HALFTIME
The Vermont legislature wrapped up the first half of the 2024 legislative session this week. Next week lawmakers will be on break – heading home to attend town meetings, meet with constituents and catch their breath. When legislators return on March 12 policy committees will finalize their bills and pass them by March 15. Any policy bill that does not meet the deadline is dead for the year, unless leadership grants an extension or if the language is added to another bill that has made crossover. The FY2025 state budget and all tax legislation have a crossover deadline of March 22.
With the crossover deadlines looming a sense of urgency grew in the statehouse this week. Lawmakers face the challenge of funding state government without the unprecedented levels of federal funding that supported the past three budget cycles. As a result, there is increasing pressure on legislative committees to trim spending on many programs that were set up or expanded during the COVID-19 pandemic. This coincides with a ballooning need for housing, social services, workforce development, flood recovery, infrastructure improvement and other critical public sector investments.
As lawmakers return home for the town meeting break, many communities around the state will vote on school budgets, which are proposed to increase in some cases by as much as 20 percent. Lawmakers are warily eyeing Town Meeting Day, as voters will either reject or approve steep school budget increases. Both scenarios are likely to impact the tone of the second half of the legislative session. If school budgets are widely rejected it will send a strong message that voters want to see spending curbed. If school budgets are widely approved, it will signal support for shoring up the Education Fund with property tax revenues.
While not responsible for developing school budgets, lawmakers are responsible for ensuring the Education Fund can support those budgets. There has also been significant focus in the House Ways and Means and Senate Finance committees on raising revenue to support the state’s public access television stations. In addition to the budget and tax considerations, lawmakers are always keenly aware of the concerns of their constituents, and given it is an election year, the votes coming out of Town Meeting Day will undoubtedly set the tone for the second half of the 2024 legislative session.
TAXES
Facing tremendous pressure to do something to reduce the projected 20 percent increase in property taxes, legislators are focused on raising additional non-property tax revenue. On Thursday, a lobbyist for the Vermont NEA urged the committee to support the “cloud tax”. That afternoon, the Senate Finance Committee reviewed a new draft of the “streaming tax”. The latest draft is based largely on a bill that has been introduced in the New York General Assembly. Unlike New York however, Vermont already subjects streaming services (and all digital goods – ebooks, audiobooks etc.) to the state sales tax. The Senate Finance proposal would subject streaming companies to an additional five percent charge on their streaming revenue. The House Ways and Means Committee reviewed the same language this week, though their proposal would direct the revenue to a new special fund, with the purpose of funding public access television and providing subsidies for broadband service to low-income Vermonters. The
cloud and streaming tax are just two of many new or increased taxes currently proposed. As we have noted previously, tax committee members are actively considering taxing sugar sweetened beverages, candy and clothing, increasing the sales tax, expanding the sales tax to other goods and services, adding a surcharge to individuals earning more than $500,000 per year, and taxing “unrealized gains.” While it’s not clear how many of these proposals will make it across the finish line, there appears to be serious momentum behind raising new revenue one way or another. These proposals will trigger a veto by the governor, and lead to an interesting showdown and potential veto-override session heading into an election cycle.
BUDGET ADJUSTMENT ACT
The conference committee report on H.839, the 2024 Budget Adjustment Act (BAA) was approved this week by the Senate and the House and now goes to Governor Phil Scott’s desk. This year’s BAA has been highly contentious. Mirroring a move made by some members of the Senate a couple weeks ago, some House Democrats and Progressives argued vehemently against a technical yet controversial change to a fund created in 2023 to distribute afterschool funding. The fund was intended to be accessed by both public and independent afterschool programs. But some lawmakers argued that the special fund should be controlled by the public programs only, inhibiting access by private entities. The Afterschool and Summer Special Fund, using a portion of cannabis tax revenue, aims to expand access to afterschool and summer programs, especially in underserved areas. The fund supports a variety of organizations through grants and stipulates non-discrimination. The bill now heads to the governor who is expected to
sign it.
Flood Recovery Funding
H.839 directs resources towards recovery efforts in communities that were severely impacted by the July 2023 floods. It earmarks $30 million to match FEMA requirements for state buildings that were damaged or destroyed. It also includes over $23 million for affected municipalities, $17.25 million of which goes to the Emergency Relief and Assistance Fund to increase the state’s FEMA match contribution to municipalities. While municipalities have been relieved to see recovery funding come to fruition, it’s clear that there are still additional needs such as elevating houses in flood plains and covering remaining municipal revenue losses and abatements. This week Representatives from Barre City and Montpelier addressed the House Appropriations Committee, asking for additional funding in the FY2025 budget, including for home buyouts, revenue replacement and mitigation efforts.
Emergency Housing
The BAA includes an $11.3 million allocation from the General Fund for General Assistance Emergency Housing, with provisions to cap rates for hotel and motel rooms. Additionally, $4 million is appropriated for emergency shelters.
Public Safety
The BAA allocates $1.81 million from the General Fund to fund overtime for the Department of Public Safety (DPS) workforce.
SERGEANT AT ARMS ELECTION
On Friday a Joint Assembly voted for a new Sergeant at Arms. Former legislative staffer and current Deputy Director of the Office of Professional Regulation Agatha Kessler won the election by a razor-thin margin, defeating current Director of Legislative Operations Mike Ferrant by a vote of 84-82. Kessler will succeed longtime Sergeant at Arms Janet Miller, who is retiring.