Vermont Legislative Preview Quick Links
Budget Deficit
Education Consolidation Law (Act 46)
Independent Contractors
Local Governments and Renewable Energy Projects
Reauthorization of the Vermont Economic Growth Incentive Program
Independent Advocate in Energy Oversight
Ongoing Scrutiny of Vermont Health Connect
Paid Sick Days
Recreational Use of Marijuana
Coordinated Treatment of Substance Abuse
Lawsuit Lending
Security Breach Amendments
Universal Service Fund
Privacy and Private Right of Action
Raising the Cap on Net Metering
Changes to Act 250
Tax Havens
Carbon Tax
All Payer Health Care Model
Single Payer Up to Age 26
Report Critical of Vermont Training Program
Transportation and Agriculture Fees Under Review
Budget Deficit
Legislators this session will grapple with an estimated $58 million budget gap for fiscal year 2017, of which $53 million is attributed to Medicaid. With Vermont’s Medicaid program now covering one in three Vermonters, the cost of the program accounts for the largest share of the projected budget gap. Costs are increasing due to more enrollees, high utilization and increased drug costs, including a new cystic fibrosis drug. At a December briefing, analysts also warned of projected cuts in federal Medicaid funding.
Before looking ahead, lawmakers will look back. The House Appropriations Committee met with the administration and department heads in December to review a proposed $40 million budget gap in the nearly $1.5 billion General Fund budget for fiscal year 2016. The majority of the mid-year shortfall results from human services expenditures within the Agency of Human Services. Because of a calendar anomaly in 2015, the state is also responsible for a 53rd week of vendor payments for the current year, a phenomenon that apparently escaped the attention of budget writers during the 2015 session.
Education Consolidation Law (Act 46)
A major education governance reform bill passed last year (Act 46) has generated a great deal of discussion – and some action – on the subject of school district consolidation. Although there will be a vocal effort to repeal the authority of the Agency of Education to require consolidation, that is unlikely to result in any legislative action.
A provision in the bill that caps school spending is likely to get early attention, however, and will likely be repealed. That provision caps spending growth for fiscal year 2017 and fiscal year 2018 on a sliding scale of zero to 5.5 percent, based on a district’s spending in the prior year (with lower spending districts permitted a higher rate of growth). Gov. Peter Shumlin has called on lawmakers to repeal that section early in the session.
Independent Contractors
Lawmakers are likely to revisit the issue of independent contractors, despite years of failed efforts to find a resolution. Labor organizations have complained that some businesses misclassify employees as independent contractors, thereby circumventing employee benefits such as social security. Business organizations don’t oppose simplifying the law, but they object to legislation that would enact barriers to the use of legitimate independent contractors.
The Department of Labor has engaged in some effort to find middle ground, but a solution will likely not be reached until the administration makes the issue a greater priority. The most likely framework would involve the pre-certification of sole contractors who can meet certain tests of independence.
Local Governments and Renewable Energy Projects
Local governments across the state have complained loudly that their voices are ignored when renewable energy projects are considered by the Vermont Public Service Board.
Renewable energy providers, like other utilities, need a Certificate of Public Good from the PSB to build their projects. Although existing law makes municipalities a party to the proceedings and requires the board to take local plans into account, the towns’ ability to influence projects is limited.
Opposition has grown as more projects are approved over local objections. The legislature created a 10-member Solar Siting Task Force last year that has met throughout the summer and fall in an attempt to reach a compromise on the competing goals of renewable energy generation and local control over siting. The issue is expected to be considered in the Senate beginning in January.
Reauthorization of the Vermont Economic Growth Incentive Program
A program that provides financial incentives for companies to expand in Vermont when they would not otherwise have invested in the state is set to expire at the end of year and will be up for reauthorization. The Vermont Economic Growth Incentive Program, or VEGI, was established in 2007 and is scheduled to sunset after ten years. The incentives require a rigorous application process and careful tracking. Awards are approved by the Vermont Economic Progress Council, a citizen board.
According to an annual report released in 2015, the program generated more than $36 million in new tax revenue and 5,372 direct and indirect jobs in Vermont by the end of 2013 after the cost of the incentives are accounted for. Despite the careful tracking, some Vermont lawmakers are skeptical of the program, and a simple reauthorization may be a challenge for its supporters.
Independent Advocate in Energy Oversight
The Vermont Department of Public Service is supposed to represent the public in rate-setting cases before the Public Service Board. Some say it is too close to utilities.
Spurred on, in part, by a complicated, multi-year review of the proposed extension of the Vermont Gas Systems natural gas transmission line from Chittenden County to Addison and Rutland Counties, AARP of Vermont has begun a public campaign to create a new independent advocate for energy consumers in utility cases. The new advocate would be associated with the Attorney General’s Office, rather than the DPS.
The call for more independent public representation also resonates with those who want a stronger voice before the PSB on renewable energy siting and low-income energy programs.
Ongoing Scrutiny of Vermont Health Connect
Lawmakers will continue to monitor operating issues and high costs relating to Vermont Health Connect, the state’s health insurance exchange. Legislators want to ensure that the recommendations provided by the state auditor and an external audit conducted by Grant Thornton are implemented regarding standard operating procedures, timely eligibility determinations and security.
Paid Sick Days
The Senate is poised to take up H.187, a House-passed bill that requires employers to provide paid sick leave for most employees by 2016. As passed by the House, the bill requires employers to provide three days of paid time off during the first two years of employment, increasing to a minimum of five days by 2018. Paid leave would be available after employees have accrued 1,400 hours of work or after a full year of employment with a company, whichever comes first.
Recreational Use of Marijuana
The Senate Government Operations Committee has nearly completed work on a comprehensive bill that would legalize the recreational use of marijuana. The bill has bipartisan support in the Senate, so passage in that body seems likely.
The bill is likely to face stronger opposition in the House, where members seem to have far greater concerns about the potential adverse effects of legalization.
Gov. Shumlin, who strongly supported legalization several years ago, is now taking a more cautious approach. Lobbying firms have lined up on both sides of the issue, which is certain to generate an inordinate amount of attention in the months ahead.
Coordinated Treatment of Substance Abuse
The House will consider a bill passed by the Senate that calls for a more coordinated system of care for substance abuse. S.42 requires the secretary of the Agency of Human Services to develop rules for acceptance into treatment, which includes an evidence-based assessment and level of care determination. The bill also calls upon the commissioners of the Departments of Health, Mental Health, and Vermont Health Access, in consultation with the Green Mountain Care Board and providers, to create a cohesive substance abuse system of care. The plan will address both reimbursement and payment reform.
Lawmakers will also consider increasing the support available for prison inmates with serious mental illness and complex medical needs. The medical needs of Vermont’s prison population are increasing as inmates age and the portion of incarcerated people with mental health conditions grows. Although the state has made significant strides in deinstitutionalizing individuals with mental illness, some lawmakers are concerned that many of these individuals are now being institutionalized in correction facilities.
Lawsuit Lending
Lawmakers are likely to revisit the issue of lawsuit lending, a relatively new practice of lending money at high interest rates to plaintiffs as they pursue personal injury claims. The legislature approved a moratorium on such loans last year and required the Department of Financial Regulation and the Attorney General to submit a legislative proposal for a permanent resolution. The moratorium expires in July 2016.
Security Breach Amendments
The Office of Attorney General is proposing a series of relatively minor amendments to the state’s security breach notification law. Most involve clarification of existing law. The amendments would require a business to report employees who steal information; establish a duty to report a breach even if data is not stolen; require that a breach be reported within 45 days of discovery; and require each party to report a breach where multiple entities handle the same data.
Universal Service Fund
The Shumlin Administration may propose an increase in the Universal Service Fund of 0.05 percent, with the proceeds used to fund increased broadband connectivity. Whether that proposal moves forward depends largely on the appetite of legislative leaders for the increase, which would create a rate of 2.5 percent on all telephone lines. The USF pays for E-911.
Privacy and Private Right of Action
The Senate Judiciary Committee met several times over the summer to develop a bill on a variety of privacy issues. The proposed bill, S.155, establishes a private right of action for a person whose protected health care information is improperly disclosed, establishes regulations for the use of drones and restricts the use automated license plate recognition systems. The committee plans to act quickly on the bill.
Raising the Cap on Net Metering
A number of electric utilities across the state have reached the statutory limit for the volume of small-scale renewable energy they are required to accept from residential and commercial sources, and the Vermont Public Service Board is looking to expand the program. Based on a recommendation of the Department of Public Service submitted in October 2014, the board has issued draft rules that would allow more projects to be built and offer new incentives for developing projects in brownfields, landfills and parking lots. In 2014 the legislature authorized the board to restructure and expand the program, and the board has held a series of workshops based on the draft rule. The legislature will review the work, but it is unclear whether it will take independent action.
Changes to Act 250
Before he left to return to academia, former Commissioner of Environmental Conservation David Mears made a strong plea of the House Natural Resources and Energy Committee to make permits issued by the Agency of Natural Resources dispositive of technical criteria under Act 250, the state’s development control law. The idea appears to have the support of House Natural Resources and Energy Committee Chair Rep. Tony Klein, D-E. Montpelier, and a significant share of the business community.
Likewise, finding a way to stop low-budget project opponents from wearing down applicants through endless appeals of technical points by reviewing the record that has been created is a generally popular proposal. Yet the potential for reforms to the state’s development control law has been elusive since the law was first enacted in the 1970s.
In recent meetings with lawmakers and developers, new Natural Resources Board Chair Jon Groveman has suggested that now might be the time for a comprehensive look at how the law is working. The 2016 legislature is unlikely to undertake large-scale reforms of the development law, but some minor improvements are possible this session while a study of the law between sessions is in the works.
Tax Havens
The tax committees of the House and Senate want to recapture a share of the revenues they feel the state is owed by companies operating in both Vermont and foreign countries. Last session, the House Ways and Means and Senate Finance Committees took a hard look at these “tax havens.” The issue will likely be debated in Vermont in 2016.
About half of the states in the U.S. collect a share of corporate taxes under a “unitary combined” valuation system that apportions tax liability according a company’s proportional share of sales relative to other jurisdictions, but the apportionment doesn’t extend to foreign countries. Now, this “water’s edge” provision is being challenged by Vermont and several other states, who view companies that locate assets in more favorable taxing climates around the world as tax dodgers. A few states have enacted laws that require companies to include foreign income in their corporate tax calculations.
Carbon Tax
After having knocked on at least 10,000 doors since the last session, the Vermont Public Interest Research Group claims that most Vermonters support the idea of taxing the carbon content of fuels. VPIRG is the lead organization in a coalition of environmental and low-income advocacy groups that have kept up a steady drumbeat of letters to the editor and public demonstrations in favor of the tax.
Under the current proposal, a tax of $10 per ton of carbon in petroleum fuels would be imposed in the first year, rising to $100 per ton eventually. The higher tax would equate to 88 cents per gallon of gasoline or $1.02 per gallon of home heating oil. Of the money raised, 90 percent would be used to offset other taxes or costs, and ten percent would be invested in renewable energy.
Although House Natural Resources and Energy Committee Chair Tony Klein, D-E Montpelier, says the carbon tax will happen some day, he also says this is not the time for it. Nevertheless, proponents continue to demand action on the tax and it may receive some attention in this legislature.
All Payer Health Care Model
The Green Mountain Care Board and the Shumlin Administration continue to negotiate with the federal government on a five year agreement to change the way hospitals and physicians are paid. The agreement, known as the all-payer model, will link reimbursement to outcomes and actual costs. Many key legislators are skeptical about the plan and want to better understand what is being negotiated.
The model calls for a global budget with financial caps for nearly all medical expenditures in the state. Health care providers would be required to operate within the caps. Instead of private and public insurers paying hospitals and doctors for various services and procedures, providers would receive a lump sum to take care of a population of patients.
The Office of Health Care Advocate has encouraged policymakers to ensure that the interests of consumers are heard as the state plans for the all-payer model. The health committees are likely to examine the proposal in January.
Single Payer Up to Age 26
Single payer advocates will ask lawmakers to commission a study in 2016 to review the financing options for expansion of the Dr. Dynasaur program to Vermonters of all income levels up to age 26. Dr. Dynasaur is a health insurance program unique to Vermont that covers low and lower-middle income children with no out-of-pocket costs and low, income-based premiums. The report will also address how to raise reimbursement rates to primary care physicians. The proposal has the support of Speaker Shap Smith, D-Morristown.
Report Critical of Vermont Training Program
State Auditor Doug Hoffer issued a report in September criticizing the control and operation of the Vermont Training Program, a long-standing state program that helps private businesses train workers with the goal of earning higher wages. Although the Department of Economic Development believes the program has been a highly effective tool to grow jobs and wages, the auditor criticized it for failing to document company eligibility up front, failing to accurately track changes in wage rates and for concentrating the program on a few large companies year after year. The House Commerce Committee and the Senate Economic Development, Housing and General Affairs Committee will look into the report, but the program has suffered from frequent changes imposed by the legislature, and lawmakers will likely be resistant to further tinkering.
Transportation and Agriculture Fees Under Review
Every year on a rotating basis about one third of the fees charged by state agencies are reviewed by the General Assembly. Usually, the fees are increased. In the 2016 session, lawmakers will look at fees charged by the Agency of Agriculture, where the Weights and Measures Division collects fees for its oversight of cash registers, scales, gasoline pumps and other such devices. They will also consider revisions to motor vehicle fees, such as driver licenses and registration fees, totaling about $9 million. The motor vehicle fees are intended to cover an anticipated shortfall in the state Transportation Fund, where gasoline tax revenues based on the cost of the product are falling short due to unusually low prices.
