April 6, 2012 – Week 13

Employers from across the state took time away from their businesses to visit the State House this week and share their ideas and concerns about the issues that keep them up at night. The themes that were discussed throughout the day were:

• The need for predictability and consistency from state government as they consider changes to policies such as health care, energy and taxation
• The costs of doing business and how it affects competitiveness in this global economy
• The need for a better trained workforce
• Strategic investments and direction with taxation practices and programs that will bring long term and sustainable growth for our economy

Employer Day a Success
Approximately 150 employers spent the day at the State House talking with legislators about how to make Vermont a great place to do business. Five different employers provided overviews of concerns ranging from cloud computing taxation to health care, energy costs and tax policy before a joint Senate and House Economic Development Committee meeting co-chaired by Senator Illuzzi (R-Essex/Orleans) and Representative Botzow (D-Pownal). Ted Adler of Union Street Media called for more transparency and predictability with respect to the state’s tax codes. He also made the case that taxing the cloud will affect every Vermonter from farmers to doctors and restaurants and not just the “small niche of nerds in Chittenden County.” Win Smith of Sugarbush Resort described the energy costs for their business and how the renewable energy mandates will create a competitive disadvantage in contrast to other states such as New Hampshire and Maine. He also cited property taxes as an issue and suggested that by adjusting tax rates we could raise revenues. Marc Sherman of Stowe Mercantile described the uncertainty surrounding health care reform. He indicated that the uncertainty makes it difficult for businesses to make future plans and asked that the state allow as many options as possible. Tom Clavelle with Engelberth Construction described the advantages of our small state saying, “because of the size of our small state, the ripple effect is huge. I understand there’s no magic in this room but if there are clear obstacles to business growth, let’s get rid of them.” Employers also heard from Governor Shumlin, Lt. Governor Scott, Speaker Shap Smith, Senate Pro Tem John Campbell and Agency of Commerce and Community Development Secretary Lawrence Miller.

Business Investment at Risk?
The Senate Economic Development Committee will take up H.78 next week. As reported last week, the bill was passed by the House in an attempt to ensure that employees can collect unpaid wages when a business closes. The final section of the bill includes a provision that could have unintended consequences for venture capital in Vermont. The bill would make directors or shareholders liable for unpaid wages. While shareholders and directors are currently liable for unpaid taxes, we’ve heard from many members who feel the provision would make Vermont an outlier. If directors or shareholders were made liable for unpaid wages, investors would likely avoid investing in Vermont companies. Depending on the type of business, wages can be a significant part of a company's costs. While we understand the intent of the bill, we feel that this section of the bill must be removed if the bill moves forward. If you'd like to learn more about the bill, please contact Cathy Davis at cathy@vermont.org. 

Governor Declares Cloud Will Not Be Taxed
Governor Shumlin made a strong statement at Employer Day that the state will not be taxing the cloud. However, the House Ways and Means Committee voted out a bill by a margin of 7-3-1 that will begin taxing remotely accessed software. The bill includes:

• A refund for taxes paid after December 31, 2006 and before July, 1, 2012 if a documented request is made of the commissioner of taxes
• Treating cloud computing as tangible personal property after July 1, 2012
• A study committee to examine how current policies help and encourage the software development industry in Vermont

The Administration has indicated they are not supportive of this bill. Our organizations, however, do put our support behind the Senate Economic Development Committee’s bill, S.173. The next stop for the House bill is the Appropriations Committee to discuss funding the study and then a House floor debate before it moves on to the Senate. Contact your legislator to express your opposition to the House bill and in support of Senate bill S.173.

Health Care Considered
What bills will move forward and which will not is becoming clearer by the day. Any bill that includes a new fee or tax must be considered by the Ways and Means Committee in the House or the Finance Committee in the Senate. If a bill includes a new state government position or some other kind of spending, it must be reviewed by the Appropriations Committees. As such, these Committees can get very busy at the end of the session as they try to consider all the bills that need to move to the floor. In particular, the Senate Finance Committee must try and find the time to work on the Miscellaneous Tax Bill (H.782) as well as complicated bills like the health care reform and energy bills.

The Senate Finance Committee took testimony on H.559, the health care reform bill this week. The bill includes provisions on how to implement the health care exchange in Vermont. The Exchange will become operational in 2014 and be a marketplace where small businesses and individuals will purchase insurance. The bill is very technical and the Committee has had limited time to consider it. One of the issues at the heart of H.559 is whether purchasing insurance in the Exchange should be mandatory or voluntary for small businesses. Jim Harrison with the Vermont Grocers Association testified before the Committee and asked why small businesses shouldn’t have options available to them. He went on to ask what the harm was in giving small businesses options, explaining that if the Exchange is competitive and works well, small businesses will gravitate there. He also noted that many in the business community want to see health care reform work and that if the Exchange doesn’t go well, it will mean a huge roadblock for future reforms. Several witnesses have suggested the Committee consider making the Exchange voluntary for the first year or two and then sunsetting that provision. At this point in the Committee’s deliberations, it seems unlikely that they will make the change and it appears the Exchange will remain mandatory for small businesses come 2014.

Energy Bill Draws Concerns
The Senate Natural Resources and Finance Committees are working on H.468, the renewable portfolio standard (RPS) bill. The Senate Natural Resources Committee heard from staff with IBM Vermont this week who expressed concerns about the impact the bill would have on their electricity bill. IBM Vermont is an aggressive adopter of efficiency measures, yet they feel that measures in the bill could increase their electric rates by at least $4 million per year in out years under the RPS. The Chamber and GBIC cannot support any plan that makes Vermont companies less competitive on a national and global scale and increases the cost of doing business in Vermont.

Utility Merger Controversial
One of the most interesting issues in the State House the past few weeks has been the attempts by a tri-partisan group of legislators in the House to pass legislation that would require Green Mountain Power to return funds directly to Central Vermont Public Service (CVPS) customers as a part of their proposed merger. In brief, when CVPS was facing bankruptcy several years ago, electric rates were increased in order to help the company pull out of the situation. Some lawmakers feel customers should be repaid out of the profits of the merger in the form of direct payments. Commissioner of Public Service Liz Miller met with members of both the House and Senate this week in order to provide them with more specific information on the merger. The Vermont Public Service Board is currently reviewing the merger. The Chamber and GBIC feel that the since the PSB is a creature of the Legislature designed to protect the interests of Vermonters, the Legislature should let the PSB consider this issue in the context of their larger deliberations on the merger.

Permitting Changes Resurrected
Some bills have managed to be resurrected despite not making the crossover deadlines.
After laying dormant for much of the session, S.28 “an act relating to the permit process for protecting the environment” emerged out of the Senate Natural Resources Committee on a 3-2 vote with Committee Chair Lyons (D-Chittenden Co.) voting with Senators Brock (R-Franklin Co.) and Benning (R-Caledonia Co.) to advance the bill. At the beginning of the session, Governor Shumlin had requested passage of legislation that would eliminate the need to hear environmental permit application cases all over again if appealed from the District Environmental Commission to the Environmental Court.
S. 28 now includes:

• Appointment of a new magistrate (will likely become a hearing officer) to increase speed of application review and increase accessibility to proceedings by parties.
• Ethical standards for District Commissions.
• Changes to party status to clarify standards as a result of a recent court case referred to as Pion in which the environmental community believes some parties were unfairly kept out of the process.
• A pilot project for record review in the District Environmental Commissions for Chittenden, Rutland and Lamoille/Washington Counties with a four year sunset, and annual reporting of its use and effectiveness by the Natural Resources Board (NRB) to the legislature. Record review is to be used upon request of either NRB or parties for controversial applications.
• A requirement that the appellant will bear the burden to demonstrate the Commission committed reversible error.
• A study to be conducted by the NRB that would recommend provisions for improving Act 250 so as to address climate change, sprawl, loss of agricultural/forest soils and the cumulative impacts of development.

Our organizations, along with other business groups, offered testimony in support of the record review for controversial cases, but expressed reservations with the possibility of expanded party status. We also believe that the record review should not be just a pilot nor be limited to three district commissions. The environmental community contends that a clarification to party status might make the process more efficient as there would be less disagreement over party status and who qualifies. If the bill passes the Senate, we will work to improve the bill in the House. For more information on this bill, contact dawn@vermont.org.

Labor Bill Moves Along
H.762, the omnibus labor bill which contains the “sole contractor” provisions was approved by the House Ways and Means Committee and referred to the House Appropriations Committee. Resolving the issues many of our members have encountered with regard to who is considered an employee for the purposes of workers’ compensation and unemployment insurance is a priority for the Chamber.

Tourism Funding Study?
The Senate Economic Development Committee received an overview of a bill that calls for a study of tourism funding for the state of Vermont (H.640). The bill has a number of findings relating to the importance of the tourism economy and calls for the agency of commerce and community development and the other state departments to “evaluate the optimal structure of tourism and marketing funding” as well as “fast action funding” to take advantage of opportunities as they arise. No appropriation is provided in the bill.

Education Finance Impacts Studied
The House and Senate Education Committees received an overview of a study conducted by Northern Economic Consulting for the Vermont towns of Dover and Wilmington concerning the impact of Vermont’s education financing structure on the state’s towns and cities. These towns felt the Picus report on education finance had shortcomings and therefore, commissioned their own study. Findings include:

• Larger high schools in Vermont offer greater education opportunities in core academics, fine arts, athletics and extra-curricular activities
• While under Act60/68 the same school tax rate allows the same dollar spending per pupil across towns, the same school tax rate does not lead to equal education opportunities
• There were mixed results between economic activity in towns that were most adversely affected by Act 60/68

As a follow-up, and because of the lack of comparative data statewide, representatives for Dover and Wilmington are proposing a study to determine the data necessary to compare how all schools are able to offer substantially equal educational opportunities for students.