Vermont Legislative Update Week 15

Downs Rachlin Martin PLLC

[co-author: Jessica Griswold]

Senate passes budget

On Friday, the Senate gave final approval to the $7.17 billion FY 2022 budget, H.439. Senate Appropriations Chair Jane Kitchel, D-Caledonia, called it “as complicated a budget as I’ve ever had to put together in my time in the Senate” due to the flood of federal aid to Vermont for coronavirus relief and an unexpected $211 million revenue surplus.

The bill spends $478.5 million in federal American Rescue Plan Act funds, while incorporating only a portion of Gov. Scott’s ARPA spending proposal. Kitchel said the governor’s plan did not focus enough on the legislature’s funding priorities, including service delivery structure, court re-opening and higher education needs. Scott had asked the legislature to place all of the ARPA expenditures in a separate bill. Kitchel rejected that request, instead placing all ARPA spending in one designated section of the budget bill.

Highlights from the budget include:

ARPA spending:

• $20,000,000 to Agency of Commerce and Community Development
• for Economic Recovery grants;
• $11,000,000 to the Agency of Commerce and Community Development for brownfields remediation;
• $11,000,000 to the Department of Economic Development to fund priority capital projects across the state as identified by the Regional Development Corporations or Regional Planning Commissions, or both;
• $1.5 million for EMBRACE grants;
• $101.8 million for broadband;
• $500,000 to the Agency of Education for grants to local
• education agencies for the purchase of locally produced foods;
• $2,000,000 in FY 2022 to the Department of Labor for
• apprenticeship programs; and
• $5,000,000 to provide free last dollar tuition for one year of
undergraduate studies for critical occupation careers.

General Fund spending:

• $150 million General Fund reserve for pension underfunding and $200,000 for a Pension Task Force created to make recommendations for the next legislative session;
• $2.7 million to increase the Reach Up benefit to the 2021 standard of need, an increase of $132 per month;
• Base funding to address a court workload backlog due to the pandemic;
• One-time General Fund appropriations to shore up several special funds, including Forests and Parks and Act 250; and
• $9.5 million for the Environmental Contingency Fund, of which $4.5 million is allocated for PCB testing in schools, in addition to $500,0000 General Fund dollars dedicated to the Vermont Department of Health for school PCB testing.

House Commerce considers changes to unemployment insurance bill

The hotly debated unemployment insurance bill, S.10, left the Senate with a new $50 per month dependent benefit for UI recipients, but no adjustment to the UI Trust Fund formula. Businesses sought the adjustment to account for the pandemic, which created an anomaly that will increase UI taxes on employers.

The House Commerce Committee is considering a strike-all amendment that would remove 2020 from the formula. The rate schedule would likely increase to Schedule 3 next year, Schedule 4 for the following two years, and then begin to decline. While businesses would pay a bit more in the near term than they would under a Schedule 1 rate freeze, they believe this is preferable to the language the Senate passed.

This committee also received a thorough review of the newly passed childcare benefits in the American Rescue Plan Act from the Joint Fiscal Office. The Senate Economic Development Committee added the $50 dependent support before these new benefits were made clear to legislators. In light of this development, the House Commerce Committee has proposed removing the benefit.

Senate committee scales back money for economic development

H.159 has become the session's economic development bill for targeted project spending. As passed by the House, the bill contained one-time appropriations of ARPA funds for tourism and marketing, UVM’s Office of Engagement, federal grant writing assistance for technology based industries, a BIPOC business development project and money for downtown revitalization projects.

Responding to instructions to limit the budget from the Senate Appropriations Committee, the Senate Committee on Economic Development, Housing and General Affairs has taken a scalpel to the House version of the bill, dramatically cutting back spending. Sections of reduced appropriation:

• Tourism and marketing – Reduced from $2.5 million to $2 million.
o $1.25 million for direct out-of-state marketing.
o $750 thousand to local chambers to design consumer stimulus programs.

• Technology-Based Economic Development – Reduced from $3 million to $1.8 million.
o $200 thousand for federal grant writing assistance.
o $400 thousand in matching grants for businesses that receive federal grants.
o $200 thousand for and industry research partnership program.
o $1 million to UVM to complete the startup of the Office of Engagement.

• Better Places Program – Reduced from $5 million to $1 million.
o Grants to municipalities for the creation of vibrant spaces.

• Microbusiness Development Program – Reduced from $2.2 million to $1.5 million.
o $200 thousand increase in base funding.
o $1.5 million to assist new micro businesses impacted by Covid-19.

The bill retains initial appropriations for an Entrepreneurs’ Seed Capital Fund, a study of the state’s post-secondary career and technical education system, outreach and technical assistance for BIPOC-owned businesses and an International Business Attraction and Investment Program.

The committee is still considering the addition of Economic Recovery Bridge Grants and Capital Investment Grants sections to the bill.

Issue Bytes

Economic Recovery Grants – While the governor has said there is $500 million in unmet business needs relating to the pandemic, the legislature has proposed only $50 million proposed for a new round of grants. The Senate Economic Development Committee recommended using $20 million this year and $20 million next year. Senate Appropriations reduced it to only $20 million this year. The Senate Economic Development Committee heard from the Vermont Lodging Association, Vermont Association of Wedding Professionals, Lake Champlain Chamber, and the Vermont State Chamber about the need for additional funding. They shared their suggestions for grant criteria that would include six months of fixed costs with a $300 million cap. Senators will have more discussion in the coming days to determine how to allocate funds.

Taxation of PPP grants – The House Ways and Means Committee continues to consider the issue of taxation of 2021 federal Payroll Protection Program grants. If the legislature fails to authorize a state linkup to recent federal tax changes, the grants will be taxed. In addition, lower-income Vermonters will lose enhanced benefits provided under the Earned Income Tax Credit and the Child and Dependent Care Credit.

Broadband - The Senate Finance Committee continues to mull over the establishment of an authority to guide the state’s efforts towards universal broadband coverage. As passed by the House, H.360 would create the Vermont Community Broadband Authority, an independent entity responsible for coordinating the buildout of Vermont’s communications union districts. Community-led CUDs would be charged with providing universal access to high-speed broadband. To address concerns about expertise, expediency and accountability, Senate Finance is considering a different approach: creating a position of Executive Director or Deputy Commissioner within the Department of Public Service. Committee members generally agree that if providing broadband access is a fundamental obligation of government, then that responsibility should remain within state agencies.

Guidelines for bridge grants for "gap" businesses – The legislature has appropriated $10 million of American Rescue Plan Act funds to provide grants to businesses that have not received prior state or federal financial support. The Agency of Commerce and Community Development has posted the bridge grant guidelines. Companies that received small amounts of federal support in PPP grants may be eligible if the $10 million allocation is not exhausted.

Restarting the courts – The Senate has proposed $16.4 million in one-time ARPA funds over a two-year period for justice system investments that will allow courts to begin functioning in person. Courts have been shuttered since the pandemic began, with limited remote options, and that has caused a significant backlog of civil and criminal cases which includes child support and evictions. “When you don’t have trials, you don’t have settlements,” commented one senator about the backlog. The bill also authorizes six-person juries in civil cases.

PCB testing in schools – The Senate has proposed $4.5 million towards indoor air quality testing for PCBs (polychlorinated biphenyls) in public and independent schools. No funding has been set aside for remediation. The costly problem of PCBs in schools became well known when Burlington High School was forced to shutter its doors due to high levels of PCBs. The state then had to spend $3.5 million to retrofit a closed Macy’s store in downtown Burlington to allow for in-person learning. Remediation at the Burlington High School site could cost $7-12 million and still may not lower PCBs to approved levels. Officials are now considering a complete teardown of the building.

Amending Act 250: the next three weeks – This week, legislators continued to discuss and take testimony on H.120, a bill that would update Act 250. The bill attempts to address climate change with a revised Capability and Development Plan, newly delegated supervising authority for District Commissions, and proposed permitting criteria changes. Many of the bill’s criteria changes follow recommendations from legislation the General Assembly worked on last year. Administration proposals to restructure governance of the Natural Resources Board and provide exemptions to designated downtowns, villages and neighborhood development areas have yet to be considered by the committee.

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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