Leonine 2023 Legislative Wrap-up | Vermont Business Magazine

Submitted by tim on Sat, 05/20/2023 - 12:38

Sunset

Leonine Public Affairs The 2023 Vermont legislative session ended right on schedule, late in the evening on May 12. The session was defined by a historically large incoming class of new lawmakers and Democratic supermajorities in both the House and Senate. While the first half of the 2023 legislative session was characteristically slow to get up and running, the final months were filled with dramatic policy debate and political maneuvering.

Since election day 2022, when Democrats claimed supermajorities in the House and Senate, it was clear they were going to pursue major policy initiatives that had previously been considered out of reach due to the veto pen of Republican Governor Phil Scott. Since first elected in 2016, Governor Scott has been mostly successful in countering Democratic policies he disagreed with (Democrats had only successfully overridden two Scott vetoes prior to 2023). Despite Vermont being a deep blue state, this dynamic has provided the moderate Republican governor with significant influence in the crafting of policy and state budgets since he first took office.

An overhaul of the child care system, Paid Family and Medical Leave (PFML) and the implementation of a new Clean Heat Standard are a few examples of initiatives the Democratic supermajorities set out to pass during the 2023 legislative session. Governor Scott and his administration raised concerns early and often about the financial burden they projected would accompany these policies. But Democrats pointed to their success in the 2022 election, saying Vermonters had given them a mandate to move forward with their policy platform.

As the legislative session progressed, it became clear that there was not enough support within the Democratic caucuses to pass comprehensive child care and PFML programs. While Democrats in both chambers supported both initiatives, the House favored PFML and the Senate favored child care. By the crossover deadline the Senate passed landmark child care legislation, which increased annual investment in child care by more than $100 million. The Senate bill, S.56, also included a parental leave component, but PFML proponents argued the Senate proposal fell far short of a comprehensive PFML program. When the House started work on S.56 they tried to craft a revenue package that would fund both child care and a comprehensive PFML program. By the end of the 2023 session Senate and House Democrats were at an impasse on how to fund the two programs. The Senate bill implemented a payroll tax to fund child care, and the House wanted to use a payroll tax to fund PFML. The House proposed to fund child care with increases to the corporate and personal income taxes. After intense behind-the-scenes negotiations child care emerged as the policy that would move forward, funded by a 0.44 percent payroll tax.

Due to procedural time restraints at the end of the legislative session the child care initiative, including the payroll tax, was added to H.217, a workers’ compensation bill that passed the legislature before adjournment. Governor Phil Scott has pledged to veto H.217 and the FY2024 budget (H.494) because of the tax increases and spending priorities outlined in both bills. For example, H.494 also includes DMV fee increases, which the governor opposes.

When the legislature adjourned Democratic leaders set June 20 as the date to return for a veto session. The Democrats proved the power of their supermajorities the week before adjournment when they successfully overrode the veto of S.5, the bill to create a Clean Heat Standard. However, when it comes to the FY2024 budget, Governor Scott appears he may have support from an unlikely source – the progressive wing of the Democratic caucus in the House.

The FY2024 budget eliminates the motel voucher program that was created in response to the COVID-19 emergency. By the final weeks of the legislative session a contingent of about 20 House Democrats and Progressives were vocally opposing the decision to eliminate the motel program. They are threatening to sustain the governor’s veto if Democratic leaders do not find a way to support the roughly 2,800 Vermonters who will be without housing when the motel program ends. When the House held the final vote on H.494, the bills passed 90-53, far short of the 100-vote supermajority needed to override if all House members are present.

Since adjournment there has been a flurry of media coverage of the rift in the Democratic/Progressive caucus in the House, and there is no doubt it will be the top story in Vermont politics in the weeks leading up to the veto session in June. During that time Democratic leaders will work to shore up their supermajority, and Governor Scott will continue to make his case to the public that the Democratic budget is unsustainable for Vermont taxpayers.

It will be an interesting few weeks. Please look for a veto session update from the LPA team later in June. And thank you for following along with us throughout the 2023 legislative session. Have a wonderful summer!

By the Numbers

There was a total of 680 bills introduced during the 2023 legislative session, 523 in the House and 157 in the Senate. Of the 523 bills introduced in the House, 87 passed, while 45 of the 157 Senate-introduced bills passed that body. A total of 96 bills passed both the House and the Senate, though this does not mean that all those bills will be sent to the governor’s desk. On a number of these bills the two chambers still need to work through their differences before they can be sent to the governor.

Other Bills of Interest

H.429 - Elections

Last week the Vermont Senate held a contentious vote on H.429, an elections bill. The bill is at the center of a heated debate between some in the Democratic majority who support the bill and their progressive Democrat colleagues who joined the side of the Progressive party in their opposition to the bill. The bill aims to restrict candidates who lose in major-party primaries from being nominated to represent a different party in the general election.

Democrats who support the bill said it will bring transparency and fairness to the election process by limiting the ability of candidates who are defeated in major-party primaries to switch party affiliations and run again in the general election. Proponents argue that this measure would prevent strategic party-hopping and ensure that candidates genuinely represent the principles and values of their chosen party. Opponents say the proposed restrictions are an infringement on the democratic process. They argue the legislation would stifle political competition and limit voters' choices by impeding the ability of defeated candidates to seek alternate party nominations. One of the most notable opponents of the bill is Lt. Governor David Zuckerman, who has been nominated by both the Progressive Party as well as the Democratic Party. Republicans and some centrist Democrats objected to other measures in this bill, such as allowing limited electronic ballot submissions and making it easier for towns to adopt ranked-choice voting by removing the need for a charter change to do so.

Ultimately, six Senate Democrats joined Republicans and Progressives in opposing the bill. The bill narrowly advanced in the Senate on a vote of 16-14, but did not receive final approval before adjournment. The Senate will likely give final consideration to the bill when they return in June for the veto override session.

SALT Tax

One casualty in the final 36 hours of the session was the so-called State and Local Tax (SALT) deduction workaround. The SALT deduction workaround would permit certain self-employed taxpayers in “pass through entities” (Partnerships, S-Corps, and LLCs) who itemize when filing federal taxes to elect to pay Vermont income taxes at the business level instead of at the individual level, thereby restoring the federal deductibility that is limited under federal law. The 2017 Tax Cuts and Jobs Act capped the deduction at $10,000 per year, a policy targeted at states (primarily Democratically controlled) with higher state and local tax rates. Since 2018, 29 states have crafted laws that allow for a workaround to this cap, and the practice was blessed by the IRS in 2020.

The Senate passed S.45, which would have created the same workaround for pass-through entities in Vermont, which the Joint Fiscal Office projected would save Vermont taxpayers between $10 and $20 million annually in federal tax obligations and generate an estimated $800,000 per year in additional revenues to the State of Vermont. S.45 was referred to the House Ways and Means Committee, which took the language from S.45, modified it slightly, and added it to S.56, the childcare bill. However, since the House never approved S.56, the SALT workaround did not make it across the finish line during the 2023 legislative session. In an attempt to save the language in the final days of the legislative session, the Senate Finance Committee was prepared to tack the SALT workaround on to H.471, the miscellaneous tax bill, but House Ways and Means Chair Emilie Kornheiser (D-Brattleboro), told the committee that the House would not view the move favorably. On the final day of the legislative session, Rep. Jim Harrison (R-Chittenden) made a motion on the floor of the House to relieve the House Ways and Means committee of S.45, resuscitating the bill’s chances, but the motion failed, all but sealing the fate of the SALT workaround for the time being.

The failure of the legislature to act on this bill will remove $10-$20 million from the Vermont economy in the next fiscal year while at the same time preventing the state from collecting $800,000 in additional revenue.

H.158 - Bottle Bill

After passing the House and Senate, H.158, also known as the “Bottle Bill,” ultimately ran out of time to get final approval in the Vermont House before adjournment. The original Bottle Bill, passed in 1972, established a redemption system that charges consumers a deposit when they buy certain beverages.

H.158 expands Vermont’s existing beverage container redemption program beyond beer and soda containers to include water bottles, wine bottles and sports drinks. It would also create a Producer Responsibility Organization (PRO) beginning in 2027. A PRO is an organization that assumes responsibility for collecting and recycling certain products. Stakeholders who oppose expanding the bottle bill say that the expansion would increase the cost of recycling and create a hefty burden on distributors and redemption centers, especially because of the addition of wine bottles, which come with unique labeling challenges, among other issues. There has also been criticism of the bill for continuing to divert the unclaimed deposits out of the bottle bill system. The organizations that will be tasked with running the PRO are asking that they be allowed to keep 100 percent of the unclaimed deposits in the PRO for the first five years, when costs are expected to be substantial as the program is designed and investments are made in new technology and infrastructure.

Although the bill did not make it over the finish line before adjournment, it’s likely that the House will look to move the bill when the legislature returns in June for the veto override session.

S.5 - Clean Heat Standard

Though more vetoes are expected before the June override session, Governor Scott has vetoed just one bill so far this year. S.5 establishes a Clean Heat Standard, aimed at reducing greenhouse gas emissions in the thermal sector. Against a backdrop of a hefty advertising campaign by opponents of the bill, the House and Senate voted to override the governor’s veto of S.5 in the final weeks of the session, demonstrating their ability to hold together the supermajority gained during the 2022 elections. While the override of S.5 does not guarantee that the Democratically controlled legislature will be able to override every veto of the 2023-2024 session, the vote on S.5 is a good barometer for leadership’s ability to hold their caucus and its allies together.

Impeachment Proceedings

In an exceedingly rare move, on May 11, the House adopted H.R. 11, a House Resolution that establishes a seven-member Special Committee on Impeachment Inquiry that is directed to investigate whether there are sufficient grounds for the House to impeach two elected officials. Democratic Franklin County State’s Attorney John Lavoie is facing allegations of harassment and discrimination in his office. Republican Franklin County Sheriff John Grismore is being investigated for alleged financial improprieties in his office and for assaulting a person in custody last year. The Speaker appointed the following House members to the Special Committee: Chair Rep. Martin LaLonde, (D-South Burlington;) Vice-Chair Rep. Mike McCarthy, (D-St. Albans); Rep. Matt Birong, (D-Vergennes); Rep. Carolyn Branagan, (R-Georgia); Rep. Tom Burditt, (R-West Rutland); Rep. Karen Dolan, (D-Essex); and Rep. Kelly Pajala, (I-Londonderry).

The special committee is authorized to meet anytime during the 2023-24 biennium, including this summer and fall, and may subpoena witnesses and hire investigators. The Special Committee is required to recommend articles of impeachment or make other recommendations to the House. As set forth in Vermont’s Constitution, if recommended by the Special Committee, the House can order impeachment by a two-thirds vote of its members. The Senate then has the power to try and decide upon the impeachment and can convict and remove the person from office by a two-thirds vote of those members present.

Shield Laws

This session Vermont lawmakers overwhelmingly voted for two “shield bills” designed to protect health care professionals and others who engage in “legally protected health care activity,” including offering abortion care or gender-affirming care to those traveling to Vermont from states where those services are illegal.

Governor Scott signed both bills on May 10. Act 15 (S.37) protects health care providers from adjustments in malpractice insurance premiums or being charged with unprofessional conduct for engaging in “legally protected health care activity,” for example. The Act also requires health insurers to continue to cover abortion care and gender-affirming care and includes a provision to ensure the abortion pill Mifepristone remains legal to prescribe and use in Vermont.

Act 14 (H.89) addresses civil and criminal court procedures to protect persons from “abusive litigation” when they are engaged in “legally protected health care activity,” among other things. These laws, along with the Reproductive Liberty Amendment to the Vermont Constitution enacted last November, fortify Vermont’s protection of “legally protected health care activity” from increasing threats from other states and the federal courts after Roe v. Wade was overturned by the U.S. Supreme Court last year.

Data Privacy

The House Commerce & Economic Development committee spent a significant amount of time this year taking testimony regarding H.121, a consumer data privacy bill that includes protection for biometric data. The bill is a priority of Democratic Attorney General Charity Clark. Vermont’s business and nonprofit community, from banks to hospitals, have serious concerns about the bill and many asked to be exempt from its provisions. Ultimately the committee had concerns about the vague and potentially unconstitutional language in the bill and the problems businesses would face if Vermont adopted it. The committee put the bill on hold and received permission from the Speaker to meet this summer and fall to draft a bill that the House plans to move early in 2024 to give the Senate time to consider and pass next year.

Thank you for following along throughout the course of the 2023 legislative session. We will provide an update on the veto override session which is scheduled for June 20-22.

Source: Leonine Public Affairs, Montpelier, Leonine 2023 Legislative Wrap-up. May 19, 2023. leoninepublicaffairs.com.

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