Legislative Preview: Budget, Congress and pot make their marks

BUDGET

Governor Scott will deliver his budget address on January 23, where he will lay out his priorities for the FY2019 budget.  It is expected the Governor will propose a budget that is level funded, but with cuts and increases to various line items that reflect the administration's priorities. (CLICK HERE FOR SCOTT'S STATE OF STATE ADDRESS).

In the meantime the House Appropriations Committee has been meeting to begin hearing requests for adjustments to the FY2018 budget from administration secretaries and commissioners. The most controversial element of the Administration’s BAA request deals with a $300,000 appropriation to the Agency of Education for a study regarding equalized per pupil calculations. Earlier in 2017 AOE Secretary Rebecca Holcombe refused to complete such a study as required in legislation adopted during the 2017 session due to a lack of staff and resources, prompting charges from members of the legislature that the administration had decided to “ignore the law.” 

HEALTH CARE/MENTAL HEALTH

The Legislative Joint Fiscal Office prepared a watch list of federal issues related to health care that may prompt a response from the Vermont legislature. Many of these potential changes at the federal level would have a significant impact on the state’s budget. One of the most prominent changes relates to federal funding the Children’s Health Insurance Program (CHIP). CHIP expired on September 30, 2017 and Congress has yet to re-authorize it. If the program is not reauthorized by February 2018, Vermont could be on the hook for $1.9 million in FY2018 and $21.6 million in FY2019. The full report can be found here. 

Legislative review of the state’s effort to change the way health care providers are paid by implementing a capitated payment system via Accountable Care Organizations (ACOs) will likely be a significant feature of the 2018 session.  It is also likely that changes to the state’s Certificate of Need program, which requires regulatory approval for many types of capital and programmatic expenditures by healthcare providers will be considered.

Legislative leaders have said addressing the state’s mental health system as a top priority in 2018. Alleviating capacity pressures throughout the mental health system will be a key focus as will issues related to workforce. 

EDUCATION FINANCING/PROPERTY TAXES

Education financing will be a significant issue during the 2018 session due to an estimated $50 million shortfall in the state’s Education Fund in FY2019. Because of the shortfall property taxpayers are facing a significant increase in the education property tax.  Part of the shortfall is due to the use of one time monies in FY2018 to suppress an increase in the education property tax rate in that fiscal year.  The other part of the shortfall relates to increasing expenses in the public school system.

Governor Scott recently said that a discussion of public school staffing levels is needed. While he did not directly call for legislation mandating a cut in staffing levels, he may yet make a proposal to address the issue.  Vermont currently has, on a statewide basis, one staff person for every four students, which is the lowest ratio in the nation.

Another driver of education expenses is increasing healthcare costs for teachers and other public school staff.  A commission set up as a result of the discussion at the end of the 2017 legislative session over teacher health care costs recently recommended that health care benefits be negotiated and implemented at the state level, as opposed to the school district level.

MARIJUANA

All signs suggest that Vermont is poised to pass some form of marijuana legalization. In 2017 the legislature passed S.22, which would have legalized the possession of up to one ounce of marijuana and up to two mature plants for personal use. Governor Scott vetoed S.22, saying he was concerned the bill did not do enough to address the issue of impaired driving or protect children from being exposed to marijuana use. Legalization advocates and members of the legislature worked with the governor to address his concerns, and the Senate passed a compromise bill during the June veto session, but the House was unable to suspend rules to take it up. The Governor recently said he is “comfortable” signing a legalization bill into law in early 2018. The House passed the measure Wednesday. If the governor signs the bill into law, Vermont will become the first state in the nation to enact legislation legalizing the personal possession of marijuana through the legislative process rather than via ballot measures approved by voters. 

PAID FAMILY LEAVE

The House passed H.196 late in the session by a 88-58 vote. The bill was sent to the Senate Rules Committee because it missed the crossover deadline. H.196 applies to all employers with ten or more employees who work an average of at least thirty hours per week and establishes the Parental and Family Leave Insurance Program that provides employees with six weeks of paid family leave benefits. The bill imposes a payroll tax equal to 0.141 percent of each employees’ covered wages (up to $150,000) that an employer must withhold from its employees’ wages. The Senate is expected to take up H.196 when it returns in 2018, but the governor has consistently said that he does not support such a program because it would raise taxes. 

MINIMUM WAGE

Senate President Tim Ashe has identified a $15 minimum wage as one of his top priorities. Last session, the legislature created the Minimum Wage and Benefits Study Committee to examine the impacts of increasing the minimum wage in Vermont. The study committee issued their report in December, which outlined five potential options: $12.50 by 2021, $13.25 by 2022, $15 by 2022, and increasing the Minimum Wage annually by the greater of the CPI or five percent, or by the greater of the CPI or six percent. The committee voted 4-2 in favor of recommending that the General Assembly enact legislation that would increase the minimum wage to $15 within the parameters of the policy priorities outlined in the report. Vermont's minimum wage rate is now $10.50 per hour from the 2017 rate of $10.00 per hour, effective on January 1, 2018.

CLEAN WATER FUNDING

 A top priority for both legislative leadership and the governor is expected to be clean water. Gov. Scott supports a plan put forward by state Treasurer Beth Pearce which relies on existing funding mechanisms to support lake cleanup efforts. The issue is that plan was a short-term stopgap measure that will only get the state through this year and next. The state has yet to identify and agree on a long-term funding source for lake cleanup efforts. Earlier this year, Treasurer Pearce released a report outlining 64 funding proposals that would raise $25 million a year. In 2017 the legislature established a working group which was tasked with submitting a report on the subject, but the group’s preliminary proposal relied almost entirely on the state’s capital budget, an idea the Treasurer says is not feasible. This tees up a battle between an administration that has drawn a clear line of no new taxes and fees, and the need to come up with $25 million a year from a stable funding source.