Campaign for Vermont: Child tax credit bill, workforce development bill, and more

Editor’s note: The following is the Campaign for Vermont March 27 legislative update.

Legislators found out this week that the Vermont child tax credit bill may need a haircut. The workforce development bill received such a large haircut that we may have a headless horseman situation.

In case we scared you, the economic development bill passed out of committee this week and is headed to the Senate floor (mostly intact). Some provisions in the bill received push-back around what business would have access to funds and whether or not revenue replacement is the role of government (that question as largely been decided by ARPA). The workforce bill was passed by the House this week as the House and Senate exchange their flagship bills.

Also, the ethics bill received a warm welcome in the House and we are looking forward to testifying on that legislation next week.

Fiscal Responsibility

H. 510 – Vermont Child Tax Credit and the Vermont Social Security Income Exclusion

The Senate Finance Committee took testimony on H.510 on Tuesday. The program would provide families under $200K of annual adjusted gross income a $1200 credit per child – helping roughly 30k tax filers. 44% of Vermont children are in low-income families who would be particularly helped by this credit. The federal version of this program is credited with bringing 6M families out of poverty. There was also a 26% reduction in food insecurity at national level. Most of the money was spent on childcare or allowing a parent to stay home with a child.

The Administration is pleased that the committee is discussing tax relief, however they feel that the focus of the bill is too narrow and would not have the broad impact the Governor would like to see. Vermont can use these credits to attract new workers and help more people over a longer timeline. The Administration would also like to see student loan interest deducted from taxes (like the federal government does).

None of the Governor’s proposals have made it into this bill, but Administration officials have engaged on several bills that are still in play and hope to find common ground. The number of families helped by the Governor’s proposal would be about twice as many as under H.510, but they would receive a smaller tax credit. Under either model, the Department of Taxes would need to hire two additional staff persons.

The Committee is still weighing their options, but advocates warned that too large of a tax credit amount could create a benefits cliff with the way it interacts with other programs. However, it was also noted that the number of children in poverty in the state increased during the pandemic and we should do something to make sure their needs are met.

Revenues and Taxes

The Senate Finance Committee reviewed tax revenues on Tuesday. The proposed child tax credit would put the budget out of balance. There is about $39M available for tax expenditures (this how state budgeters refer to decreases in tax collections or liabilities) for FY2023. The current version of the child tax credit is $48M so legislators will either need to scale it back, cut spending somewhere else, or increase tax revenues.

Workforce Development

The House Commerce Committee reviewed a fiscal note for H.703 on Tuesday from the Joint Fiscal Office. Some swapping from the General Fund to ARPA funding sources had taken place as the Appropriations Committee reviewed the bill.

Some changes that happened:

  • The workforce participation incentive program run by UVM was cut in half.
  • Upskilling funding for private employers was cut in half.
  • $1.5M in a regional workforce development pilot project was cut.
  • $1.5M was added for the existing work-based learning program.
  • Internship cost offset program was cut in half.
  • The early childhood educator section was cut completely (appeared to be redundant with existing efforts).
  • The health care workforce data center was reduced from $2.5M in funding to $1M.
  • Advance Vermont saw their funding cut from $350K to $150K, but the Committee would be interested in restoring this.
  • The Serve, Learn and Earn program was cut from $3.2M to $2M.

The Committee came back before a Friday floor vote to review an amendment to the bill that would better define nurse educator in the health care workforce section. The sponsor of the amendment, Representative Mari Cordes, pointed out that they are not educators, they are faculty and clinical instructors. The Committee settled on using the term “nurse faculty.” This is primarily a technical correction that would make them able to apply for loan forgiveness. The Committee found the amendment favorable and will support it on the floor.

The bill passed the House Floor unanimously on Friday.

Economic Development

H. 159 – Economic Development and Workforce Revitalization

The economic development bill – H.159 – also ran into funding issues this week in the Senate Economic Development Committee. Chairman Sirotkin said on Tuesday that, “the size of grants has become a concern and many of us have been busy over the weekend trying to sort this out.” He asked Joan Goldstein (Commissioner, Department of Economic Development), who he said is “pretty much in charge” of the Capital Improvement Grants program, about the status of the ARPA funds. She noted they have gauged interest in eligible sectors and gathered documentary evidence of Covid-19 impacts by sector that qualify candidates per the ARPA rules. They are getting close to having the grant agreement process, submission criteria, and capital outlays developed for the new program.

There was some concern about the caps in place on the capital improvement grants. Grants can only cover 20% of the project costs but they are capped at $1M, so effectively that might limit project sizes to $5M. However, Goldstein pointed out that the caps are related to “Covid impacts” so some may be much less than 20% of the overall project costs and some may be more (in the instance where the project is smaller than the pandemic financial impact).

The Department has gone back to early applicants and screened them based on sector impacts and the potential new rules. There are 126 applications on file from last year that could potentially be helped by this bill, representing about $90M in requested funds. They have also found that certain sectors, such as hospitality and HVAC were under-represented in the applications so they intend to reach out more directly to those sectors.

The State Auditor, Doug Hoffer, also weighed in. He questioned the need for this program and some of the assumptions being made. Just because a business applies for the program, does not necessarily mean that they “need” the funds, saying that “claims based on asking for money are not actually based on need.” There is also a potential that people who apply for this program have already taken advantage of other ARPA funds, such as the interest free bank loans. He anticipates a surge in applications when (and if) the new program and education efforts launch.

Senator Clarkson took issue with some of the things he said, suggesting that he is being a “bit less than circumspect” when he says “they [businesses] are still here so they must have made adjustments and survived.” She agrees that most will never be made whole but he should be satisfied that VEDA will do good work making assessments. She reiterated that “just because a train is moving does not mean it is up to speed,” and the Arts and tourism/restaurant sectors are struggling to get up to speed with wage inflation and lack of employees.

There was also discussion about the thresholds used to qualify for the grant program. Currently the bill sets qualification for a business at a 25% loss in net operating income due to the pandemic. It was pointed out that this number is much different than overall revenue. This criteria has been particularly difficult for hospitality businesses to meet because they have had to cut costs so dramatically to maintain cashflow.

The Committee came back to this bill on Wednesday to review a fiscal note from the Joint Fiscal Office. The major spending themes in the bill include:

  • An additional $6M for employee relocation incentives (General Fund)
  • $4.2M for the Think Vermont regional recruitment network (General Fund)
  • An additional $40M for the Capital Investment Grant Program (ARPA)
  • $20M for the VEDA short-term forgivable loan program (ARPA)
  • $16.5M for a new temporary Paid Leave Grant Program (ARPA)
  • $200K for a Paid Family and Medical Leave task force study (ARPA)
  • $8M for unemployment insurance supplemental benefits (ARPA)
  • $6M for brownfields (General Fund)
  • $485K for downtown development grants (Reallocated)

Chris Kesler (Founder, Black Flannel Brewing & Distilling Company) testified in favor of some aspects of the bill that impact the hospitality industry generally. He stressed the ability of Vermont Economic Development Authority (VEDA) and the Agency of Commerce and Community Development (ACCD) to apply their expertise without undue restrictive statutes. He specifically supports the removal of the January 27, 2020 “operating date” for grant eligibility. He explained his business was still in the development and financing stages up until the beginning of 2020 and then was directly affected by capacity and other operational limits food establishments which resulted in a real patron capacity of about 25% for their brewery.

He explained that the current language would not only make them ineligible, but the associated damage estimates are based on previous tax receipts which they were unable to offer. Other programs, like the bridge grants, were also difficult because the caps were set at $150K, which amounted to two weeks of payroll at best for them. They employ 40 people and are an economic multiplier at their location for local tourism. He and his wife have exhausted their life savings and one more economic variable (like a new Covid-19 variant) would “crush them” even as they approaching high profitability.

His ask is for ACCD to be able to distribute funds at a varied level of need for all types of businesses. Second, devote the maximum amount possible from ACCD Bridge Grants to the VEDA Short Term Forgivable Loan Program as possible ($26M currently). Third, allow a higher level of eligible expenses with maximum allowable awards (he recommends $500K).

Tom Kavet (Legislative Economist) shared that he sees Covid economics changing rapidly (much different than a year ago). He describes it as fairly “boiling” with inflationary pressures, supply chain holdups, and employee droughts. He sees VEDA short-term forgivable loans is a good place to go for funds to address concerns, but the rapid recovery of hospitality and tourism (judged via rooms & meals tax revenues) indicate a robust recovery, at least in the form of activity. The short-term rental market has also returned with momentum.

When asked about how to help some businesses, like Black Flannel Brewing, that have been left behind by the current programs, Kavet responded by asking “is it the governments problem to ensure profitability of companies no matter what happens in the world? You could make the argument about wages and staffing issues today that you need assistance for that to remain whole.” He was reluctant to say it is a good use of state money, but perhaps an efficient way would be to address crushing debt resulting from the pandemic costs. Perhaps, he argued, addressing these for businesses which are otherwise profitable would be an efficient use of taxpayer money.

Joan Goldstein, Commissioner, Department of Economic Development joins the discussion with her observation that even at 50% (currently 20%) we are asking for at least a dollar-for-dollar match from participants. Kavet agrees these are well established thresholds and not all businesses will be able to take advantage of these funds unless they still have some financial capacity left. Essentially what this means is that if a business has fully exhausted capital reserves and lending options it will be too late for this program to help them. They are better off asking for the assistance up front before exhausting other options.

After discussion, the Committee indicated agreement to remove the January 2020 threshold for eligibility and move away from the net operating income model for loss calculations.

On Thursday, they presented new criteria which moves the eligibility date to businesses who were operation or well underway to becoming operational as of March 2020. They kept net operating income as the tool to calculate economic harm, but introduced more discretion for the Agency to evaluate if a businesses situation met the intended use of the funds. The forgivable loans will be capped at $200K or six months of operating expenses, whichever is lower. The funds are not intended to be used for capital expenditures, but may serve as revenue replacement or to pay down loans taken out to maintain cashflow.

The Committee voted the bill out and it was referred to the Senate Finance Committee on Friday.

H. 627 – Vermont Economic Development Authority

The Senate Finance Committee reviewed H.627 on Tuesday. Cassie Polhemus (CEO, VEDA), is looking to increase the max loan size for the direct loan program up to $2M (hasn’t changed in over a decade). They also want to broaden the range of industries they are allowed to lend to in the direct loan program. When the statute was created decades ago, the language was more focused on industrial and manufacturing businesses. That is not where the bulk of economic development is happening now. They would also like to have expanded funding access for mixed use projects.

Legislative Counsel walked through the bill for the Committee. Certain types of businesses would not be eligible, including distributors, casinos, clubs and membership organizations, religious institutions, and mixed-use properties with less than half of square footage dedicated to commercial purposes.

S. 234 – Changes to Act 250 (housing-focused)

The bill making tweaks to Act 250 to address the housing crisis (S.234) was introduced in the House Natural Resources Committee on Wednesday. Both the Vermont Traditions Coalition and the Vermont Realtors Association have come out in opposition to major sections in the Senate version of the bill.

While we share many of the concerns as other advocacy groups, we think there still may be some positive things that can come out of this bill. We plan to engage on it further in the House.

Good Government

Statewide Code of Ethics

The Senate gave final approval to S.171 on Tuesday on a third reading vote. The same day the bill was passed by the Senate, the House Government Operations Committee reviewed it.Christina Sivret (Executive Director, Ethics Commission) gave an overview of the bill. The key tenant is that a public official who has a direct or indirect interest in a matter they have decision-making authority should recuse themselves or file a one-page explanation about why they are proceeding.

Other prohibited behaviors include:

  • Preferential treatment
  • Use of public position for financial gain
  • Misuse of information or state resources
  • Accepting of gifts larger than $100

The bill does not have a self-enforcement mechanism. Some members of the committee questioned this because in certain events, such as insider trading, it would be difficult for the public to know. If no one comes forward with such information then the Ethics Commission would not be aware (although even if they were, jurisdiction is limited unless the official broke the law).

There were also questions about the obligation of persons to defend themselves if a complaint is made. For legislators, they have access to legislative counsel and state employees have access to HR resources. You can also have outside legal representation if you so choose. Some questions also stemmed from how close the conflict has to be to you; this question comes up often in ethics discussions and it really has to do with how large of a group would be impacted by the policy decision and how direct your involvement is. For example, presumably all legislators pay taxes and voting on a state budget could impact their tax liability. Taxpayers are such a large group that it would not be considered a conflict for a legislator to vote on a budget. If, however, the group was much more narrow, say it was a bill dealing with marinas and a legislator is one of a handful of people in the state that own one that would likely be considered a conflict.

Advocates and policy experts reiterated to the Committee that this is a modest bill and most states go much further than what is being proposed here. Ethics laws generally have three key pieces: a code of ethics, an organization to provide training and education, and an enforcement mechanism. The bill does not include the latter. This gives the state a chance to see how the first two pieces work and get comfortable with the process before implementing an enforcement mechanism.

There were a number of engaged questions from the Committee about how to avoid scandals, not overstepping constitutional bounds, and what oversight existed (or could exist) for both public officials and the Ethics Commission. They are planning to take more testimony this coming week.

Education

Union Representation on UVM and VSC Board of Trustees

The Senate Education Committee took testimony from the Vermont State Employees Association on S.248Tuesday. The bill would put union representatives on the boards of UVM and the Vermont State Colleges (VSC). VSEA argued that their members “don’t feel it is right” that there are no staff on the board of the VSC. They do not feel that the board has been responsive to staff concerns and that decisions made at the board level trickle down into the institutions. Staff and faculty seats on the board would provide a valuable perspective that is missing, according to them.

They insisted that union members could serve on the board and be unbiased, because they care about the success of the system as a whole.

Chairman Campion questioned what was wrong with having staff and faculty on sub-committees instead of full board. VSEA just reiterated what they had already said about staff members having on the ground experience and would provide a valuable perspective. Senator Chittenden noted that the legislative members on the VSC Board of Trustees do not seem in favor of allowing faculty members to have board seats. He noted that the advocates should work harder to convince them because there does not seem to be the traction for this change this year.

The comments of the Committee members make this particular bill seem unlikely to pass out of committee this year.

S. 287 – Adjusting the School Funding Formula (Student Weighting)

The student weighting bill (S.287) appeared on the Senate Floor on Thursday. Senator Hardy gave an impassioned review of the bill and the necessity for it. She provided a history of the Brigham decision and how our current funding system evolved. The core tenant of the supreme court case was that the state must ensure “substantially equal” access to education throughout Vermont. This is the basis for our current statewide funding mechanism so that two districts spending the same amount per student will have the same tax rate.

Fast-forward twenty years and it was becoming clear to policy-makers that certain students cost more to educate and that there are concentrations of these students in specific communities. This led to a 2019 study of the student weighting factors which suggested a new formula to account for these cost differences. It was clear that existing pupil weights were insufficient to address inequities. The Student Weighting Task Force that met last year was directed to make recommendations around how to implement those weighting factors, which is how we arrived at this bill.

For those unfamiliar, budget and spending decisions are made at the local school district level (by school boards and voters). The weighting factors formula is applied to the school district’s student population and a cost per student number is calculated. This number, known as education spending per equalized pupil, is what drives the tax rate in the district. The higher your cost per student, the higher your tax rate.

Some of the factors that weights are applied to include:

  • School size
  • Grade level (middle and high school)
  • Rurality
  • Poverty
  • English language learners

There were questions from Senators around what we could expect for tax implications from the bill and how dramatic of a departure this was from the existing system. There was some expressed interest in moving to an income-based funding system.

The tax implications of this are still unknown, but given that two-thirds of districts will get “free money” by maintaining their current tax rate we are likely to see education spending increase overall. This will result in higher tax rates in subsequent years for nearly all taxpayers.

Health Care

Vermont Blueprint for Health

The House Health Care Committee reviewed the Vermont Blueprint for Health on Friday. The program is a series of community-led strategies for improving health and well-being. Current Blueprint programs include Patient-Centered Medical Homes, Community Health Teams, the Hub & Spoke system of Opioid use disorder treatment (medication assisted), the Women’s Health Initiative, Support and Services at Home (SASH), Self-Management and Healthier Living Workshops, full population data and analytics for policy makers, and a series of learning labs for providers and community teams. Performance of programs are analyzed based on their per-member-per-month (PMPM) cost and/or benefit.

Blueprint’s Patient-Centered Medical Home (PCMH) – payments originally ranged from $1.20 to $2.49 PMPM. Currently, Blueprint the practices are eligible for a $3.00 PMPM base payment from Commercial insurers and $4.65 from Medicaid. Additionally, practices can receive a performance payment up to $0.50 PMPM. These payments are in addition to the normal fee-for-service payments that practices receive through claims for standard primary care services. The Blueprint payments were intended to cover the costs of the primary care practice, achieving and maintaining National Committee for Quality Assurance (NCQA) recognition for operating a medical home and providing enhanced primary care services.

Blueprint’s Women’s Health Initiative (WHI) –  payments were originally designated to be $1.25 PMPM from Medicaid for a practice’s first year of participation, with a reduction to $1.00 after the first year. A possible $0.25 performance payment was contemplated, but has not yet been implemented. The payments are intended to provide additional funds for implementing the Women’s Health Initiative in each practice. Both PCMHs and women’s specialty practices are eligible for these payments.

Blueprint Hub & Spoke – programs are eligible for Community Health Team payments from Medicaid. Spoke payments are based on the average number of unique patients in each Health Service Area for whom Medicaid paid Buprenorphine or Vivitrol pharmacy claim during the most recent three-month period. For every 100 patients, Blueprint provides funding for a certain number of staff positions, which results in a PMPM of $163.75.

Self-Management – historically the Blueprint for Health administered these programs, however the Vermont Department of Health (VDH) took over in October 2021. This fits well with the work on hypertension and diabetes prevention at VDH and streamlines the work with this field. $664,163 in funding flows through Department of Vermont Health Access to the Vermont Department of Health annually. There is no PMPM payment associated with these programs.

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One thought on “Campaign for Vermont: Child tax credit bill, workforce development bill, and more

  1. What have the proposed doing to the Vermont Social Security Income Exclusion. Its in the headline, but I read the article looking for details and found none.

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