Thank you to this week’s sponsor of our Advocacy Update:
April 5, 2021
If you were to summarize the conversations our team has had this week, it would come down to; “the phrase ‘better late than never’ is being put to the test.” This is true in so many ways. Again, this week, the Governor foreshadowed the guidance coming this week, a blueprint to emerge from the pandemic, leaving the sectors hit hardest by this pandemic anxiously waiting and watching peers in neighboring states make hay of the guidance they have had for weeks, some even months. And then there are recovery grants; starting with the gap recovery grant program proposed in January that was meant to be a quick-moving proposal that would cover those who have received no assistance to date, which is now in its final legislative form, and will hopefully expedite grants to a larger audience. While all of these delays are understandable, to some extent, they put Vermont at a disadvantage coming into the summer.
In this week’s update;
S.10 Passes the Senate, Heads to the House
An amended version of the bill that has caused so much contention limped across the Senate’s finish line on Tuesday after the action was postponed on Friday due to power outages. The final vote of 18 to 12 saw the Senate Democrats fractured with five of the 23 from the Democratic-Progressive coalition splitting from the party, among them four powerful committee chairs.
We wanted to elaborate further on our discussion of why the proposed $66 million is a “false benefit” from last week’s newsletter. The balance of the UI Trust Fund is not an arbitrary number, it is derived based on a calculation involving looking at 10-years of activity within the fund and arriving at the correct balance size to protect the fund from any potential insolvency. This would set a target (more likely a range) for the end balance of the fund, and then rate schedules would be corresponding to that target. That number is currently a topic of discussion, as LCC believes that removing the anomalous year of 2020 from the calculation would have the fund at the correct size, however, the bill would direct a study to come to how best to calculate the balance size. Unless the anomalous year of 2020 is accounted for or removed, employers will be overpaying to the tune of hundreds of millions of dollars.
Because the balance size of the fund is set this way, directing the Commissioner of the Department of Labor to deduct $66 million from the contributions from employers over a 10-year period as written in the bill could possibly (it remains to be seen if this is workable) reduce payments $66 million, however, it would be at the cost of falling short of the derived target balance for the Trust Fund. This approach is akin to forgoing payments to a pension plan to achieve short-term goals, something Vermont has done with disastrous results, and Vermont employers do not wish to replicate.
In short, the mechanics of the UI Trust Fund do not accommodate deducting or forgiving contributions to the Trust Fund, only delaying. The only true way to deduct $66 million in UI Trust Fund contributions would be to appropriate $66 million in state dollars into the UI Trust Fund; this is something neither employers have asked for nor the Senate has proposed. As we’ve said all along, employers have only asked for smaller payments in the current years while catching their breath from a global pandemic, to then pay off the remainder of the balance over 10-years.
The bill will now head to the House, where the Commerce and Economic Development Committee already crafted legislation to address the issues around rate schedules without any extraneous additions last year in a bill passed by the House. The Committee heard proposals of amendments to the effect and dismissed them.
This is a difficult issue to explain, and we could use all the help we can get. Please take a moment to contact your Representative, particularly if they are on the House Commerce and Economic Development Committee to let them know that the employer community cannot accept S.10 as currently passed. If you would like help from our advocacy team, please feel free to email them at [email protected] or schedule a time to talk here.
State-State Level COVID Relief Bill Resolved
As you might have seen in previous coverage of this bill, H.315 started out as a small, $62 million bill and has since turned into a $128 million “mini-budget” which has brought with it most of the controversy and negotiations of a large budget. As the bill came over from the Senate, nearing the legislative finish line, it drew criticism from the Administration about pre-emptively spending a great deal of federal relief before the state has received it or all of the information around it. The Appropriations Committee has stood by that decision and expects the Commissioner of Finance and Management to use anticipated receipts to pay for state expenditures as needed
Aside from that, multiple issues slowed down the final passage of the bill and leadership took the unusual step of tasking members to negotiate with the members of committees of the Senate to avoid a committee of conference on the bill. This made the process slightly more opaque to follow compared to a Committee of Conference, as there was no public access to those negotiations. Two of the areas where issues needed to be mitigated were the Gap Recovery Grants and the link-up to federal tax law changes.
Gap Grants:
LCC’s testimony on the Gap Recovery Grants section of the legislation on Tuesday was well received and reflected in the final product of the bill. The Gap Recovery Grants were originally proposed in early January as part of the Administration’s proposed budget, and intended to be part of the Budget Adjustment Act, to be able to fit the needs of those who fell through the gaps in assistance, both state and federal, so far. Many in the legislature were uneasy about using state dollars, unlike previous state-level grants which were federal dollars, so criteria were narrowed and the Legislature took its time on the proposal as this was to be funded by General Fund dollars and many felt that money needed to be used with different diligence than federal dollars.
Fast forward to now, we’re in month four of the legislative session, so this is not being deployed very rapidly, and it is no longer with general fund dollars, as the legislature is using the more recently passed American Rescue Plan Act dollars. In the context of these changes, LCC advocated that the House reverse changes of the Senate version of the bill to expand relief beyond businesses that have received absolutely no help.
As negotiations dragged on, a few sticking points emerged. First, the Senate looked to restrict the grants to only those businesses that received no aid. Second, the metric for loss was changed from tax loss to economic loss. Third, a simple change of one word limited the potential size of assistance and the flexibility of ACCD to right-size grants.
The House Commerce and Senate Economic Development Committees went back and forth over these changes, with the House Committee eventually passing a new version which was subsequently agreed to by the Senate. Under the newest version, the program eligibility is similar to what has always been envisioned for the first 30-days, with only those who have received no assistance. After this, other businesses who received limited assistance will be able to apply provided they make the required certifications and show a tax loss due to the COVID-19 emergency.
Federal Link-up Issues – UI and PPP Tax Treatment
One issue plaguing the passage of this bill was Vermont’s link-up to federal tax law, something of greater urgency, impact, and consequence as tax day quickly approaches and the U.S. Congress has made a plethora of substantive tax changes to the tax code in the last 5-months. Vermont is technically a static conformity state (where we have to, through legislation, link to federal laws), however, we operate more like a rolling conformity state in practice, as the Department of Taxes often assumes conformity and begins crafting documents for tax season ahead of a legislative link-up. This is typically fine, however, recent drastic changes have made members of the Ways and Means Committee uncomfortable with such methodology and they would like to exert more control over state tax conformity.
The House Ways and Means Committee decided to link up to federal tax changes affecting tax year 2020 in this legislation, however, after negotiations with the Senate, did not link up for tax year 2021. This means that when filing this year’s taxes, individuals will not pay taxes on the first $10,200 of unemployment benefits, and businesses will not need to pay tax on PPP loans forgiven within tax year 2020. Everything from 2020 is linked up, however, the fate of 2021 is still uncertain. LCC will advocate for the PPP tax conformity as well as tax provisions such as the Earned Income Tax Credit and Child Tax and Dependent Care Tax Credit from ARPA to be included as well.
If you have a PPP loan, and do not want to be taxed on that loan in tax year 2021, we strongly suggest you reach out to members of the Senate Finance Committee or House Ways and Means Committee.
Resolution of H.315
The legislature adjourned for the weekend without bringing H.315 to the floor, however, the House Committee on Appropriations resolved all of these issues with the bill and it is ready for a floor vote.
Senate Finance Acts Quickly on Healthcare Opportunity
An opportunity presented itself as a result of the American Rescue Plan Act that could have major implications for Vermonters. ARPA caps health insurance premiums at 8.5% of income for individuals making income up to $95,000 or about $265,000 per joint filers. 90% of Vermonters would be covered by this change. The state has previously considered dividing the individual and small group health insurance markets, however, it would increase rates in the individual market by about 7%, as the small group market is keeping the individual group market stable.
If we were able to divide, this would decrease the rates in the small group, providing relief to businesses, and increase the rates in the individual group, however, the individual groups would be offset by the changes to ARPA. The legislature would do this for 2023 on a trigger for the possibility that this provision in ARPA is extended in perpetuity. The Senate Finance Committee moved unanimously moved language to that effect last week.
The Laundry List
- Last week’s update here
- Have an issue to discuss with our advocacy team? Schedule a time here.
- Miss in-person programming? So do we. However, before we make any return to the days of business card exchanging and name tag wearing, we need to not only be mindful of state guidelines but your current comfort levels. Please let us know how you feel about the return to in-person events.
- H.437, a bill we covered last week, that contains a property transfer tax surcharge, a clean-up of the manufacturing equipment taxation, and a tax credit expansion for manufactured homes was received by the Senate and sent to the Rules Committee pursuant to the Senate’s temporary rule 44A. Under a strict interpretation of the rule, the bill did not meet its crossover deadline despite passing out of committee on time because it was not on the House calendar the next legislative day. The Senate Finance Committee did a walk-through of the bill, though they do not have jurisdiction at this time.
- The second round of sole proprietors grants from the VT Community Development Block Grants (CDBG) was recently announced. This additional funding will offer grants of between $1,500 and $10,000 to qualifying Sole Proprietors on a first-come, first-served basis. The application for this new round of funding will open on Monday, April 5th.
- The deadline from March 31st to May 31st was signed by the President this week! applications received by the deadline will continue to process into June. Important note; If you’ve already had a PPP loan in 2021, with this extension you may be eligible for a second draw.
- The House Ways and Means Committee heavily amended the bottle bill by stripping the expansion to beverages with flexible containers as they are not recyclable at this time as well as, more impactfully, undoing the doubling of the 5-cent deposit on containers. The bill would still expand containers covered under the program to include all water, juice, wine, and non-carbonated drinks under the 5 cent deposit which could affect more than 300 million containers.
- The House Committee on Commerce and Economic Development expanded the eligibility of the Microbusiness Development Program to allow individuals who have experienced disruption in their employment due to COVID-19 to be eligible under H.315.
- The Economic Development Bill, H.159, had its first look in the Senate Committee on Economic Development, Housing, and General Affairs this week.
- The House Human Services Committee and House Natural Resources Committee heard a walk through of the Senate passed S.20, a bill relating to restrictions on perfluoroalkyl and polyfluoroalkyl substances and other chemicals of concern in consumer products. The bill will receive additional testimony on Thursday.
- Effective April 2nd, adult sports leagues may resume the following activities: Individual skill-building exercises; Strength and conditioning sessions; and Drills involving incidental contact. In addition, adult outdoor sports teams and leagues may resume games, meets, and competitions, subject to some restrictions. Find the full details, including a timeline for indoor sports leagues, at the ACCD Work Safe Memo.
- COVID-19 vaccination windows continue to open on schedule with the 40+ window open today, Monday, April 5th. For full details and to set up an account to schedule a vaccination appointment, Vermonters should visit HealthVermont.gov/MyVaccine or call 855-722-7878.
- Governor Phil Scott announced that he has appointed James Pepper of Montpelier, Julie Hulburd of Colchester, and Kyle Harris of Montpelier to the Cannabis Control Board (CCB). The CCB was created by Act 164 of 2020 for the purpose of safely, equitably, and effectively implementing and administering the laws and rules regulating adult-use cannabis in Vermont.
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