March 29, 2025 Legislative Update

 

Legislative Update

Rep. Anne Donahue

March 29, 2025

A total of 32 bills were passed by the House over the past two weeks and are enroute to the Senate. There they could be passed, could be abandoned, or could be rewritten and sent back for our reconsideration. So, they are a ways away from reaching the final stage of going to the governor, apart from the controversial budget adjustment act (BAA), which was vetoed and is still in flux.

Many were updates to existing law and not controversial, or were initiatives with broad support. The most prominent included a new BAA (political gamesmanship); next year’s annual budget (104-38 vote after a unanimous bipartisan committee vote); election law changes (a very controversial provision limiting write-in votes was removed); the homestead property tax rate (reduced by injecting added general funds, risking a big spike next year); the capital construction and transportation bills (I raised concern about the new Dog River bridge in Berlin being constructed without a sidewalk); expansion of access to unpaid leave (I pointed our concern for small businesses); protection of personal information of public service employees from data brokers (badly written, but a start; vote was 106-38); and state advertising restriction to use a minimum of 70% in local media organizations (overly prescriptive but also with a huge loophole that will negate its good intent.) Ask me for details on any or all.

Meanwhile, we still await hearing how our Ways and Means Committee will respond to the amendment that proposes a military pension exemption from the state income tax. It’s ironic to me that we were willing to pay out $5,000 in cash to entice folks to move to Vermont a few years ago but haven’t been willing to pay a much lower per person cost to attract this skilled workforce to further their careers (or maintain them) here.

Our House version of initial steps for education and funding transformation is emerging shortly and will be certain to result in a lengthy House-Senate process of attempting to reconcile the significant differences in approach. Predictions are that we will be in session for at least several weeks longer than usual in order to get this done.

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Rather than speculate on the outcomes of these multiple moving targets, I want to use this update to focus on a picture of the kinds of “work behind the scenes” legislators can get pulled into, and that don’t usually make it into news media.

Two years ago, the legislature passed a bill to create “Vermont Saves,” a very positive way to support Vermonters in building retirement savings if they do not have access to an employer-sponsored plan. The way it was set up, employers are required to send the employee information to the state Treasurer, who runs the program. It is promoted as a voluntary program, but in order to help foster participation, it is an “opt-out” rather than “opt-in” program.

That means that anyone can give notice that they do not want to participate, and they will be removed, but silence is consent. If you don’t object, five percent of your net income is deducted from your paycheck and becomes a contribution to a Roth IRA established through the Treasurer’s office.

Obviously, for many wage earners, five percent is a whole lot of money to carve out. Fortunately, they can ask for a lower contribution rate if they prefer. Starting to save for retirement early and regularly is a good move, but some people who are just scraping by simply can’t do it, and we certainly want to preserve their choice in such decisions, right? The problem with any “opt out” system, however, is that someone can only choose to opt out if they receive clear information that they have been automatically enrolled and that they need to take action if they do not want to take part. Otherwise, it’s no longer actually voluntary.

So I was shocked several weeks ago when a constituent sent me the copy of a “Vermont Saves” program notice he had received. It was an email that came from an unknown company and the headline was, “You’re in! Your Vermont Saves account is ready to be set up.” Note in particular the terminology: “ready to be set up,” future tense. It goes on to laud the program, which “puts you in control of your financial future by offering you a safe, secure, and simple way to save for your retirement with every paycheck.”

Some lines further down the page, a boldface bullet point states, “Participation is voluntary” and continues, in regular font, with, “Stay enrolled or opt out…” That’s the very first reference to the auto-enrollment that has already occurred. The account isn’t “ready to be set up.” It is already set up. This isn’t “offering” something. It’s already done, unless you act to stop it.

In today’s world of email scams, I think it’s likely that some folks will see that the email isn’t from the state or their employer, and say, “Wow, I know better than to hit that ‘set up account’ link on this email. I’ll be hacked.” Others will skim the beginning and say, “well, this is an offer I’m not interested in; I’m not going to set up an account to participate.” By appearance, they have not taken up the offer. In reality, they needed to set up access to their account in order to then withdraw from participating. Even when the first paycheck with a deduction arrives, some will see it and just sigh (or curse) over a new payroll tax being imposed, unaware that it is “voluntary.”

Employers didn’t receive transparent information, either. They were told that they were required to send in the information on their employees, but that then their employees would be able to choose whether they wanted to participate. I spoke to one local employer who was absolutely stunned to learn that it required an active opt-out by the employee to prevent automatic payroll deductions.

But it gets worse. The notice announces, “Your paycheck contributions have the potential to grow into big savings over time” – with “have the potential to grow” boldfaced. True. But a Roth IRA is an investment account. It includes the risk of loss as well as the potential of gain. (I think we’ve all seen ads for investment opportunities that specifically state that, in a manner that suggests they are required to do so. Apparently, our Treasurer is not under that requirement… yet.) It makes no reference at all to the difference between a savings account and an investment account.

Last week, I met with our State Treasurer, Mike Pieciak, to share my concerns. He defended the information as being tested and evidence-based by the company contracted to produce it; it runs the same program in other states and uses the same communication with good results. After all, people should be saving for retirement, and this helps people stay on board. That’s the program goal. He agreed the notices might lack some clarity and said he’d talk to the company to see if they could rework some of the placement of information. I was unimpressed by his response.

By coincidence of timing, that same day our 2026 state budget bill was on our House calendar. In reading it, I discovered there was a section about Vermont Saves, which included a change to allow the Treasurer to adjust the automatic annual contribution rate increase by up to 10 percent, instead of the original eight percent. You are not merely automatically enrolled, you also have an automatic increase in your contribution rate each year… unless you give notice that you don’t want it increased. What will the phrasing be like to tell employees about that right?

So I introduced an amendment to the budget bill to put a pause button on that change.The first auto-increase isn’t until next year, so there’s no rush. The Treasurer’s Office objected to the amendment and began giving broad testimony on the purpose of the program and the importance of encouraging savings, including that optimal rates to save for retirement are actually more like 15 percent… so they want to be able to get the deduction up to at least 10 percent of net wages.

As it turned out, the Appropriations Committee had never heard any testimony about the rationale for the proposed change and for including the Treasurer’s language in the budget bill. He had bypassed the process of bringing the issue to the policy committee for review before asking to have it added to the budget. It had then slipped in as a “technical” change almost without being noticed.

The Committee voted 10-1 to support my amendment. The Chair suggested that the Treasurer should go to the Senate Government Operations to make his case in full and enable that policy committee to discuss it, before seeking to add it back into the budget bill during the Senate’s work on it. It was really only a symbolic victory, but what was important was that presenting the amendment on the House floor was an opportunity for me to ring the alarm on the much bigger underlying issue – the misleading communications – to the full body.

I’m not planning to let it end here. I talked with the Chair of House Government Ops and he is going to have me meet with the committee about the need for more transparent communications to the people who are about to have their paychecks raided (for their own benefit, of course…), and how we might address it. I’ve also already given a heads’ up to the Senate Gov Ops chair that I’d like to meet with him to share this same background information. That committee would have the best opportunity to get protective language through the legislative process this late in the session.

How could we have put something like this in motion two years ago? Well-intended, of course, but also passed in the very last week of that legislative year, a time during which bills are passed at dizzying speed, despite the attempts of some of us to be allowed more time to be thorough in our work. We are a citizen legislature with no individual staff and who must rely heavily on the expertise of others.

But if we were going to pass a bill that would automatically deduct money from Vermonter’s paychecks to invest in an IRA, we owed it to Vermonters to have made sure they would get full, clear information about how they could turn the program down. Not everyone is in the place to give up the “as little as $105 a month” that the notice cheerfully uses as an illustration. To some of us, that’s a lot of money.

So now, we need to fix it.

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It is a pleasure to be representing you. Please contact me at adonahue@leg.state.vt.us with questions or concerns, or my district-mate Ken Goslant at kgoslant@leg.state.vt.us. All of my past updates are accessible at representativeannedonahue.blogspot.com

March 2, 2025 Legislative Update

This communication is about my work in and perspectives on the Vermont legislature, not the national or world scene, but this session, they could overlap in unprecedented ways. Because of the “small state minimum” in federal grants, fully one-third of Vermont’s budget revenues come from the federal budget, including more than half of our direct health care spending. If there are significant cuts in the pending federal budget, we will have holes far vaster than anything we could backfill.

For now, we carry on in developing the state budget based on the current status quo. The House is in the final weeks of work on its budget for the year ahead and at the end of last week, committees provided their perspectives on the governor’s proposed budget. In my Human Services Committee, we look at what the ideal would be to fully support our network of social supports, and then list the priority areas that, “to the extent funds allow,” we recommend that the Appropriations committee add.

Our biggest concern this year was that while the governor’s budget included basic inflation increases for government-run services so that they can maintain current functions, the government services that are contracted to be provided by community agencies were level-funded. If income stays level in the face of inflation, balancing the budget means cutting back, not maintaining the same services. So, a major disparity is created among different services.

One of the largest gaps – which I discussed in my previous update about the budget adjustment bill – is in addressing our crisis in providing temporary shelter to those who homeless in light of a crisis in available housing. People cannot move out of homelessness if there are no places to move to.

The week after town meeting, as we reach the half-way point of the session, is the deadline for bills to be voted out of committees in order to cross from House to Senate or vice-versa if they are to be passed this year. The major bill from my committee will be a proposal for restructuring the emergency housing program.

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The Big Five

The crossover deadline means that we will be getting the first look at concrete proposals to address our major pressures. Often, we start a session with a “headliner” top issue. This year, there are five that are competing in urgency: Education, Housing, Climate; Public Safety; Health Care. The Governor has presented proposals for the first four of those issues. They are getting a mixed reception. The proposals are summarized below.  

Education

The most attention thus far has been on the major restructuring proposal for K-12 education. The legislature is charting its course to revise some pieces and reject others, but the majority appears inclined to move more slowly than the governor’s two-year phase-in.

The Speaker’s Office has issued a public input site, which can be accessed at: https://bit.ly/VoiceVermontEducation. Much of it is free-form response to very open-ended questions, not check boxes. This avoids the inevitable bias of the wording of questions but will present a real challenge in compiling responses into an intelligible and accurate document of the opinion of Vermonters. Results will be shared with districts, so I will report on Northfield and Berlin responses.

The governor’s plan includes a base grant per child to each district, adjusted for particular types of student need, in order to ensure equal resources for all students regardless of town. The statewide tax rate will be uniform, but with income-based deductions for homesteads. Much larger districts (maybe as few as five) are proposed to achieve common standards, including state oversight of maximum class sizes and graduation standards. Vermont has the smallest classes sizes in the country while not performing as well, so significant costs might be saved there. Reinvestment would go into teacher salaries. There is also a school choice component that has produced some strong objections and is not likely to survive the legislative process.

The initial proposal sets the base grant at about the current average per-child spending in the state. For context, Northfield’s current district is below that spending level, though if this year’s budget passes, it will come closer to the average. Berlin’s current district is a bit higher than the average.

Housing

There is consensus about continuing to invest heavily in housing, though the amounts available to spend will be debated. There is no question that, despite major funding over the past several years, we are not on track to meet needs. The Governor’s proposal include targeted funds for local infrastructure to support housing growth. The governor wants to see more progress on easing red tape that increases construction costs, such as standards for local appeals, as well as adjustments to last year’s three “tiers” that revised Act 250 review.

Climate

The “Clean Heat Standard” from last year appears to have died an untimely death. Once firmer numbers were assessed, it turned out that the naysayers were right: the potential benefits were far outweighed by the clear drawbacks and high costs. But the Global Warming Solutions Act (passed in 2020) remains law, so achieving its targets in other ways remains ahead of us. The law was passed in 2020 and it includes binding greenhouse gas emission reduction targets.

Looking back a few years, the transportation sector goals of the Act rested heavily on our collaboration in the Northeast Regional Transportation Initiative, in which 12 states looked at reducing carbon emissions by addressing the fossil fuel market collaboratively. That failed because other states backed out, not Vermont. I don’t believe these types of initiatives are ever feasible by a single small state – it’s why the Clean Heat Standard never had a chance. As the Senate Pro-Tem Tim Ashe said about the transportation initiative in 2019, “banding together with the entire Northeast region all the way down to the mid-Atlantic protects us from a go-it-alone strategy."

So, we’ve had two well-intended, major efforts that have not met hopes or expectations. Meanwhile, the clock has kept ticking. Staying locked into targets on an unchanged timeline that is no longer achievable seems like making false assurances, particularly since we granted the right for anyone to sue the state for failure. I think we need to maintain the goals of the Act, but not at levels that we cannot now achieve. We need to also consider some of the governor’s proposals for better management of the process.

Public Safety

Public safety debates have focused on bail reform for repeat offenders and repealing the “Raise-the-Age” law that would add 19-year-olds to the definition of a child for juvenile court purposes. The House Judiciary Committee did vote Friday to defer that step for another two years. We have also passed a number of laws that fully erase criminal records after set periods of time. The governor is pushing back to have them in a “sealed” status instead, which would make them confidential but still allow access for law enforcement purposes.

In the category of, “NewSpeak,” a bill was introduced last week that sets out when a person who was convicted of a crime is “eligible to recidivate.” This is on top of inmates no longer being released from prison; an inmate “releases” from prison. It’s in line with another change that annoys me, in health care. You are no longer discharged from a hospital; you “discharge.” Maybe I’m getting too set in my ways.

Health Care

Speaking of health care, it seems to be the fifth wheel despite how it cuts across all sectors. Vermont has risen to having some of the highest costs in the nation. It isn’t just about an aging population, because an increasing need for care does not mean that each episode of care needs to cost more. The University of Vermont Health Network says they are being forced to cut services because the Green Mountain Care Board has required them to stay within their revenue cap. They assert that volume (the people needing care) is what is driving the increase in revenue, so to cut revenue they must cut volume by cutting services. But revenue is the combination of volume plus price. The Green Mountain Care Board is telling the Network that it must reign in prices, not cut services. There are no clear proposals emerging yet for alternatives on how to stem the trajectory of cost increases.

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A Note on Advocacy

Persistence pays. Northfield’s Mary Nadon Scott was back in the Human Services Committee lobbying for a Vermont Rare Disease Advisory Council last week, and was there to hear the committee chair say that we will be taking up the bill later this year.

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Words from the Governor

If you didn’t see it elsewhere, I’m pleased to share the comment that Governor Scott made on the third anniversary of the invasion of Ukraine:

“On February 24, 2022, Russian military forces crossed the eastern border of Ukraine. Russia’s unprovoked aggression escalated a years-long conflict into outright war, threatening the sovereignty of a free nation, and the hard-won peace of the European continent.

“These are facts, and it’s important to repeat them when the truth is threatened. Three years later Vermonters still stand with Ukraine. We still hope for peace and a just end to this senseless war. We still hold fast to the most American of ideals: liberty, self-determination and the restoration, preservation, and expansion of freedom around the world.”

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Thank you for the honor of representing you. Please stay in touch with me (adonahue@leg.state.vt.us) and with Rep. Ken Goslant (kgoslant@leg.state.vt.us). We welcome your input.