.

Similarly, this crisis has put on full display what we’ve always said about the advantage of Vermont’s small size and access to government. Federal relief is disproportionately helping Vermont thanks to our seasoned professionals in our financial institutions, our business organizations willing to put in the hours, and leadership from Vermont Senator Patrick Leahy who is vice-chair of the Senate Appropriations Committee. Similarly, Vermont’s bootstrapped, can-do nature and true grit have been on full display as communities have come together to support each other. These are stories we need to broadcast to the world in the coming months and years. 

While we are seeing large losses in our travel, tourism, recreation sectors in the last month, once travel and leisure can resume, Vermont’s tourism sector can capitalize on “drive-market” tourism from large, close by, metropolitan areas such as Boston, New York, and Montreal. The state was considering investing a half a million dollars in tourism marketing before the state of emergency, and despite constrained state coffers, such an investment targeted at these drive markets can bring in the stir-crazy city dweller who likely does not want to get on a plane anytime soon. 

There are plenty of places where this crisis is bringing to the forefront what Vermont could have done better. It now places the onus on us to do better going forward from digitizing land records to extending broadband.

Governor Amends Executive Order to Slowly Open Spigot to Economy 

Today the Governor announced the “first turn of the spigot” to slowly re-open the Vermont economy. The Administration believes we are currently at peak and if we follow the guidelines developed by the CDC and Vermont Department of Health we can successfully keep our number of cases low.

We can expect guidance very soon from ACCD for limited outdoor work that would fit into categories such as landscaping and construction, as well as guidance that will likely allow highly-limited, low-contact, low-density operations of other specific businesses beginning April 20th. Work conducted outdoors will need to be done by no more than two-people per job site or acre, whichever is lower. Strict safety requirements will need to be followed. Continue checking the ACCD website to learn more about this guidance as it is finalized and available.

The Governor is obviously worried about easing restrictions too much and then having to clamp down again, so we should all be diligent to follow the guidance of the Vermont Department of Health. 

You can watch the Governor’s press conference here.

Earlier this week, the Governor announced the creation of an Economic Mitigation and Recovery Taskforce charged with providing technical assistance and expertise to mitigate the devastating short-term economic impacts of the COVID-19 pandemic and develop strategies designed to speed long-term business and community recovery. This group will provide sector-specific guidance to re-opening the economy. More information about the taskforce, its subcommittees, and all of those appointed to it can be found here.

Unemployment Frustrations

Discontent is building as more than 40,866 Vermonters are on unemployment, with many of them not receiving compensation yet. About 60,000 Vermonters have been identified as qualified for unemployment assistance during the COVID-19 crisis. The Governor announced today that he has given the Department of Labor until Saturday night to clear the backlog, and if not, he has authorized the state Treasury to issue $1,200 checks to those who have not been covered. 

The Department of Labor began drawing additional scrutiny and criticism from legislators this week who are being flooded with painful stories from their constituents. All of this is conjuring up memories of the early troubled rollout of Vermont Health Connect for many legislators. 

In the meantime, anticipation and anxiety are building as an expected 35-60,000 Vermonters will flock to the system in the next week as the Pandemic Unemployment Assistance promises what is being called a “second tsunami” of requests for the Department of Labor. This program will provide wages to Vermonters who typically wouldn’t be covered by UI and will be backdated to March 29th, the date the CARES Act was signed. At this time, it seems a myriad of factors will contribute to this program not fully rolling out in the time table expected.

graphic with information on the pandemic unemployment assistance hotline

Much of the legislative attention has been directed to asking that more resources and money be directed towards the problem. However, members of the administration insist that resources are not the limiting factor. The main issue they suggest is the need to train anyone to handle all the potential complexities or issues that may arise to comply with Federal UI law. This training takes time and this week DOL brought on 40 new people to handle the influx of calls. Additionally, the state will be taking on a third party vendor, which it has worked with before to handle the issues with volume and adopting new software systems to take PAU applications. That software has come under scrutiny by some in the Senate, as they consider it “unused and untested.”

The Senate and House Commerce Committees are looking at a bill that would allow the Vermont Department of Taxes to share the information of individuals who apply to PAU with the Vermont Department of Labor by way of providing wage history. Under current law this is not allowed and the committees are still trying to understand if the program should have language alerting applicants to the program of this information exchange.

For a listing of all events visit the Department of Labor calendar. All virtual events will be recorded and accessible on the VDOL YouTube channel.

SBA Dollars Flowing to the State, but the Programs are Over Subscribed 

There is good news and bad news. First the bad news: as of yesterday morning, there is no more Paycheck Protection Program (PPP) funding and Economic Injury and Disaster Loans (EIDL) are oversubscribed by about four million applicants. The latest updates point to most recipients only seeing up to $25,000 in total EIDL funds due to constraints. We now need to wait for Congress to put more funding behind it. The good news is that over $853 million will be circulating through the Vermont economy very soon thanks to everyone’s efforts to help Vermont capitalize on the PPP program. 

Businesses that did not take advantage of the PPP in the first round should reach out to their lender and get an application ready for submission in the event the program gets up and running again. The most recent numbers we’ve seen nationally – as of April 15 – were about 1.37 billion applications with $301 billion allocated through 4,800 lenders. On Thursday morning, our advocacy team was made aware that the funds had been depleted and federal intervention would be needed if the program is to offer any more assistance (see below for more on the federal negotiations). 

Vermont ranks 3rd in the country for per capita capturing of PPP funds. This is in no small part due to the herculean efforts of Vermont’s banks, credit unions, ACCD, chambers, and everyone who has been helping businesses navigate this program. As of April 13, there were 4,886 (that number could actually be as high as 7,000 unofficial sources tell us) applications submitted and approved for Vermonters, resulting in an allocated $853.7 million in the state of Vermont which will mean paychecks for workers otherwise on unemployment in the next few weeks.

Vermont banks have been closing applications at an incredible pace due to the constraints of the program, however, they have not had full guidance which is very frustrating. The US Department of Treasury has been building this program as we go, creating problems with sole proprietors which didn’t see full guidance until recently. Additionally, Vermont banks and credit unions are required to close out the loan within 10-days; at least one bank has found itself in a position where they have over 800 loans to close in a week, but they are only able to close 100 loans a day.

The next big challenge we are going to face is what happens on week-7 when we see businesses coming in looking for forgiveness – we still need more guidance from the U.S. Treasury. To get full forgiveness, keep scrupulous records and keep the use of the dollars as narrowly tailored to the program as possible. 

Reminder: if businesses say they don’t want to take the funding because they still need to be closed, they need to remember that it doesn’t matter. The legislative intent of the program is to just keep money flowing in the economy and keep people off unemployment even though you might not be able to operate normally.

Another possible program is the Mainstreet Lending program created by CARES which is being stood up by the Treasury. It has a much higher threshold for employment figures (500 employees and higher). However, bankers are seeing what can be done to backfill the need for the PPP. Additionally, there are other elements of legislation and regulatory changes over the last month that can help businesses, such as the employment tax deferment, employee retention tax credit, and express bridge loans.

Federal Legislation Held Up by Partisan Impasse

This week saw a showdown at the federal level with the biggest loser being anyone who thought more Paycheck Protection Program (PPP) funding was coming soon. The crux of the partisan division has been primarily around the size of this round of relief package. Both sides originally agreed to an additional $250 billion to be appropriated to the PPP program, with one party insisting that the funds be bifurcated into two different buckets for classes of businesses as well as an additional $500 billion in appropriations for hospitals. 

With no agreement or action taken in the last 24-hours, it is very likely we will need to wait until Monday when the Senate returns. Even then, everyone should mitigate their expectations, as this package will be much more narrow in scope than people thought and look more like the CARES Act as Senate leadership does not have the appetite to create and stand up new programs again and will work through existing programs. 

As we said in our introduction to the newsletter, Congressman Peter Welch and colleagues have offered a bill this week to set forth a framework for reopening America if there are low enough disease rates as well as sufficient resources for safe hospital capacity, contact tracing, and testing. The bill would allocate money to the states to accomplish these efforts.  

Senator Leahy was appointed to President Donald Trump’s council to reopen the country’s economy. The Administration rolled out guidance Thursday evening that leaves the opening of states to the discretion of Governors, a reversal of the President’s earlier stance which set the stage for a potential showdown.   

First Round of Economic Injury Payments Hits Vermonters Bank Accounts 

The first stimulus checks hit banks on Friday and were released yesterday to individuals via ACH. Another round of direct deposits will go out the next two Wednesdays (hitting banks on Fridays before and then being distributed). In total, $181 million going out through ACH based on having a direct deposit relationship with the IRS. Checks will be going out April 20th for those who do not have the existing ACH relationship, however, the IRS is limited to five million per week and there are about 70 million Americans will need to receive checks by mail.

Property Tax Bill Creates Relief for Towns, Agita for State Budgeters 

The Senate Committee on Government Operations passed a bill Tuesday that would allow local municipalities to change property tax due dates, penalties, and rates by a vote of their legislative body for FY 20. Typically these provisions are set by a town meeting or by town-wide vote, however, given the circumstances, towns would like greater flexibility to provide relief to their residents affected by COVID-19. The bill seemed set to be brought up on the Senate floor session (virtually, of course) today, however, instead, the Senate caucused. 

The Senate Finance Chair yesterday expressed concerns with what she considers “blanket authority.” Towns currently have the ability to abate property taxes via their Board of Civil Authority on a case-by-case basis. The  Chair worries that categorically pushing back the deadline would result in individuals who otherwise have the ability to pay not paying at a time when the state is in desperate need of revenue.

Workers’ Compensation Will Adapt to the Changes in Operation 

With the closure of most businesses in the state, and many businesses operating in vastly different ways, many workers are no longer doing the work they typically do and do not merit the current workers’ compensation rate employers pay. The Department of Financial Regulations (DFR) will be finalizing an order next week which should result in a decrease in rates reflective of a decrease in risk for employees working from home or on furlough. Stay tuned for more information on this as soon as it’s available. 

The Department of Labor (DOL) has issued two orders in response to the COVID-19 crisis that limits the ability of insurance carriers to deny the payment of benefits and to discontinue benefits. The pandemic has complicated the workers’ compensation claims process due to the difficulty claimants have in meeting work-search requirements and scheduling and attending medical appointments. DOL is recommending the use of access to telemedicine and DFR has directed insurers to utilize and cover telemedicine at this time. Additionally, work search requirements have been waived at this time. 

What is still unclear is the coverage of the COVID-19 illness under workers’ compensation. If the employee contracts COVID-19 and tells the employer that they believe that they contracted it on site, the employer should file that within 72-hours with their insurer as this is a reportable incident. Following the typical order of things, the employee will need to show that they contracted it from work when an insurance adjuster does contact tracing. This process will take into account how well the employer followed Vermont Department of Health and CDC guidelines and take into account the potential risk doctrine. 

This week, the Senate Committee on Economic Development, Housing, and General Affairs looked at a proposal, similar to one recently passed in Minnesota, that would create a presumption that an “essential employee” who contracts COVID-19 is eligible for workers’ compensation. The presumption could be rebutted if the employer “shows the employment was not a direct cause of the disease.” 

While not an avenue for all essential workers; an alternative which in most circumstances would be better for both the employer and the employee in the event of COVID-19 illness would be the federal Families First Coronavirus Response Act (FFCRA) leave. Under FFCRA an employer can pay the employee sick leave at a rate potentially higher than the wage replacement that they would receive under workers’ compensation and then the employer can recuperate the cost of that leave through tax credits associated with the FFCRA program. 

The committee will be meeting today to consider the proposal discussed above as well as considering codifying the actions taken by DOL and DFR around prohibiting discontinuation of benefits until the state of emergency is lifted.

State Budgeting Challenges Becomes More Clear, Yet Still Uncertain 

It is looking like Vermont will have enough money to make it through this fiscal year, however, as everyone everywhere is experiencing, beyond that is unclear. The state has until the close of business today to signal to the U.S. Department of Treasury that it will receive the $1.25 billion Vermont is eligible for from the Coronavirus Relief Fund established under the CARES Act. Provided that the state provides the necessary information for where the money can be wired and a designated state contact, we can expect to have half the money by April 24th. 

What to do with the money is less clear. Like every other program we’ve seen from the U.S. Department of the Treasury, the guidance comes piecemeal. So far, we know that the funding must be directed to expenses that: (1) are necessary expenditures incurred due to the public health emergency with respect to the Coronavirus Disease 2019 (COVID–19); (2) were not accounted for in the budget most recently approved as of March 27, 2020 (the date of enactment of the CARES Act) for the State or government; and (3) were incurred during the period that begins on March 1, 2020 and ends on December 30, 2020.

Equipped with only this, Vermont much like many businesses, will need to grab hold of this lifeline today and creatively think about how to use the funds tomorrow. There is great anticipation that future stimulus or stabilization bills will provide dollars to patch holes in our lost revenues, but for now, this will need to do.

Laundry List

  • Today the Chancellor of the Vermont State College System announced that the system could shutter three campuses and cut 500 employees under a radical restructuring proposal its leadership plans to bring to trustees in an effort to manage the pandemic’s financial fallout. Read more as this story develops here.

  • Filling out the 2020 Census will take you only 10-minutes and it will help our Vermont communities for the next 10-years. Go to my2020census.gov.

  • ACCD needs to hear from all Vermont businesses impacted by the response to the COVID-19 virus to have an accurate total accounting of the damage done. Please share these impacts via the ACCD Business Impact Form

  • The Burlington International Airport (BTV) received just over $8.7 million in assistance as part of the CARES Act this week. Meanwhile, the airport predicts over $20 million in lost revenue

  • The Department of Financial Regulation has released a Summary of National Foreclosure Freezes and Forbearance Programs for a range of consumer assistance loan types as well as national-level holds on foreclosures and evictions.

  • ACCD has released new guidance for campgrounds and parks that host campers, trailers, and RVs on a seasonal basis. The Agency recognizes many people use these sites as second homes, but these sites should not be open for business as usual. Limited in-person operations under certain conditions are permitted.

  • The Vermont Supreme Court amended Administrative Order 49 on April 9 to extend the Judicial Emergency to May 31, 2020. Emergency proceedings continue to be heard pursuant to the Order. Non-emergency hearings are only being heard if an exception is granted.  The Court is updating its website as pandemic circumstances evolve, with changes occurring often.

You can find this update and much more on LCRCC’s COVID-19 Resource Guide.

Concerned or need to learn more about anything in this newsletter? Email our team at [email protected]. 

We look forward to working with you this session.
Sincerely, 
The Lake Champlain Chamber Advocacy Team

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Tom Torti, President
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Cathy Davis, Executive Vice President
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Austin Davis, Government Affairs Manager
Thank you to this week’s sponsor of the Legislative Update: