This week’s Legislative Update is sponsored by:
Friday, March 20, 2020
During this uncertain time, we at the Lake Champlain Chamber are asking something difficult of everyone; we are asking for patience with our State Government as this unfolds. For those of you who follow our weekly updates, you know that the government typically moves at a glacial speed, by design. This week, it is moving, by government standards, like lightning in an attempt to address a crisis that is moving just as fast. Our state government is doing a fantastic job responding to an unprecedented situation and we are committed to working with them.
We’d like to thank everyone for reaching out to us and sharing their experiences, needs, and concerns. We are working tirelessly to serve you and our team is being judicious with what we share as we know everyone is inundated with information. We are prioritizing only quality, substantive communication at this time.
There are few rather simple pieces of advice we’d like to share with you;
- Slow down and document everything your business is experiencing right now; every cost, every loss, every hard decision should be documented to prepare for any relief or economic stimulus package coming down the road.
- Have conversations with your lenders and financial institutions now, not later, even if it is just to understand what could potentially be available to you to weather the storm. As we will discuss later in the newsletter, there is federal legislation that won’t help your business unless you can keep your doors open.
- Talk to your landlords now if you foresee rent becoming a problem down the line.
Additionally, you can find resources from the Lake Champlain Chamber team here.
Times like this are why the Lake Champlain Chamber exists, and just as important, we will be here to help pull the economy back together. Please stay safe and think of us as a resource. Don’t hesitate to reach out to our Government Affairs Manager, Austin Davis, at [email protected].
In this week’s update;
- Changes to how our state government works
- Unemployment insurance and changes to come
- Federal legislation which creates opportunities for businesses and states
- The bad news, and small good news, for restaurants
- Tax changes
- The fiscal impact of COVID-19 on the state
- The Laundry List
Where is our Government and How Are They Working
Government has been forced to go virtual, as legislators, administration officials, and everyone else in the world try to adjust to life entirely on conference calls and video chat. Senate Committees have tried their best to carry on holding conference calls and both the House and Senate have held calls with all of their members. The big objective of the week was to understand what actions the Administration can take without legislative action.
The legislature will need to come back to do a few important things in the near future;
- Broadening Unemployment Insurance – as we will outline below, the VTDOL is providing more flexibility than ever in administering this benefit, however, they need some statutory changes.
- Amend Open Meeting Laws – currently, public bodies can meet but need someone at a physical location where the public could go. Senate Government Operations is looking at changing the law to allow everyone to connect virtually as long there is a way for the public to call in.
- Local Elections – while this may seem unnecessary, some school budgets did not pass this month and we have an election cycle coming up.
Eventually, the legislature will need to reconvene to:
- Pass the “big bills”; the budget, revenue, capital, and transportation bills which the committees of jurisdiction are still working on.
- Pass a recovery package the Governor and others will build.
Unemployment Insurance and Reinforcing It to Support Many More People
As you can probably imagine, in the last week, unemployment insurance (UI) claims have spiked from the low rate we saw last month of about 2.5%. The Vermont Department of Labor (DOL) has created an online intake form, and in the first 24-hours that the online form went live, it received over 4,000 claims. There are over 21,000 people in Vermont’s food-service industry and right now the expectation is that half of those people will file for UI. You’ll remember that last week, we sent a memo asking that this program be reinforced and adapted as soon as possible.
A quick recap of how Unemployment Insurance works, because it is now more important than ever. If you know this well you can skip to the next paragraph. UI is funded by a payroll tax from employers and those who do not pay this tax, such as sole proprietors, are ineligible. To qualify for UI an employee must have been working for at least two quarters in the last five quarters and met the minimum earnings threshold. For an employee to collect UI, they must be looking for work or have been told by the employer that they will bring them back after no longer than 10-weeks. During that time, an employee can collect 50% of their income with a statutory cap of $513 a week.
The Senate Committee on Economic Development, Housing, and General Affairs has heard multiple times from the VT Department of Labor Commissioner, Mike Harrington, that they are being as flexible as possible in administering the benefit, however, it will require a statutory change to expand UI access to individuals who are leaving work to care for a family member, as the VTDOL does not have that authority. This is contained in H.681, which we reported was passed by the House and sent to the Senate. This bill has a component that would hold employers’ experience rating harmless during this time, however, that is less time-sensitive given that the change in an experience rate is a year and one quarter away. Never-the-less, there is broad consensus that experience rating relief is needed.
The Committee has also heard that the unemployment insurance trust fund is in better health than many other states with a reserve of $500 million. In a normal recession scenario, we’d expect to see that depleted by 60-70%. Federal legislation, passed in response to this crisis, is directing more UI dollars to states and giving them more flexibility with how they administer their programs.
Commissioner Harrington is continually advocating for diligence, both on broadening the benefit (money going out) and relieving the tax requirement for an employer (money coming in). For example, one crux the conversation faces is opening UI to individuals who leave work out of fear of catching the virus. The Commissioner is hoping for the solvency of the fund that those individuals have some sort of validation for that fear from a medical professional.
The Department prefers people to file online at this time, however, if you need help by phone:
1-877-214-3330 – for initial claims
1-877-214-3332 – for general assistance
1-802-828-4344 – for employers
Federal Legislation Creates Opportunities for States to Respond
Much of the state legislative discussion will depend on, and has waited on, the federal conversation. In the past week, Congress and the Senate have passed two pieces of legislation in an attempt to stabilize the economy, with one or possibly two, more pieces of legislation coming.
Phase-1 was a supplemental appropriation passed last week shepherded by our own Senator Leahy. This was primarily a healthcare package aimed at helping states respond and as we reported last week, our state received about $5 million in assistance from that. This legislation also contained $1 billion in loan subsidies that would provide $7 billion in low-interest loans for small businesses impacted by financial losses as a result of the coronavirus outbreak. We will discuss this further in the SBA financial assistance section of this newsletter.
Phase-2 – HR6201, the Families First Coronavirus Response Act, was passed on Wednesday and was designed to strengthen social safety nets during this crisis. The two major components of this bill are paid sick leave and paid family medical leave;
- Sick Leave – the legislation allows for 10-days to comply with a quarantine order, self-quarantine, care for a child whose school or daycare is closed, or to get tested.
- Paid Family Medical Leave – allows for 12-weeks for employees who need to take time off to care for a child or family member.
The biggest issue with this package is one that has drawn tri-partisan criticism; it requires employers to pay for the leave and then it proposes to reimburse them at a later date with a tax credit that applies to their payroll tax (expected to cost $104 billion). The problem is, if the employer cannot stay open and keep cash flow through this crisis, they will not be here to collect that tax credit.
It is also important to note that this bill does not apply to employers with over 500 employees. Additionally, employers with under 50 employees and those providing essential healthcare services can apply for a waiver from the Secretary of the Department of Labor. Their absolute inclusion under the legislation is, so-far, unclear. Under this legislation, gig-economy employees and self-employed could qualify as well.
Phase 3 & 4 – are coming and currently being negotiated in Washington D.C. The Lake Champlain Chamber is in contact with our Congressional Delegation and conveying our concerns and your concerns. Please do not hesitate to reach out.
Vermont COVID-19 Emergency Response Package
Last Friday, the House passed H.742 and sent it to the Senate with the intention that they could build on the legislation. The Senate Health and Welfare Committee has since been working to parse what needs to be done legislatively.
The bill as sent from the House does the following;
- Prepay insurance claims to keep clinics from closing
- Reimburse for empty nursing home beds
- Waive co-pays and deductibles for COVID-19 treatment
- Quickly relicenses retired health care workers
- Relax or waive healthcare workforce regulations
- Expand the use of telemedicine
- Boost nutrition assistance for elderly Vermonters and children
- Give flexibility on car license renewals and vehicle inspections
- Allow services to legal and illegal immigrants without their fear of consequences
- Let employees care for a sick person without losing unemployment insurance time
There is a discrepancy between hospital administrators and legislators whether or not many of these items can be done administratively or if legislative action is needed.
Restaurants are Hit Hard; Tossed a Limited Lifeline
The Executive Order to first reduce capacity and then the following order to close have obviously hit restaurants very hard. In an effort to help, restaurants have been allowed to continue curbside and delivery options of food. This was then extended to sales of “to-go” beverage alcohol with the purchase of a meal as well as the delivery of alcohol by licensed retail stores. You may now sell take-out of closed containers of malt and vinous products accompanying food orders for off-premise consumption.
LCRCC supported and advocated for this because, as we described above, survival under the federal legislation will mean maintaining cash flow long enough to take tax credits later in the year and the only way to do that for many of the businesses is to sell their existing inventory.
Additionally, early in the week, the Department of Liquor Control issued guidance on restaurants and other businesses returning product to distributors. More information can be found here.
The Lake Champlain Chamber is advocating for additional opportunities for relief for restaurants.
Childcare Issues and Guidance for “Essential Employees”
In the wake of the Governor’s Executive Order that childcare is only to be provided to essential personnel, many businesses had questions as to if their employees fit into this category. This is an evolving issue, but this list is the current scope of essential categories for childcare.
The Lake Champlain Chamber has asked Emergency Management for any guidance or other clarification on how broad the scope of covered grocery/food supply and medical device manufacturing is and are awaiting their response. In the meantime, ACCD asks employers who might need a designation as essential to send an email to [email protected] with the subject heading: Childcare Essential Business Clarity: INSERT BUSINESS NAME. While this doesn’t ensure a business will be named essential, the SEOC is compiling and reviewing these inquiries daily.
This page will be constantly updated as things change. Families with Essential Persons who need help finding childcare can now submit a webform or call 2-1-1 ext. 6, for assistance in connecting them with options for childcare for their children up to the eighth grade.
The Lake Champlain Chamber is working with ACCD to include additional categories of employees to this list.
At this time, childcare subsidies are still flowing to childcare centers in the hope to keep childcare centers, which typically operate on thin margins, solvent through this crisis so they can open their doors and let parents go to work picking up after this crisis.
Business Impact and SBA Loans
Over the weekend, the Agency of Commerce and Community Development (ACCD) collected reports from over 500 businesses documenting the impact from at least five small businesses in each county that have suffered substantial economic injury as a result of the current crisis to have the Governor seek a Certification Disaster Declaration. As a result, the state is eligible for the Small Business Administration to provide Economic Injury Disaster Loans (EIDLs) made possible by the Coronavirus Preparedness and Response Supplemental Appropriations Act recently passed by Congress. Businesses in the 10 counties in Vermont already declared may immediately apply for assistance. To apply online, visit https://disasterloan.sba.gov/ela/.
Though ACCD has received enough feedback from businesses for the EIDL they are still asking any Vermont business impacted by the response to the COVID-19 virus to share these impacts with the Agency through a dedicated email address: [email protected]. The Agency has also established a hotline so that businesses may call to report impacts and be directed to resources: (802) 461-5143. If you have experienced an economic injury, please share that with ACCD and CC [email protected] so we can help compile and advocate for your concerns.
We reported last week that the Vermont Economic Development Authority has made a request to the legislature for $800,000 for 1% interest loans to help businesses at this time and that they might be looking for more funding at a later date to help lower interest rates for existing loan-holders that might have trouble. We would hope to see a larger package. The Lake Champlain Chamber is advocating for an appropriation to make this proposal possible and would urge you to do the same.
Taxes – Business and Personal – What Can Change
Unfortunately, the federal government is not extending the filing due-date for business taxes, but will be forgoing charging interest and penalties for late filing and payment. Thus, the Vermont Tax Commissioner does not have the authority to extend Vermont’s tax filing date, however, he does have the authority to forgo penalties and interest for late filing and payment for income, corporate, and fiduciary taxes.
Sales and Use | Rooms and Meals
For sales and use, as well as rooms and meals taxes, the Department of Taxes does not have the authority to abate these taxes, as the entity that has charged and collected those taxes was acting effectively as an agent of the state; this means that if the Department was to abate they would need to be sure that the business could return to each customer what they collected. The Commissioner of the Department does have the ability to forgo penalties and interest.
Individuals
Income tax payment deadlines for individual returns, with a due date of April 15, 2020, are being automatically extended until July 15, 2020, for up to $1 million of their 2019 tax due. This payment relief applies to all individual returns, including self-employed individuals, and all entities other than C-Corporations, such as trusts or estates. The IRS will automatically provide this relief to taxpayers. Taxpayers do not need to file any additional forms or call the IRS to qualify for this relief.
More Updates from the IRS can be found here.
The Lake Champlain Chamber is advocating for attention to businesses’ property tax and a delay of that liability.
Impacts on State Revenues, Budget, and Future Financial Health
Legislative leaders are looking back to the 2008 crash and Tropical Storm Irene for guidance, however, it’s fair to say, no one knows how bad things may get. Senate Finance Committee members heard Thursday from the Joint Fiscal Office (JFO) that the projected revenue shortfalls in the near term due to diminished economic activity and delayed payments could cost the state about $200 million. The revenue shortfalls break down like so:
Education Fund – loss of about $35-$45 million due to lost sales and use and rooms and meals tax revenue. During the 2008 recession, the EF was reliant on payments from the GF, which we have since changed, creating more volatility.
General Fund – $120-140 million reduction in this fiscal year due to tax payment deferral April 2020 to July 2021 by the IRS. This presents more of a cash flow issue for the state, with the state still able to recapture some of this in the next fiscal year. Still, the GF will suffer around a $30-50 million reduction in revenues to personal income and meals and rooms taxes.
Transportation Fund – possible reduction in revenues of $15-20 million as people drive less over the next few months and do not pay gas tax.
JFO shared with the committee that the state has $31 million in the state’s Rainy Day Fund, $100 million in the Human Service Caseload Reserve, and $78.2 million in the Actual Stabilization Reserve for a total of $209.8 million. Not all of this money can be used to plug the holes recently created, however, this can help hold the state over where we have cash flow issues.
There is a small amount of good news, though it won’t go too far; in January the state updated its revenue forecast to show a previously unexpected increase of about $35 million which can make up for some of the losses.
What the Committee, of course, didn’t get into this week are the long-term impacts that will need to be addressed moving forward. Tanking markets will hurt our already large unfunded liabilities in our pension system which will probably see a loss of somewhere between 9 to 13 percent of its value. Issues outlined by JFO around the education fund will be exacerbated by an increase in the next fiscal year of people needing to utilize income sensitivity for their property taxes and from potential large abatements from towns. Our state already had a housing crisis, and currently, almost all housing development has slowed or stopped. And then there is the effect of most Vermonters’ retirements and investments taking large hits.
The Laundry List
- Most up to date guidance from the Vermont Department of Health and U.S. Centers for Disease Control (CDC) can be found here.
- The Department of Motor Vehicles has suspended all in-person transactions. The DMV will continue to process registration and license renewals and various other services online, by mail, or via telephone. The Governor has extended a variety of DMV regulations by executive order, and it is unclear if he has the ability to do so. The Legislature will add this to work they will do upon return.
- New fact sheet, translated into nine languages, has been added to the Department of Health website under “Translated Materials.” The U.S. Committee for Refugees and Immigrants in Vermont has also posted a new series of COVID-19 videos in several languages.
- The Department of Financial Regulation has recently posted guidance regarding telemedicine services and prescription drug refills, and Business Income Insurance Guidance is available for review, or contact your insurance agent for details on your specific policy.
- The Senate Economic Committee heard testimony on suspending evictions during this turbulent time. Judge Brian Grearson, who surveyed 32 of his colleagues, testified that the courts do not view eviction proceedings as an emergency and since Emergency Administrative Order #49 postpones all non-emergency proceedings, the state in effect has a moratorium on evictions. Additionally, at the federal level, there is a moratorium on foreclosures for both HUD and secondary market mortgages.
- Senate Natural Resources and Energy met earlier this week to hear about potential public health threats related to COVID-19 in state, local, or private water and wastewater infrastructure of which they were relieved to report there are none.
The Lake Champlain Chamber will continue to post updates and resources on our COVID19 resource page.
Concerned or need to learn more about anything in this newsletter? Email our team at [email protected].
We look forward to working with you this session.
Sincerely,
The Lake Champlain Chamber Advocacy Team
Thank you to this week’s sponsor of the Legislative Update: