Skip to Main Content

LCC Advocacy Update: Week 10, 2021

Thank you to this week’s sponsor of our Advocacy Update:

March 19, 2021

The difficulties associated with remote legislating, changing variables as federal funds are anticipated, and new strategies being adopted to deal with more money than the state has ever seen mean nothing is simple these days. Still, you can rely on LCC’s advocacy team to pull together conversations from disparate committees and conversations to give you a comprehensive overview of what is happening in the Vermont legislature. 

In this week’s update; 

Thank You to Everyone Who Joined Our (Virtual) Legislative Breakfast Series 

We’ve had a fantastic legislative breakfast series. Our first breakfast featured Governor Scott, and over 20 elected policymakers, and staff of the Congressional Delegation, and our second breakfast brought a timely insight into the perspectives of Lieutenant Governor Molly Gray and Senate President Pro Tempore Becca Balint, Speaker of the House Jill Krowinski. 

Our Legislative Breakfast Series is a staple of each legislative session, providing access and perspective into the inner workings of Montpelier. During these uncertain times, the format has changed; however, our team’s dedication to bringing you this access has stayed the same. 

Special thanks to the sponsor of our Legislative Breakfast Series:

Unemployment Insurance Negotiations Get Tense 

A storm quietly brewing over the past few weeks made landfall last week when the Senate Committee on Economic Development, Housing, and General Affairs passed S.10, a bill making substantial changes to the unemployment insurance system. In the below section, we’ll cover how the big hole in the trust fund was created, the origin of S.10, where things went astray, how that put S.10 in a place where it digs the hole deeper, why LCC is concerned, and what you can do. 

The Big Hole in the Trust Fund

The Vermont Unemployment Insurance Trust Fund has a roughly $300 million hole due to the pandemic, which employers will need to fill. The UI trust fund exists so that when employers need to make difficult economic decisions around staffing, employees have wage replacement to transition to other employment. At the onset of the pandemic, the Governor mitigated the pandemic by shutting down many businesses, requiring employers to put employees on the UI system. Additionally, the Legislature expanded eligibility to the system under Act 91. Though the businesses did not make decisions that damaged this employer-sponsored tool, none have said that they do not want to close the $300 million hole; they have asked to change the rate at which they pay back into the trust fund. This leads us to; 

The Origin of S.10 

Because so much money came out of the Trust Fund so quickly, the fund’s automatic policy would mean that employers’ tax rate would jump from schedule-1 to schedule-5 (tripling the tax rate for many employers) to make up the lost revenue. The Department of Labor has indicated that it is unnecessary to jump that high that fast, so S.10 was supposed to be about three things in the bill, and the employment community is grateful for it.

  • Pausing the rate schedule increases in the coming benefit year.  
  • Limiting the rate increase in the 2022 benefit year to only rate schedule-3, rather than schedule-5. 
  • Providing universal charge relief to employers who had employees leave due to reasons allowable under Act 91. 

These items are entirely reasonable; as we said above, employers did not create the hole in the fund and are willing to foot the bill to fill the hole; they just want to pay into it at a lower rate over the next few years, as they try to recover from the pandemic. 

Where Thing Went Astray 

Some Legislators have misconstrued this change in the pace at which employers restore the fund as a gift to the employment community when nothing can be further from the truth. Limiting a rate schedule is NOT a gift or handout to employers; it is simply adjusting the pace at which employers fill the hole. Due to this misconception, some legislators decided if they were going to give something to employers, they should balance it by giving something to claimants. Again, nothing is being given to employers, they still need to pay it back. 

How S.10 Digs the Hole Deeper   

The bill increases benefits by 20% and creates a dependent benefit of $50 per week at the cost of roughly $50 million to employers. 

Why LCC is Concerned

While LCC is appreciative of the three positive things this bill does, there are three main reasons why LCC is concerned with this bill; 

  1. It “digs a deeper hole” when the conversation should be about setting a pace to get out of it. When you are in a hole, the answer is to stop digging and decide how best to get out. This legislation effectively decided to dig deeper before trying to set a sustainable pace to climb out of the hole. 

2. The legislation passed without considering the massive amount of help coming from the federal government. Under the American Rescue Plan Act, the federal government is giving people on UI an additional $300 a week, has sent $1,400 checks per individual, made the first $10,200 unemployment tax-free, and is providing people almost $70 a week from a massive overhaul of the Child Tax Credit – all of this adds up to over $1 billion directly to VermontersWe understand the need to support people who have lost their jobs, however, the federal government has stepped up to offset this burden, and Vermont employers have a tough road without additional expenses.

3. This will make rehiring difficult as we try to recover. Last summer, it was well documented that the enhanced UI benefits disincentivized people to seek work. This proposal is set to take effect at a time when we will be emerging from the pandemic, with business owners seeking new employees. As you can see in the accompanying chart, even employees making more than $30/hour may think twice about seeking work.

There is a proposed amendment soon in play that might resolve some of these issues, however, the bill has not been changed at this time. 

What You Can Do

This is an all-hands-on-deck situation, as this is a complicated subject matter, and we need to explain the nuance of this situation to legislators. Here’s how you can help; 

  1. Learn more from this factsheet created by the LCC advocacy team and partners. 
  2. Share the points from that sheet and those above with your Senators and Representative(s) and explain how this bill will affect you specifically
  3. Still not sure how to contact them or what to say? Schedule a quick call with our advocacy team here

Legislators Get First Look at Roughly $3 billion in Federal Relief 

Just as when the CARES Act passed with its CRF funds for the state, we are looking at another round of “hurry up and wait” as the Treasury could take up to six weeks to distribute American Rescue Plan Act funds to the state and then even longer potentially to understand the rules around the use of the funds. The Legislative Joint Fiscal Office released their first overview of ARPA impacts on Vermont (we’d note that they made some minor mistakes, most notably listing union pension bailout money as business relief). We do know that the eligible uses in the American Rescue Plan Act, while including the familiar uses allowed by the CRF, added additional eligible uses, including revenue replacement for losses due to COVID and “necessary investments in water, sewer or broadband infrastructure.” Another key difference from the CRF money is that we have nearly four years from March 3, 2021, to expend the State fiscal recovery funds, giving us until December 31, 2024.

Last week, the Administration asked all agencies to put forth proposals for using ARPA funds to be compiled and presented to the legislature. One large concern the Lake Champlain Chamber has, as do others, is that the state might use this funding to create ongoing obligations that result in a cliff when we lose this money. Already, legislators have put forward ideas for new programs that would need funding streams beyond 2024. 

In advance of these new funds, the Agency of Commerce and Community Developments and Department of Taxes released a report on last years’ Economic Recovery Grants. This week, the House Committee on Economic Development Committee heard from Commissioner Goldstein, who reported that close to 5,000 businesses received a total of over $330 million, yet there is still over $515 million of unmet need from the time period between March and September 2020.

State Level COVID Relief Bill Moving Back to the House with Senate Changes 

H.315 will soon be headed back to the House after numerous changes in the Senate (language found on page 637 of this Senate Calendar). Notably, the Senate version swaps out much of the state general fund spending from the House version (about $47 million) with money coming to the state under the American Rescue Act Plan (ARPA), a move which the Secretary of the Agency of Administration called premature in a letter outlining the Administration’s disappointment with the bill. The bill now contains close to $80 million in spending of ARPA funds in anticipation of funding that will come in up to six weeks, potentially straining the state’s finances if we spend in anticipation of receipts. 

Major provisions include; 

  • $10 million from the General Fund for Gap Economic Recovery Grants for businesses that have not received aid to date. The Senate Economic Committee made some changes to this program from the House program. The Committee included $1 million for eligible businesses owned by Vermonters who are members of underrepresented communities, and an audit provision is included. This program will now be funded with ARPA dollars rather than general fund dollars. Draft program requirements can be found here
  • The bill also directs the ACCD to consult and coordinate with the legislature promptly with proposals for future distributions of funds for business recovery through the ARPA.
  • $500K to the Community Action Agencies for the Economic Micro Business Recovery Assistance (EMBRACE).
  • $5 million from ARPA for Mortgage Assistance Foreclosure Prevention.
  • $15 million from ARPA is directed for School Indoor Air Quality Grants, originally funded by CARES Act CRF, drawing some criticism from the Administration.
  • $3 million in ARPA ESSR funds for literacy training, $500K for student mental health, $1 million to address truancy, $4 million for afterschool and summer programs, and $5.5 million for summer meals.
  • $4 million from ARPA in “Workforce Upskill Opportunity.” 
  • $3million for up to two free classes at a Vermont State College for Vermonters seeking a new career or to enhance job skills, and $1 million for up to two classes at UVM.
  • $2.8 million from ARPA for up to two free classes at VSC for recent high school graduates.
  • $3.2 million of unexpended CRF money for broadband programs.
  • As in the House version, the bill reserves $20 million of General Fund for Other Post-Employment Benefit (OPEB) liabilities in hopes of heading off state credit rating issues, which we’ve discussed in previous updates.
  • $500k for increased slaughterhouse capacity.
  • Links up federal income tax laws. This is an important issue for many businesses who drew a PPP loan trying to file taxes. The Lake Champlain Chamber advocated that the Tax Department that they issue guidance that Vermont businesses file assuming Vermont conformity and, in the event of non-conformity, that there be a grace period to amend the filing free of penalties and interest, that guidance can be found here. Another outstanding question within the link-up is whether this link-up carries with it the exempt status of the first $10,200 of unemployment benefits created under ARPA, which could cost the state up to $12.6 million.

See a full breakdown of the H.315 spending here. 

Governor Rolls-Out Vaccine Roadmap for Every Vermonter and Turns Spigot Slightly 

Governor Scott rolled out a roadmap for when Vermonters can expect to receive the vaccine over the next few months (depending on supply from the federal government, which they expect to remain stable). The Governor said this schedule leads him to expect things to look very normal, by which he reiterated not just backyard barbecues by the 4th of July – something he said in an earlier press conference. The Governor made another small turn of the Spigot today too, announcing that as of March 24, bars and clubs will be able to open under the restaurant guidance, with capacity limits and distancing; however, towns can take stricter action on bars and clubs if the municipality opts to do that.

Governor Scott took a moment to remind people to continue to follow all guidelines about preventing the spread of the virus now; as he puts it, “we are nearing the end of the race, but we’re still in the race.”

Check-in On Proposed Economic Development Initiatives 

In his proposed budget this year, the Governor put forward possibly the largest one-time appropriations request for economic development the state has ever seen made possible by financial flexibility afforded to Vermont by federal coronavirus relief and better than anticipated revenues to the state. In this section of the advocacy update, we’re checking in on where some of these proposals (as outlined in the below table) are. 

A large number of these proposals have moved in the House within bill H.159, including; 

  • The Better Places Program – H.159 Creates the fund, rules for distributing funds, and maximum grant amounts; however, it does not fund appropriate the $5 million the administration proposed. The program would be solely dependent on crowdfunds. 
  • Tourism Promotion – House Commerce decided to support the $1 million in seed funding, however, it did not create a dedicated revenue stream to the fund. 
  • Creation of the new technology-based economic development program – The Committee added to its bill the Administration’s requested $1 million in one-time funding for a project with the UVM office of engagement.  
  • A presence seeking FDI in Montreal – $300,000 for the ACCD for a two-year contract with a foreign trade representative to improve Canada-Vermont business ties. 
  • Expansion of downtown tax credits – H.159, as discussed above, includes provisions around Downtown Tax credits. It would expand the program to neighborhood development areas while also increasing funding from $3 million to $4.75 million. This proposal has hit a bit of a roadblock in the House Ways and Means Committee, where they have considered pulling it from the bill to be considered as a stand-alone bill or when S.101 comes over from the Senate. S.101 has been passed by the Senate Economic Development Committee and the Senate Finance Committee and is now in Senate Natural. It contains nearly identical language to the House version on Downtown Tax Credit contained in H.159. It also proposes; 
      • changes to promote housing choice and opportunity in smart growth areas, including updating the Municipal and Regional Planning Fund program to allow grants for municipalities seeking to modernize their bylaws to increase housing choice
      • Training for developers on how to navigate permit processes to develop in-fill housing 
      • To remove the requirement for State water or wastewater permits where the municipality has issued a permit.

Also, in H.159 is 

  • $1 million for the Entrepreneurs Seed Capital Fund for early-stage risk capital for Vermont businesses that have experienced economic disruption from the COVID-19 pandemic as advocated by the Vermont Center for Emerging Technology and supported by LCC. 
  • The Commerce Committee decided to appropriate $100,000 to ACCD to convene BIPOC businesses, organizations, and community leaders.
  • $20.5 million to the Vermont State College System for a myriad of different scholarship programs including: 
    • $4 million to provide scholarships to Vermonters transferring from out-of-state institutions or returning to school after exiting in 2020–2021. These scholarships vary depending upon the status of the student at a VSC institution. 
    • $3 million to provide scholarships for individuals who have completed some amount of schooling but are seeking to finish their degrees. 
    • $2 million in scholarships for graduate students completing degrees in education or mental health counseling. 
    • $2 million for scholarships for undergraduates majoring in education or allied health.
    • $5.5 million for full-tuition scholarships for students majoring in critical occupation majors.
    • $3 million in scholarships for Vermonters whose employment was impacted by the COVID-19 public health emergency. 
  • $2.2 million for the creation of a micro business development program within the Department for Children and Families, Office of Economic Opportunity
  • microbusiness business development program

Other Initiatives and their status 

  • Place-Based Tax Increment Financing (Mini-TIFs)S.33 passed Senate Economic Development and is being reviewed by Senate Finance. They are considering limiting the number of pilot projects to two a year for five years. 
  • Gap Recovery Grants – what was supposed to be an appropriation in the Budget Adjustment Act has since been delayed so much that if it was life-saving medication, it might be delivered to the morgue. While the proposal is moving in H.315, significant changes have been made, and the change in the funding source, from general fund dollars to anticipated ARPA funds, raises questions around the speed of deployment. 
  • Act 250 Modernization – after a dramatic first act on this issue that involved the legislature rejecting the Administration’s attempt to use executive authority to reorganize government in the first half of a new biennium, the conversation has now been focused on a few pieces of legislation being considered in the Senate Committee on Natural Resources and Energy S.102, with all indications that if the legislation moves forward, it will be more narrowly focussed. The Chair of the Committee indicated that he doubts they will have the capacity to address Act 250 this year, and their corresponding committee in the House has not taken action on this issue. 
  • Buy Local Consumer Stimulus – this proposal was pretty close to dead on arrival and has not moved in recent week.
  • Brownfield Mitigation Funds – H.315 include the first tranche of $14 million in brownfield dollars requested with anticipation that the remainder of the proposed funding will come in the appropriations bill.  
  • Weatherization – what started as a one-time appropriation of $20 million has turned into S.109, which set a goal of weatherizing 120,000 homes and reducing greenhouse gas emissions by a set target by 2031. The bill creates the Energy Savings Fund administered by the Department of Public Service to fund energy savings programs, including weatherization and transportation programs which would need a long-term funding source in the future. The bill will likely be wrapped into the appropriations bill. More on the bill can be read in its fiscal note. This bill also raises more questions than answers beyond just the source of the $102 million a year, adding up to over $1 billion in the required fund over the next 10-year; there are also questions of consumer demand and the workforce necessary to hit these targets. 
  • Manufacturing Tax Inputs Exemption – the House Ways and Means Committee has been receptive to this proposal; however, it appears it has now been wrapped into a proposal to create a marginal property transfer tax surcharge on properties over $1 million
  • Manufactured Home Replacement Tax Credit – just as with the Manufacturing inputs exemption, the House Ways and Means Committee has been receptive to, however, it has now been wrapped into a proposal to create a marginal property transfer tax surcharge on properties over $1 million

We’ll provide more updates on these initiatives and the others in the table above as they reach milestones. If you have any questions, be sure to contact our advocacy team. 

Laundry List 

  • Last week’s update here
  • Have an issue our Government Affairs team can help with? Use this tool to schedule a meeting.  
  • Vaccine Related Employment Questions? Vaccines bring about a whole host of new questions employers must ask and contingencies they must plan for. Our Government Affairs Manager Austin Davis sat down with two leading attorneys in the Lake Champlain Region to talk through some of these questions to develop some of your own answers and contingencies. WATCH it here
  • The Miscellaneous Alcohol bill, H.313, is advancing to a floor vote. A provision LCC has continually advocated for would allow to-go alcohol sales to continue until July 1, 2023, to assist in businesses’ recovery. 
  • This week, CEOs of Visa and Mastercard announced a “pause” of their planned swipe-fee increase after hearing from Congressman Welch and Senator Durbin in the letter they sent earlier this month urging them to reconsider their plans. We are pleased that they have made the right decision, which will help ease Vermont businesses’ burden amidst the pandemic.
  • The House Ways and Means Committee has proposed a property transfer tax surcharge on a property over $1 million, which the Lake Chamber will be vocalizing opposition to. 
  • The Governor recently signed S.110, an act relating to extending eligibility for Pandemic Emergency Unemployment Compensation, allowing Vermonters on this benefit to continue to receive the benefits without disruption or a decrease in benefits. This bill benefits not only the UI claimants but also the state as these funds are federal.
  • Governor Scott signed on the 13th, S.14, an act relating to deed restrictions and housing density which corrects a mistake made in S.237 of the last legislative session, which voided conservation easements
  • S.20 will soon be sent to the House in a similar form as it was last year.  
  • The Lake Champlain Chamber advocated the Tax Department to issue guidance that Vermont businesses with PPP loans file assuming Vermont conformity. In the event of non-conformity, that there be a grace period to amend the filing free of penalties and interest, that guidance can be found here
  • The House Ways and Means Committee is working on the draft language of their miscellaneous tax bill. A summary of the bill can be found here
  • H.157, creating a residential construction contractor registration, has passed the House General, Housing, and Military Affairs Committee and the House Ways and Means Committee. The bill proposes a program to be administered by the Office of Professional Regulation (OPR). Contractors performing construction work valued at more than 3,500 would be required to be registered with the state. OPR would also be directed to establish a voluntary certification system for contractors to signify competence in subfields and specialties. OPR would manage contractors as an advisor profession with two appointed persons to serve as advisors. More can be read here
  • This Wednesday, the Federal tax filing deadline was pushed back from April 15th to May 17th, causing Vermont to push back its personal income tax. This extension also applies to Homestead Declarations and Property Tax Credit Claims. Read more here.
  • This week, the Office of State Treasurer, rolled out their proposed Pension Group Plan Comparison for State and Teacher Retirement Systems

Concerned or need to learn more about anything in this newsletter? Email our team at [email protected].

We look forward to working with you.
Sincerely, 
The Lake Champlain Chamber Advocacy Team