Editor’s note: The following is the Campaign for Vermont Feb. 6 legislative update.

Fiscal Responsibility

The House Ways & Means Committee reviewed a strike all amendment to H.510 on Tuesday, which seems likely it will become a committee bill. One of the major changes is that the credit would now be available to part-time residents, not just full time.

There were some technical changes around phase-out of the credit for households over $200k of annual income. Also, the payout of the credit would be in two phases. The first payment would come in the fall of the taxable year (projected based on previous year) with the final amount being calculated when taxes are filed. This system is easier to manage and generates less overhead that bi-monthly payments originally contemplated.

The total cost of the program is $48M which will be paid out of tax surpluses from FY2022. The program would assist about 40k children with an average credit value of $1200. The Joint Fiscal Office also noted that if you lift the income cap, costs grow to $65 million or so.

The Committee came back on Wednesday and added an exemption on the first $5k of Social Security income for the purposes of the income calculation. The bill was voted out of Committee 8-3-0.

The Public Assets Institute (PAI) testified in front of the House Ways & Means Committee on Thursday about restructuring education finance. PAI is in favor of moving to a straight income tax system instead of the income sensitivity system we have now because they believe high-income Vermonters pay a proportionally smaller amount of their income on property taxes. The current parallel system, they say, is creating inequities because of weighting factors

One interesting point they made is that categorical aid supports all types of payers (residential, non-residential, and retail taxes) versus pupil weighting only supports the residential payers.

This might be true in a vacuum, but because the categorical aid would be paid out of the education fund it would have the same effect as the weighting formula unless there was some secondary action to vary non-residential rates by district. Currently these are all subject to a flat statewide tax.

PAI argues, essentially, that we have been moving towards an income-based system since the 1970’s why not make it official? See their full presentation here.

Workforce Development

The House Commerce Committee took testimony on the importance of Career and Technical Education (CTE) on Wednesday. Jay Nichols (Executive Director, Vermont Principal’s Association) noted that too often people are steered away from tech and towards college. CTE schools still have a lot of social stigma associated with them and he wants kids to know that college is not for everyone. Other advocates echoed these statements.

Lack of funding for CTE schools holds back a lot of kids. Burlington Technical Center only receives 15% of eligible 11th and 12th grade students in their area. Establishing a baseline level of funding would assist with this. Schedule and transportation are also an issue and Act 46 actually hurt CTEs by creating dis-alignment between CTE districts and their sending towns. It is also known that dual enrollment is an important tool and can provide tremendous benefits. Advocates are asking for an immediate overhaul to the system because incremental change may not meet the need quickly enough.

There was also talk of adding an optional 13th year of high school and creating uniform CTE curriculums across the state.

State administrators for Career and Technical Education (CTE) Centers testified in the House Education Committee on Tuesday. As in previous weeks a number of issues were raised, including:

• CTEs often run into scheduling problems with the high schools – businesses are frustrated that seniors cannot spend 2-3 days a week working on work-based programs.
• The current model has an inherent flaw with the funding method.
• More students are necessary to make programs sustainable.
• Governance is also a problem, CTEs sort of live on their own without concrete ties into school districts.
• Transportation is a problem, some classes are still at the high school and some at the tech center. This means either long bus rides or parents have to shuttle, neither is ideal.
• The rules are outdate, over 50 years old in some cases.

Economic Development

The Governor is looking for $8.6M in funding for tourism and marketing. The Senate Economic Development Committee heard from Heather Pelham (Commissioner, Department of Tourism and Marketing) on Tuesday that tourism losses in 2020 were now calculated at $650 million. Some of these losses were mitigated by second home owners and long term guests, however traditional lodging was down 50% food and beverage was down 70%. This represented a total loss of around $1B for the state. Loss of workforce is also an issue, with about 7k workers leaving the industry.

The Department has been providing grants to communities to help develop projects to promote their town and create long term assets. Another $10M non-competitive grants is expected to become available to the state to continue this work.

The Committee also spent time on the worker relocation program. Chairman Sirotkin noted that the program has gotten a lot of pushback. Pelham noted that the real relocation work happens at the regional level and that they want to formalize the network to track data on who moves to what region. The need for housing was also brought up because in-migration is somewhat stalled without housing stock being available. Betsy Bishop (President, Vermont Chamber of Commerce) voiced support for the remote worker program. Part of the problem is making people who come feel welcome, especially those from the BIPOC community.

Bishop was concerned that many businesses are still not recovering and it could take several years to be corrected. There were also big problems with the bridge grant program (evidenced by the fact that many of the funds went un-allocated). She wants to change the criteria and do a needs based program, but is opposed to turning it into a loan program as VEDA pitched last week. Many businesses are not thinking of the future, they are trying to fix what is wrong now. Creating loans that force them to plan ahead is outside their current capacity. The Committee wanted to hear more about where the needs actually are because they are getting conflicting information.

Other advocates were supportive of implementing something similar to the paycheck protection program with the unspent bridge grant funds as well as establishing project-based TIFs to help smaller communities.

The Committee took further testimony on Thursday about what to do with the economic recovery bridge grants. Chairman Sirotkin announced he was not supportive of the proposed Vermont Economic Development Authority (VEDA) loan program. He wondered why it would not be simpler to fix the grant formula instead.

Joan Goldstein (Commissioner, Department of Economic Development) pushed back, saying that the administration wants a forgivable loan fund with 0% interest. VEDA professionals can verify that the loan information is accurate and loans are more accountable than grants. Additionally, each phase of the recovery program was a separate program which requires a new to set of qualifications and guidelines – essentially, changing the formula would constitute a new program. After discussions from last week, the Department put together an outline of a plan that would create a loan program to address the lack of accessibility of the bridge grant program. It would use net operating income as the key metric and compare that from the beginning of the pandemic to today. If that figure has declined by 25% they are eligible for loans.

Sirotkin offered that they could turn this back into a grant program and have VEDA administer it, given the push back to the proposed loan program that he has heard from the business community. According to legislative lawyers the Administration cannot move money administratively into the capital grant fund. Goldstein respected this decision but she noted that this would mean that the $20M in the grant fund would sit idle.

The Committee plans to take more testimony next week from advocates given the concern over moving these funds.

The Senate Natural Resources Committee came back to Act 250 reform this week, looking at S.234. The Department of Forests, Parks and Recreation addressed the language discussed last week around forest fragmentation. Generally the Department supports the language added to the bill to prevent habitat fragmentation, however they wanted input from other departments on the infamous “Road Rule” provision (vetoed by the Governor last year) that would prohibit private roads above 2k feet in elevation.

The Committee is concerned about the break up of larger plots of land. The Department is seeing this happen as well as the number of plots of land in the current use program is increasing more quickly than total acreage. For example, someone might sub-divide a 100 acre parcel and then the department will see four applications for 25 acres each come in. This potentially leads to fragmentation if those new plots are developed in the future.

According to the Department, Act 250 should be “valuing the conservation effect of a sawmill, kiln or firewood processing operation” and not treating them the same as a residential subdivision. Not that they should be totally exempt but they have conservation value and need incentives that could be provided through Act 250. The state is well positioned in the broader forest products (including outdoor recreation) economy to attain better growth of forest land-based business.

The Committee came back to S.234 later in the week. The Natural Resources Board shared that two-thirds of the 65 Act 250 permits in front of them right now are multi-unit housing projects. An interesting line of discussion emerged around senior housing where creating stock for retirees to downsize to something more affordable would free up single-family housing stock for young families to purchase (which is currently where most of the pain is in the housing market). Folks who want to downsize but remain close to or in the community (maintain existing relationships, businesses, etc.) cannot do so without the mixed use/income lower income housing units available.

Legislative counsel shared a useful flow chart of how the bill is proposing to direct permitting applications for priority housing projects. These projects would be exempt from Act 250 review.

The Committee identified a possible issue in the definition of affordable housing in current law where income qualifications cap access at 120% of average area income. Because of upward pressure on housing markets, it could possibly create a “reverse cliff” whereby middle-income families no longer qualify for affordable housing.

The Vermont Natural Resources Council voiced concern about forest fragmentation due to subdivisions of housing. Between 2003 and 2009 found that out of 925 subdivisions creating 2,749 lots and affecting a total of 70,827 acres, only 10% were reviewed under Act 250. They believe the level of review was so low because Act 250 is only triggered at six or more lots and the majority of subdivisions were in the 2-3 lot range. They also believe that the exemptions contemplated in the bill go too far and remove neighbors from the process.

They continued by saying, “we are growing exasperated at showing up to help the industry with proposals and then see them take the seat here and oppose the forest fragmentation provisions. We don’t see how we maintain a viable forest products industry without maintaining a viable land base as its’ being chewed up and subdivided every year… if the goal of some as has been before to turn the forest processing provisions into exemptions then VNRC will oppose the bill.”

Housing

The House Ways & Means Committee took testimony Thursday on downtown development. The Agency of Commerce and Community Development (ACCD) has been issuing grants to local communities to help change their zoning bylaws to make them more open to new housing in downtown areas – the goal is to designate every downtown in Vermont. Downtown development meets the state’s land use, economic and climate goals. A Vermont Downtown Coalition group has also formed to advocate for downtown development. ACCD is also teaching communities how to repair housing stock that exists in their communities but is in disrepair.

Downtown and village center program have helped design 260 communities in the state with $3M in incentives annually awarded. The program is simple and accessible with five types of designations: Village Centers, Downtowns, Town Centers, New Town Centers, Neighborhood Development Areas, and Growth Centers. Tax incentives and credits support large historic buildings conversion to mixed use spaces, facade upgrades, and hazard abatement to bring older buildings up to current standards. All of these programs have a significant impact on downtown development with very positive feedback (many like the simplicity). One of the key outcomes is that the money has been used to redevelop large office blocks for housing. Another major focus of the funding was preserving general stores, which often serve as community centers. An additional benefit is that moving people into live-work communities (as is the goal of the downtown development programs) will reduce traffic and help to bring down emissions.

Demand is outpacing available funds – there was a $1.5 million gap in unfunded requests last year. ACCD has funded less than half of the applications that have been received over the past few years. And, that is despite an increase in resources due to pandemic assistance. More subsidies are needed if policy-makers want affordable housing to be constructed in our downtowns.

The committee asked if we are doing enough and if these investments were stable long-term. Vermont is not ready for an influx of people, our systems and infrastructure cannot handle it.

The Senate Economic Development Committee committee took up their Omnibus Housing bill briefly on Friday. There was some debate in the Committee about whether to allocate $20M in federal money for the Vermont Housing Improvement Program through the bill or through FY2022 budget adjustment (the Administration wants it in FY2022 so the money can be used faster). The Department of Housing and Community Development is pursuing an interesting idea of using Accessory Dwelling Units (ADUs) for low-income housing. These typically would be something like an in-law apartment that a family might use for short-term rentals. However, for this two work the state would need to subsidize the rent or provide grants to bring an ADU online.

After some discussion, the Committee settled on providing incentives for projects under $50k to bring ADU’s online for low-income housing. The Governor is still concerned about the “missing middle” in the housing market. He wants additional single-family homes built that middle income families can afford. The Department is hoping for a revolving loan fund to address this.

The Vermont Housing Finance Agency shared that home prices have grown 37% in three years and supply has not kept pace with demand. They are pitching a new program to offer a builder-based subsidy that will lower the cost of construction for homes in the target price range. The subsidy would cover up to 35% of eligible development costs (based on the federal Neighborhood Homes Investment Act). This subsidy could be paired with a buyer affordability subsidy that would remain with the property after sale (somewhat similar to a shared equity property). The affordability subsidy would be based on the buyers income level, for example if someone could afford (per the calculation) a $315k home but the build price was $375, then the subsidy would be $60k.

Good Government

The Senate Government Operations revisited the State Code of Ethics on Friday. The judiciary branch argued for exemption or concessions from the code because they already have stringent reporting and enforcement measures in place under their code of conduct. Similarly, some legislators were uncomfortable with how the code might be applied to legislators. After much discussion and many assurances that the judicial branch would continue as they are now and core legislative functions (voting) would not be impacted by this code, the Committee seems to be ready to move forward.

Campaign for Vermont testified in favor of keeping all three branches of government under the code of ethics – this should serve as a baseline set of expectations for Vermonters about the conduct of public officials. We believe strongly in having a unified standard across state government. Individual departments or agencies (like the judiciary) may have higher standards, but there should be a floor.

We are expecting the Committee to vote the bill out next week.

Education

The Senate Education Committee took testimony on pupil weighting on Tuesday. Kirsten Kollgaard (Winooski school system) pointed out that the United States uses complex systems which may be very complicated for those whose primary language is not english. This makes it hard to figure out how to sign up for camp and other programs. In Winooski, they provide culturally-sensitive educational programs on a wide variety of topics. However, more guidance counsellors are needed to balance the numerous culture differences. Winooksi feels it has built a strong program at a pace the taxpayers can support, but if pupil weights are not adjusted they may have to cut positions which will disadvantage families. The current categorial aid which comes from the Agency of Human Resources is challenging. The amount of the aid can vary year to year and the funding cannot be used to serve a student who has been in state for more than three years.

The Committee was glad to hear that the refugee resettlement funds were helping. They are trying to balance the needs of each community and what that looks like.

The next day the Committee heard from Professor Kolbe (co-author of the UVM Report) who highlighted the trade offs between updating existing weighting factors in lieu of a categorical funding program for English Language Learners (ELLs) students. She believes that when a population can be easily identified and requires a significant amount of support (such as ELL or special education) then categorical aid is appropriate.

Other options the legislature may consider are a tiered grant program, a hybrid system, or a cost reimbursement model. The Committee seems to be unsure where they want to go from here, they are still trying to wrap their arms around the impact to students and taxpayers. The Joint Fiscal Office showed some estimates of what a hybrid system would do to property tax rates but the analysis was pretty limited. The Committee is likely to come back to this next week.