2020 Mid-Year Legislative Update - DRM's Government & Public Affairs Team Mid-Year Analysis

Downs Rachlin Martin PLLCLawmaking in the COVID Era

The legislature adjourned on June 26 at 8:41 p.m. Sort of. After holding what was nearly the longest and certainly the strangest session in history, the legislature has really only recessed, with a scheduled return date of August 25.

The adjournment/recess could not come soon enough. Lawmakers, staff and lobbyists were frazzled by the end, suffering from endless 12-hour days and the newly discovered Zoom Fatigue syndrome. Following an unusual testy exchange with a Senate committee chair last week, a legislative staff attorney complained about being beaten down and tired. Another appeared utterly defeated as he tried to guide a committee with a wailing child in his lap. 

The Vermont legislature was one of the most agile in the nation in “pivoting” (the favored COVID cliché) in March to the remote environment. Given the conditions, the legislature’s Zoom/YouTube process worked reasonably well. But like democracy, that’s just because it was better than the alternatives. Compared to normal times, it was awful.

Many committees avoided meaningful public participation, while some lawmakers found it easier to ignore entreaties made via text, email or cell phone than personal appeals made in Statehouse hallways.

Committees regularly referred to bill drafts and memos that were not publicly available, even as they dealt with sums of money that would have been unimaginable just six months ago.

The technology itself created a barrier to participation that was perhaps unavoidable. By necessity, it required a computer and some understanding of technology (Zoom to get in, YouTube to watch). Pre-approved Zoom access was required to speak.

Most significantly, the technology frequently broke down and meetings were simply unavailable. At the direction of House Speaker Mitzi Johnson, House committees would stop meeting when that happened. But Senate committees plowed ahead with the apparent approval of the leadership. The tortured reasoning was that if the proceedings could be watched later, that satisfied the Open Meeting Law. The Senate’s cramped interpretation of the statute finally changed after the Vermont Press Association publicly complained.

Ironically, the legislature was more transparent than ever. Before the coronavirus, the legislature had refused to allow universal broadcasting of committee hearings. Now their meetings are ubiquitous, a change that will likely be permanent.

There is the final irony that while lawmakers were busy spending about $750 million in federal funds, they were facing an FY 2021 budget shortfall of $250-300 million. It was like leaving your house to go on a spending spree while the garage is on fire.

Again, it’s a terrible process but probably better than the alternative since the CARES Act funds have to be spent or returned; they can’t be used to fix the burning garage.

The legislature has set aside $140 million in the unlikely event that Congress changes its mind to allow federal money to be used to backfill state budgets. In reality, they will almost certainly have to figure out how to balance the budget through a combination of reserves, cuts and tax increases.

They’ve already made a few decisions that will make that process more difficult. The General Assembly passed a partial budget that fully funds state government for one-quarter of the year. So when they come back, they’ll only have ¾ of the year to either raise the revenue or cut spending to cover the full-year shortfall.

They’ve also taken some big items off the table. The legislature fully funded the education system for the entire year. The education fund is expected to run a deficit of around $100 million, so that money will have to come from somewhere other than property taxes. Lawmakers decided they did not want to see any reductions in any education spending, period.

It’s noteworthy that there has been virtually no pushback on these budget decisions from Republicans or the Scott administration, and little mention by the press.

In an indication of how sacred the cows are, some lawmakers got emotional just talking about whether to fund state employee pay raises for next year. They funded the first year of a two-year collective bargaining agreement, putting off until later a decision about the remainder.

A handful of senators even suggested that the state issue bonds to fill the operating fund shortfall. That idea seems to have been shot down, but it gives an indication of how far many will go to avoid making budget cuts.

Vermont is the only state with no balanced budget requirement. The legislature has always avoided the temptation to accrue deficits to avoid paying the state’s annual bills, but that discipline could be tested when they return in August.

First Quarter Budget

H.961

The first quarter budget bill and Coronavirus Relief Fund spending bill was described by legislators as the “low hanging fruit” of state budgeting with many tough choices ahead. Legislators approved the bill which funds state government for the first quarter of the fiscal year at 25 percent of last year’s budgets across all of state government, with some notable exceptions. The agencies of Natural Resources and Transportation were funded at higher levels because many of their core activities happen in the summer. The Education Fund was filled at 100 percent after the legislature made a commitment to hold property tax payers harmless for the COVID-related revenue losses to sales and use tax and other dedicated funding streams.

In spite of the estimated $330 million state budget deficit, the unavailability of CARES Act funds to fill the deficit reminds one of “water, water everywhere and not a drop to drink.”

The bill includes several Coronavirus Relief Fund allocations many of which are education related. (see Education section). 

House Appropriations Committee Chair Kitty Toll, D- Danville, addressed the issue of state budget shortfalls and said committee members should begin thinking over what they would propose to cut if budget shortfalls necessitate programming cuts. Starting that work in August, she said, will be too late.

Assistance for K-12 and Higher Education

H.961

The first quarter budget bill includes several Coronavirus Relief Fund allocations for education. Fifty million dollars is directed towards K‑12 schools for COVID-related expenditures. An additional $6.5 million will fund the creation of a school indoor air quality grant program to be administered by Efficiency Vermont for upgrades to heating, ventilation, and air conditioning systems.

In higher education $22.7 million was directed towards the Vermont State Colleges for costs and business disruption impacts through December 30, 2020 due to the pandemic. And similarly $19.3 million went to the University of Vermont for COVID-related costs and business disruption impacts. This includes capacity for the University’s Business Resource Center to engage with and provide assistance to pandemic-impacted businesses in Vermont or to assist businesses to relocate to Vermont through December 30, 2020. The Vermont Student Assistance Corporation received $5 million.

Grants for Small Businesses

S.350 (Act 115), H.966

The legislature authorized grants for small businesses in two bills: S.350, which was signed into law on June 19, and H.966, which passed last Friday. 

S.350 designates $70 million in two categories of grants: $50 million for trust tax filers (file rooms and meals tax and/or sales and use tax) and $20 million for all other businesses (i.e., manufacturing, service, non-profit). To be eligible, a business must have experienced a 75% revenue loss in any one month between March 1, 2020 and September 1, 2020 compared to the same time in 2019.

H.966 designates $82 million, also in direct grants: $26 million for trust tax filers and $56 million for all other businesses. This allocation attempted to balance aid to most business sectors when combining the grant funds in both bills. To be eligible, a business must have experienced a 50% revenue loss in any one month between March 1, 2020 and September 1, 2020 compared to the same time in 2019.

The bill also provides for additional dedicated grants:

  • $5 million to be split equally between women and minority-owned businesses with five employees or fewer.
  • $5 million for non-profit arts and cultural organizations.
  • $2.5 million for businesses within the agricultural, food and forest, and wood products industries.
  • $1.5 million for outdoor recreation businesses.

The Agency of Commerce and Community Development has posted guidelines for applying for grants and applications will be available Monday, July 6. The grants will equal 10 percent of 2019 annual revenue, and will be capped at $50,000.

H.966 also provides:

  • $2.5 million to the Department of Tourism and Marketing to create a Restart Vermont marketing program.
  • $2.5 million for technical assistance for businesses. 
  • $5 million for a statewide program, Restaurants and Farmers Feeding the Hungry, which will provide assistance to Vermonters who are food insecure by engaging restaurants to prepare meals using food purchased from Vermont farms and food producers. 

The legislature retained $140 million of CARES Act funds until they reconvene in August to determine if there are unanticipated needs. They are reserving an additional $100 million for k-12 education costs. The Governor had proposed $200 million in direct business aid.

Broadband Funding

H.966

The legislature appropriated $17.4 million for a new COVID-Response Accelerated Broadband Connectivity Program. The Department of Public Service has broad latitude to allocate the money within five separate categories:

  • Line Extensions. Up to $2 million is allocated to subsidize customer line extensions in areas without 25/3 Mbps service.
  • Get Vermonters Connected Now Initiative. Funding is directed to subsidize fiber-to-the-home installations, with prioritization for underground conduit that will provide broadband access to low-income households.
  • Temporary Broadband Lifeline Program. The Department is authorized to subsidize monthly subscriptions for low-income Vermonters until December 31, 2020.
  • Wi-Fi Hotspots. Up to $50,000 may be used to deploy Wi-Fi hotspots.

The bill also funds four other telecommunications-related categories:

  • $800,000 for planning by Communications Union Districts, which are newly created, largely volunteer organizations that promote local and regional broadband expansion.
  • $500,000 to the Department of Public Service to hire a consultant to draft a telecommunications plan.
  • $800,000 to the Vermont Program for Quality in Health Care, Inc. to fund telehealth services.

Finally, the bill appropriates $8 million to utility ratepayers to cover the account arrearages of ratepayers who are likely to face disconnection when the moratorium ends.

CARES Act Funding for Health and Human Services

H.965

The legislature approved $329 million from federal CARES Act funds to cover health care and human services expenses incurred as a result of the COVID-19 pandemic. 

The bill includes $275 million for a Healthcare Provider Stabilization Fund which the Agency of Human Services will use to provide grants to health care service providers. Factors considered in determining awards include:

  • The impact of the grant amount on the applicant’s sustainability,
  • The degree to which the grant will provide or support services that would otherwise likely become limited or unavailable as a result of business disruptions caused by the pandemic, and
  • The degree to which the applicant would use the grant funds to support existing patient financial assistance programs or would enable the applicant to continue providing services to Medicaid beneficiaries, or both.

The bill appropriates $28 million for a Front-Line Employees Hazard Pay Grant Program. The program will award grants to certain public safety, public health, health care, and human services employers whose employees were substantially dedicated to mitigating or responding during the initial months of the pandemic.

The optional program provides grants to employers to pay eligible employees a one-time payment of $2,000 or $1,200, based upon hours worked in a job with an elevated risk of exposure to COVID-19 between March 13, 2020 and May 15, 2020.

After School Program Grants

H.965

The legislature approved $12 million in H.965 to the Department of Children and Families who will determine the allocation of funds between restart grants for after school, summer day camp and child care programs and Parent Child Centers. Restart grants are designed for maximum flexibility to alleviate the continued challenges of reopening and staying open for kids during the public health emergency.

The Department administered a $6 million restart grant program in June for child care and afterschool programs that were committed to reopening by the end of June. The restart grants can be utilized for a wide range of purposes from purchasing cleaning supplies, personal protective equipment and other materials that are recommended for compliance with health guidance, and for hiring additional staff.

Data Privacy and Consumer Protection

S.110 (Act 89)

The legislature added a long list of personal information to the term “personally identifiable information,” the unauthorized use of which triggers the state’s security breach notification requirement. These include driver license numbers, taxpayer ID’s, passport numbers, military ID card numbers, financial account numbers, credit or debit card numbers, account passwords, and unique biometric data used to authenticate the consumer. The unauthorized use of login credentials also triggers notification.

The bill was signed into law by the governor on March 5, 2020.

Presumption of Workers’ Compensation Coverage for Front-Line Workers

S.342

The legislature approved a bill last week that creates a presumption of workers’ compensation coverage for front-line workers who become infected with COVID-19. Front-line workers include emergency medical personnel, workers in health care facilities and long term care facilities and home health care workers or personal care attendants. If a front-line worker becomes infected with COVID-19, an employer can overcome the claim by showing that it is more likely than not that the employee contracted the virus outside of the workplace.

For non-frontline workers, death or disability from COVID-19 is presumed to be compensable if the employee received a positive test not more than 14 days from when they were in close contact with an infected person in the workplace or if they have performed services where someone was diagnosed within 14 days of exposure. An employer can rebut the claim by showing they followed safety guidelines.

The legislature rejected the strong opposition from insurers, business trade associations and the health care industry, who argued that it will impose new costs when many are struggling to recover and continue operating and employing Vermonters. State and federal laws and regulations already address the healthcare costs and wage replacement needs of those who become ill with COVID-19 and cannot work.

Paid Family Leave

H.107

Last session, the Democratic majority was expected to pass minimum wage and paid family leave bills, both of which were key party priorities. The two bills were deadlocked in conference committees when the House and Senate adjourned last May, and so leadership failed to bring these two key pieces of legislation up for a vote. When they reconvened this year, it was apparent that they had worked off-session to find agreement. Early this year, the two chambers quickly passed compromise bills. 

The paid family leave bill moved quickly in January but was vetoed by the governor on January 31. The Scott administration had proposed a compromise that enabled businesses to voluntarily participate in an expanded leave program. That, coupled with disagreements within the Democratic party over how expansive to make the program given the tax implications, resulted in the votes needed to support the veto. Any consideration of a veto-override attempt was quashed when COVID-19 landed in Vermont. 

In an ironic twist, the federal government passed the Families First Coronavirus Response Act in response to the pandemic which expands access to paid leave from work between April 1 and December 31, 2020. It is likely the legislature will once again have a paid family leave bill on its agenda in January. 

Minimum Wage

S.23 (Act 86)

As with paid family leave, the 2019 session ended with a minimum wage bill held up in a conference committee. Early this year, the conferees came to a quick agreement and S.23 was on the House floor.

Although the Senate favored an increase in the minimum wage to $15.00 an hour, S.23 raises the wage from $10.96 to $12.55 by 2022. Many legislators expressed concern about regional pressures on small businesses and the unique economic challenges in rural areas. For these reasons, the Governor vetoed the bill, but six of the eight Democrats who initially opposed the bill changed their votes to support their party’s leadership, and the veto was overridden.

Flavored Tobacco Products and E-Cigarettes

S.288

The Senate Health & Welfare Committee unanimously approved legislation that would ban all flavored tobacco products, including menthol cigarettes and flavored e-cigarettes. Many senators were uncomfortable, however, with the ban on menthol cigarettes, so the bill has stalled in the Senate Finance Committee. Progress on the bill was also delayed due the legislature’s reluctance to take up non-COVID measures.

Cloud Tax

The House Ways & Means Committee gave preliminary approval in February to a bill that would have imposed a sales tax on vendor-hosted prewritten computer software (the so-called “cloud tax”) effective June 1, 2020. The bill also called for a study committee to deliver a report by January 15, 2021. The legislature left the Statehouse shortly after the bill’s approval and it was not taken up by the committee when it began meeting remotely. The Senate has shown little interest in the tax. However, with the legislature facing a large budget shortfall when it reconvenes on August 25, the proposal will likely get renewed attention.

Employee Misclassification

S.108 (Act 85)

An employee misclassification bill that had stalled in a conference committee last session was picked up and passed in January. The governor signed the bill into law on February 20.

Prior to the law taking effect, the Department of Labor had sole authority to investigate complaints of employers misclassifying employees as independent contractors to avoid workers’ compensation costs. The new law will enable DOL to refer egregious cases to the Attorney General’s Office for investigation. The Attorney General may investigate a complaint that an employer has committed a willful, substantial, or systemic violation misclassifying an employee as an independent contractor.

An Employee Misclassification Task Force is established and will submit a report to the House Committee on Commerce and Economic Development and the Senate Committee on Economic Development, Housing and General Affairs regarding ways to improve the effectiveness and efficiency of the system of joint enforcement by the Commissioner of Labor and the Attorney General. This task force will also provide suggested changes to “enable either the Commissioner of Labor or the Attorney General to seek the full, combined range of penalties and remedies that are currently available to them through joint enforcement.”

Victims Compensation Board exemption from Open Meeting Law

H.558

The legislature added an additional exemption to the long list of Vermont Open Meeting Law exemptions with the passage of H.558. The legislation exempts the meetings of the Victims Compensation Board relating to victims compensation or offender restitution from the law. The change was not prompted by any incidents, but by a notice received by the Board from the Attorney General’s office that it was not in compliance with current law.

The Vermont Press Association and the Vermont Association of Broadcasters argued that the list of exemptions to the Open Meeting Law continues to grow, barring access to government proceedings and reducing transparency. Concern for victim and staff safety led the legislature to pass the exemption, but a requirement was added that the Board annually hold an open meeting to present information and data concerning the victims compensation and offender restitution programs, including aggregate information on cases, pecuniary loss, expense reimbursement, restitution orders, profits from crimes, and nonidentifying information on the amounts of compensation awarded to victims.

Act 250 Reform

H.926, S.237

Just as the COVID-19 pandemic shut down the State House, the Senate Committee on Natural Resources and Energy received H.926, the Act 250 modernization bill, which had seen more than 12 months of testimony in the House. In what had been characterized as a “deal” between the governor’s administration and Vermont environmental groups, the bill proposed a host of expansions to Act 250 criteria and jurisdictional triggers, while at the same time relaxing jurisdiction on certain designated downtowns and neighborhood development areas. 

Deprived of the customary committee process of hearing exhaustive witness testimony, due to COVID-19, the Senate Natural Resources Committee sought to carve out Act 250 provisions from the bill and attach them to an affordable housing bill, S.237. Removing duplicative Act 250 review in areas that already have stringent zoning and planning regulations has long been a goal of developers and affordable housing advocates alike.

It was thought that tying Act 250 provisions to a housing bill offering exemptions from review for designated areas would finally smooth the way for expansive protections against forest fragmentation, including a 2,000 foot “road rule” trigger. But after a day of witnesses expressing dismay at any trade that included exemptions from Act 250, the S.237 amendment plan was scuttled on the Senate floor. 

Returning to H.926, the Senate Natural Resources Committee voted 3-2 to support the same package of amendments. The new bill will be taken up by the Senate Finance Committee under the standard course of review and amendment in August when the Senate reconvenes. S.237 was passed by the Senate without Act 250 conditions or exemptions from review.

PFAS Regulation

S.295

In May, after hearing weeks of testimony on the ubiquitous presence of perfluoroalkyl and polyfluoroalkyl in the environment, the Senate passed S.295, a bill to regulate PFAS substances in certain consumer products.

The bill prohibits the sale or manufacture of firefighting foam, personal protective equipment, food packaging and rugs and carpets that contain PFAS. It also adds PFAS substances to the class of chemicals of high concern to children.

S.295 is expected to be taken up by the House Committee on Human Services in August.

Global Warming Solutions Act

H.688

On June 25, the Senate approved on a 22-6 vote H.688, the Global Warming Solutions Act, legislation that will legally mandate the state to meet carbon emission reductions targets in the coming years, and allow individuals to sue the government if it does not.

The measure requires the state to reduce greenhouse gas pollution to 26 percent below 2005 levels by 2025, 40 percent below 1990 levels by 2030, and 80 percent below 1990 levels by 2050. Although the legislation sets up new emissions reduction requirements, it does not dictate how the state will meet them. Under the legislation, the state could only be court-ordered to improve efforts to meet the emissions goals.

The version of the bill previously passed out of the House created a 22-member council, comprising state government officials, citizen experts and others, to come up with a pollution reduction plan by Dec. 1, 2021. The bill as passed by the Senate adds another council member to represent Vermont manufacturers.

The Agency of Natural Resources will react to the council plan and adopt new rules to regulate greenhouse gases by the following year. Governor Scott has pointed to costly legal battles as a concern with the legislation, but has not indicated if he will veto the measure.

H.688 will go back to the House for consideration in August.

Medical Monitoring

S.37

In June 2019, Governor Scott vetoed legislation that would have established an explicit right for Vermonters to sue companies for medical monitoring costs resulting from exposure to toxic chemicals. Scott said that concerns that companies would not choose Vermont as a place of business, due to potential legal exposure, outweighed the health benefits of the bill.

The bill had passed the House easily with a veto-proof majority, but passed the Senate 19-11 – one vote shy of the two-thirds necessary to override. As the 2020 legislative session began, S.37 appeared at the top of the Senate’s daily unfinished business calendar, awaiting action. And there it stayed until the legislature recessed last week, in this case, awaiting one senator to change his or her mind.

Senate President Pro Tem Tim Ashe, D/P-Burlington, has indicated that should one more “yes” vote materialize, he will give plenty of warning for an override vote. That prospect seems unlikely by the end of this legislative biennium, though he may get his wish when the next biennium begins in January. Sen. John Rodgers, D-Essex-Orleans, a strong “no” on override, made his reelection to a fifth term more difficult by missing the filing deadline to appear on the August 11 Democratic primary ballot. Rodgers plans to organize a write-in campaign for the primary, and if that fails, to run as an Independent in the Fall elections.

Even if Rodgers’ reelection efforts fail, the medical monitoring language would need to be reintroduced as a new bill, and the make-up of a new Senate would need to fall along similar lines. Given the razor-thin margin on this bill, it is almost certain to resurface next year.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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