Leonine: Lawmakers ponder what to do with $1 billion

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Leonine: Lawmakers ponder what to do with $1 billion

Sat, 04/17/2021 - 4:31pm -- tim

Leonine Public Affairs The Senate Appropriations committee spent the week working through H.439, the FY2022 state budget bill. At the beginning of the week the committee had a goal of finalizing the budget and sending it to the Senate floor by April 20. By the end of the week the committee’s target for approving H.439 was pushed back to April 23. This is in part because the committee needs to determine how to allocate the $1 billion in American Rescue Plan Act (ARPA) funds and in part because the budget process is more decentralized than previous years.

With the glaring exception of 2020, the legislative protocol in previous years was to keep funding proposals in the budget while the associated policy provisions would often remain in other bills that were considered and approved by the policy committees. This year there are multiple policy bills that contain funding line items that do not currently appear in the FY2022 budget. Funding proposals for economic development, workforce training, childcare, broadband buildout and housing are scattered through a handful of bills being considered by Senate policy committees. The transportation and capital bills, which are traditional spending bills that accompany the budget, also have yet to be approved by the committees of jurisdiction. As a result, the Senate Appropriations Committee has been spending a fair amount of time reconciling the numbers in the budget with those in other policy bills.

Senate Appropriations has already “closed out” many sections of the base budget and is now focusing on one-time spending proposals and the more controversial and complex sections of the bill. In doing this the committee is considering how to allocate the $1 billion in ARPA funding and working to incorporate proposals from the Scott administration into the bill. 

Another interesting dynamic in committee discussion is the prospect of another federal stimulus bill passing later this year, this time geared toward infrastructure improvement. State government is hearing from the federal delegation that it should prepare for the influx of federal dollars earmarked for transportation, broadband buildout, environmental protection and other infrastructure projects. This adds an element of confusion to the budgeting process, as lawmakers want to make sure they invest in critical infrastructure but would use available funding for other projects and services if there was more certainty that additional relief is coming. 

While the Senate worked to finalize the budget, the business community spoke out strongly against a bill that would tax Paycheck Protection Program (PPP) loans. H.315 is the expedited COVID-19 relief bill passed by the legislature and and sent to Governor Scott's desk. The bill addresses and appropriates funding for a wide range of COVID-19 issues and includes a provision to treat PPP loans that are forgiven in 2021 as regular income. PPP loans are exempt from the federal income tax but H.315 would apply the state income tax for tax year 2021. This provision was added shortly before the bill was sent to the governor and the business community is very concerned about the detrimental impact it will have on recovery efforts if it goes into effect. 


On Friday the House approved S.53, an act relating to exempting feminine hygiene products from the Vermont Sales and Use Tax, as amended by the Committee on Ways and Means. The bill as passed by the Senate was straightforward, as its title would suggest - it would remove the sales tax from feminine hygiene products. However, after the Ways and Means Committee amended the bill, S.53 looked dramatically different. Significantly, it includes the repeal of an exemption on vendor-hosted prewritten computer software, commonly referred to as the “cloud tax”. Unlike previous iterations of the cloud tax, which the Vermont House has passed on a number of occasions in recent years, this year’s language significantly expands the definition of vendor-hosted software and the products and services that would be taxed. Cloud tax proponents have often argued that the goal is to loop in goods that were previously purchased "in a box" - like TurboTax - but are now accessed through the cloud. In addition to those products, the Ways and Means amendment would apply the sales tax to a much wider array of goods and services, including Squarespace, MailChimp, Constant Contact, Quickbooks, and Salesforce. The cloud tax is projected to bring in $14 million in new revenue. Here is a summary of the Ways and Means Committee amendment. If enacted into law, Vermont would be one of only eight states that tax software in this way. 


After one of the lengthiest and most contentious floor debates so far this session, the House passed H.175 on Friday. The bill proposes to expand the bottle deposit law to wine, water, juice, sports drinks and other noncarbonated beverages. The preliminary roll call vote on Thursday was 99-46. The vote was largely along party lines although there was at least one Republican that supported it and at least one Democrat that voted against it. Many members were concerned about increasing prices at the grocery store for consumers due to the 5-cent deposit being added to many beverages and the 3.5 to 4 cent handling fee often embedded in the price of each bottle sold. There were also concerns that an expanded bottle will remove valuable PET and aluminum from the curbside recycling system resulting in increased costs to Vermonters for recycling. The bill now goes to the Senate where it will likely be referred to the Senate Rules Committee because it did not meet the crossover deadline.


This week the House passed S.88, which is the Department of Financial Regulation’s “housekeeping” bill for 2021. For the most part the bill, which passed the Senate in mid-March, makes technical changes to the state’s insurance and banking statutes. However, the House amended the bill to, among other things, add language from H.294 which deals with dental insurance. Specifically, the language the House added prohibits dental insurers from restricting the amount dentists can charge patients for dental services not covered by the dental insurer. It also prohibits dental and health insurers from requiring providers to exclusively accept payments from the insurers by way of virtual credit cards. While payment by that method is still an option, the providers will have the ability to require the insurers to pay them by other methods.
S.88 will now go back to the Senate Finance Committee for review of the changes made by the House.


On Thursday, Secretary of Education Dan French testified in the House Committee on Education on S.13, a bill that would create a legislative task force charged with creating an implementation plan for an updated education funding formula. The updated formula was recommended in an education research report requested by the Vermont Legislature in 2018 called the Pupil Weighting Factors Report, authored by the University of Vermont and Rutgers University and delivered to the legislature in 2019. The report documented conclusively that although Vermont has a constitutional obligation to provide all students with equitable educational opportunities, the actual costs for educating children from varying circumstances have not been taken into account. This includes children who attend small schools, children from rural areas, economically disadvantaged children and children who are English language learners. 

Because the funding formula does not address these populations’ actual needs, and because districts that spend over a certain threshold are penalized, districts that educate these types of learners have a lack of taxing capacity and are unable to provide necessary resources for their students. Secretary French testified that the scope of work and the considerations set out for the task force under S.13 are too broad to accomplish what the bill purports to do, which is to create an implementation plan for the legislature to consider when they come back next year. As the bill is written now, it would allow the task force to modify or ignore recommendations that were made in the 2019 report. The House Committee on Education is expected to continue their work on S.13 next week when they will likely hear from additional stakeholders, including advocates for the implementation of the corrected weights who have seen their districts underfunded for decades.



Source: Leonine Public Affairs, Montpelier, Legislative Report Week 14. April 16, 2021. leoninepublicaffairs.com.

Through a special arrangement with Leonine, Vermont Business Magazine republishes Leonine's legislative report on vermontbiz.com