April 26, 2020 Legislative Update

How fast can we spend $1.25 billion in extra money?

Everyone is eyeing it, and sales pitches are already being made to the legislature for worthy causes. This is the federal CARES Act windfall that is suddenly in Vermont’s bank account in response to COVID-19.

The irony is that we are going to desperately need that kind of money to keep the ship of state afloat, because of the huge – not yet measurable – lost tax revenues from the closing down of the economy. We are facing major shortfalls in the education fund ($69 million just for the rest of the current fiscal year, ending June 30) and the general fund.

The CARES Act money is not allowed to be used, however, to fill in lost revenue. It is only allowed to be used for things we spend specifically for COVID-19.

It is already beginning to look like it will buy a lot of big gifts under the Christmas tree while the cupboard is left bare of food.

A VT Digger news brief proclaimed on Friday, “Lawmakers designate $90 million for the state’s hazard pay program.” It went on to say that, “The Senate Appropriations Committee has nailed down how much money Vermont’s essential workers will be receiving over the next three months to supplement their base pay as they continue working through the pandemic.” 

It’s a bit premature to say that lawmakers have done this and that workers will be receiving it. A Senate committee has made a proposal; the Senate will need to vote on it; it will come to the House for committee review and a House vote; and then it goes to the governor.

But right now, it’s an initiative that has gained momentum.

It’s being referred to, variously, as “hazard pay” or “appreciation pay,” and it is to thank workers across the state for keeping stocking our grocery shelves when they could be making more money if they were laid off and collecting unemployment insurance, thanks to the $600 a week extra that people are getting right now from federal dollars.

Under the proposal, anyone who works as an essential employee in a job that brings them into public exposure to COVID-19, who makes less than $25 per hour and works at least 25 hours per week would be eligible for a $1,000 monthly grant in April, May and June.

As the bill stands now, according to the Digger article, the program covers grocers, pharmacists, trash collectors, dentists, child care workers, homeless shelter staff and others who are required to interact with the public in some capacity.

I’m not questioning the good intentions of this proposal.

It would, however, use up a big starting chunk of the $1.25 billion before we really have much of an idea of what bills we’ve already run up, and what the competing needs will be.

In another legislative committee last week, a homeless coalition proposed a $100 million program to create longer term solutions for the folks we’ve been maintaining in motels to support social distancing.

The University of Vermont is asking for $25 million to help bail it out; the Vermont State Colleges needs $25 million just to keep from closing down three campuses (that amount doesn’t get it back on its feet.)

And we have been spending a lot, already. State employees are all receiving $1.50 pay bump if they are being exposed publicly, and an additional 20 percent pay increase if they are working in a 24/7 facility.

Last week, this was extended to similarly situated employees of community mental health centers, who are filling a state, Medicaid-funded function through private non-profits (that cost $7 million).

Those pay increases are very significantly less than the new private employee proposal.

We’ve issued grants to child care centers to help keep them afloat. We’ve poured money into contingency plans, creating emergency overflow hospitals and recovery housing and buying equipment and protective gear. We’ve bailed out the Brattleboro Retreat (again) to the tune of $7 million.

This is only a sampling, and it is nickel and dime stuff compared to the $90 million for the proposed grants to employees of private businesses. But a million here – a million there – and pretty soon it adds up to real money.  

Meanwhile, Rep. Peter Welch met with House and Senate leaders Friday and said that he was trying to help push for more flexibility for states in how they can use the CARES Act money. He gets it: the lost revenue to pay for what we already do it the biggest crisis we face.

If we gain more flexibility, it could mean having more money to put food in the cupboard and less for the Christmas presents. That’s an even more important reason for not spending the money too quickly, before we know all of our existing COVID-19 bills, and how we will be allowed to use the CARES cash.

Otherwise, we’re facing some pretty big cuts to our base budget, and there isn’t much in it that’s easy to cut. Roughly a third is Medicaid and another third is K-12 education. The rest is roads, child and family services, corrections, police, the court system … all core government functions.

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Speaking of the Vermont State College System: COVID-19 costs (largely in room and board refunds to students who were sent home) were only the last straw in the fiscal crisis that has been building for years.

I’m not sure whether the announcement that VSC was closing three campuses, including Randolph’s Technical College, was a ploy to draw public attention to the crisis and to get on the priority list for CARES Act money or just a badly managed information-sharing process.

It certainly got attention. But it won’t be easy to change course, because it isn’t just about the interim $25 million.

First, in a very foreseeable way, the number of available college students is dropping quickly. Remember how our K-12 student numbers kept shrinking? Those kids grow up, and those numbers are now hitting colleges.

But Vermont’s state colleges have been more expensive than most others for a long time, because they get so little state funding. Vermont ranks number one on all sorts of good stuff, including being one of the highest in what we pay per student to educate our kids in our public schools.

When it comes to supporting our state colleges, however, we have ranked 49^th or 50^th in the country for decades. I was horrified when I first learned, some years back, that we were at the bottom of the barrel in supporting accessible college for Vermont kids.

But every year, we face a budget where the existing spending trajectory and the revenue forecast leaves a gap in the tens of millions of dollars. New spending, even if it’s something we should be supporting, means either draconian cuts elsewhere or new taxes.

For now, the general plan it to try to keep the existing campuses going for a bridge year while a deeper reevaluation goes on to look at long term sustainability plans. One debate that will be on the table: if we are spending the most per pupil for K-12 and the least among states for college, shouldn’t we be focused there as the means to realign resources?

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Many of us have been sharing the good news that all health insurance (thanks to our Department of Financial Regulation, via the emergency authority we gave it) must now cover not just testing but also treatment for COVID-19, without any cost sharing (co-pays or deductibles) by consumers.

Despite everything I know about the insurance market, even I briefly believed this was true -- that maybe it was based on it being a federal emergency.

We had testimony about the new rule at a committee hearing this week, and it is not accurate. Nothing that we do on the state level can impose a mandate on private businesses that are self-insured. This has always been the case, and still is. It’s federal law.

About 22 to 25 percent of Vermonters get their insurance from an employer who pays health claims directly. They usually have back-up insurance to protect against an unusual spike in costs, and the coverage is administered by a health insurance company.

 If you work for a large employer, odds are that your employer is self-insured. You might not know it, because the administrator is one of the state’s health insurance companies.

Blue Cross/Blue Shield told us that a majority of those employers are choosing voluntarily to provide testing and treatment without cost sharing, but not all of them.

They believe that those who are not are making that choice based on one of two reasons: first, some are under too much financial stress to feel able to take on that potential added cost; second, those who combine a high deductible insurance plan with a health savings account feel they are already contributing enough towards cost sharing.

If you hear about someone whose insurance is not covering for all their COVID-19 treatment, that might be correct, despite the news about “no cost sharing.” It could well be that their employer decided against this coverage expansion.

There is an important lesson here. As insurance costs rise, large employers have increasingly turned away from the large group market to becoming self-insured, and this is at least in part because they can save money by avoiding state mandates.

When we choose to add coverage requirements -- as beneficial as they may sound for our constituents -- we push more large businesses in this direction, and the outcome is that they are not required to provide any of those additional benefits that we are trying to add.

Feel free to get in touch any time during the session with Rep. Goslant and me. It is an honor to serve you. (kgoslant@leg.state.vt.us; adonahue@leg.state.vt.us)

April 11, 2020 Legislative Update

Nothing hits home in a pandemic as much as the death of a friend and colleague.

The legislature lost one of its own on Wednesday, Bernie Juskiewicz, who had served in the House with me from 2013 through 2018. In his last term, he was on the Appropriations Committee, across the hall from my committee room.

We all know that every death represents a person with a family and loved ones left behind, and yet, in the face of so many deaths across the country and the world, they sometimes become just another number.

In sorrowing the loss of this good man, father and grandfather, active in his community, perhaps the one solace is in knowing that there could have been so many others: all those unknown Vermonters whose lives have been saved because we have, thus far, staved off the worst effects of the coronavirus through early and aggressive actions.

I am grateful to Gov. Phil Scott for having the political courage to set restrictions in place “ahead of the curve” (in both meanings). All of the data now shows that it has had a major protective impact.

Godspeed, Bernie.

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We are in fact doing well as a state in abiding by the restrictions to prevent the spread of the coronavirus, and while we are not out of the woods, there is hope that the level of preparations that are in place for a major surge of patients will never have to be used.

We could end up feeling a bit like those southern states that evacuate in the face of the projected impact of a massive hurricane only to have it swing offshore and out of harm’s way, wondering, perhaps, if the threat was overstated.

We do not have to wonder that, because we have only to look at places not far from here to see the deadly impact. Indeed, we need to remain on guard against slipping into complacency, and allowing a backlash to strike us.

As House committees began to resume quasi-regular meetings remotely with Zoom conferencing two weeks ago, my Health Care Committee started by lining up testimony from key players – Commissioners, hospital directors, health agencies – to get updates from the front lines.

Then we realized that was a mistake. Last month we worked long hours to draft legislation that would empower quick actions by the administration and health care providers during the crisis. With the crisis upon us, the last thing they need is to be called away from urgent duties to provide updates to us. Our most important work right now is to keep out of their way.

Other committees do have COVID-19 work to do, so they are meeting more frequently and collaborating with Senate committees on areas that need immediate responses.

Note, as a result of meeting remotely, committee meetings are now broadcast (and archived) on YouTube live by direct link from each committee’s web page on the legislative web site, legislature.vermont.gov.

Our committee’s big lift will be a month or more down the line, when we will need to evaluate the new landscape of health care in Vermont and what the future will look like.

One thing is certain: the push we were giving to make tele-health a more active feature has received a major jump start. The enabling and reimbursement mechanisms that we were already working on came just in time.

In addition, we’ve had a first chance at seeing the potential for the value of the all-payer model for health care payment reform. Because the model provides advance per-person payments to health providers and hospitals, rather than individual payments per service, it can create reliable revenue.

In a situation such as this, when regular patient care is being deferred and revenue has dropped sharply, they would not be wholly reliant on meeting patient targets in order to keep the doors open.

This payment reform is not yet broad based, so it isn’t solving the current cash flow crises these providers are facing but it is helping, and it is demonstrating one of its long-term values.

We will have to seek some federal adjustments to the current agreement for the model, because it also has quality measure requirements – things like the percentage of patients getting regular check-ups that are on hold right now.

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We have yet to determine how or whether a 150-member body will be able to gather remotely in the House chambers to vote on bills. We are learning the systems but it will be urgent to resolve this when essential legislation is ready to move.

Much of that “essential legislation” will itself be in the form of short-term fixes to tide us over until there is more information about the impact of the pandemic mitigation measures on our economy.

We know it will be massive. We do not yet know how long it will last.

We know there is substantial federal money on its way. We don’t know what its permitted uses will be.

The current likely scenario is that we will end up with three budget bills this year. Sometime in May, we will pass a budget adjustment act that changes the budgeted spending for the current year (which ends June 30) and a budget that carries us for the first three months of the 2021 fiscal year (which starts July 1.)

We will need to return in late August or early September to pass a budget for the remaining nine months, once there is more of a handle on our finances.

Here is what we know – subject to ongoing change – as of now.

The Education Fund is made up roughly three-quarters from property taxes and one quarter from the state’s general funds, and the general fund part comes primarily from the sales tax.

The expected revenue to the Ed Fund from the general fund for March through June was $180 million. The current projected revenue loss is $142 million.

A little more than a third of that may still come in after July 1 – the losses are due to deferred rooms and meals taxes – but a full $89 million is the direct loss of sales taxes. Revenue estimates for fy 2021 will be downgraded for certain, although it is yet unknown by how much, but at the same time, increases in budgets passed at town meetings totaled $77 million.

The general fund itself was projected to have $592 million in revenues to maintain budget expenditures from March through June.

That is now down by $202 million. Of that, $62 million is direct economic impacts, and $140 million is from deferred taxes; some of that last might come in, in fy 2021.

The transportation fund was projected at $110 million for the same period, and has been downgraded by $45 million, virtually all from reduced gas sales.

Again, this is just current year. All revenue projections are expected to be downgraded for the year that begins in July. As to how much, we are at this point, in the words of our leading fiscal staff person, “flying blind.”

In addition, we have been spending a great deal of added money on the pandemic itself, in the tens of millions already.

But what about all the federal stimulus money coming into the state? The $1.25 billion?

The catch is that it cannot be used to backfill lost revenue that would have covered the existing budget.

It can cover all new state budget costs expended on the pandemic itself, which will certainly be a big help.

One of the mega-details that remains unknown is the direct guidance the federal government will provide on what is considered to be “already planned for” versus new expenses. There is also some hope that follow up federal legislation will relax some of the requirements.

Our direct cash flow situation is challenging, but we have built emergency reserve funds over the past several years. They will be almost wholly decimated, but we will be able to pay all of our necessary bills without hitting a deficit.

All of these state fiscal revenue projection figures, in much further detail, are available on the Joint Fiscal Office web site, https://ljfo.vermont.gov/

This bleak picture is only looking at the state budget. Separate are our family budgets and our business’ budgets. When incomes are down, taxes revenues across the board are down – that’s the “flying blind” aspect of state revenue loss projections.

Separate, too, is the federal budget, which is expending vast funds of money to keep families, businesses and states afloat that this will come at a huge long-term cost.

Unlike the state, the federal government can print more money when revenues don’t match expenses. If the price we pay for that is massive inflation, it becomes another way that money is sucked from our pockets.

With the coronavirus itself, we are standing together to support one another. Both Berlin and Northfield have created local Mutual Aid volunteer resources. We can remain socially connected even if physically distanced!

We are going to be needing to do a whole lot more of that in the months, and potentially years, ahead.

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Feel free to get in touch any time during the session with Rep. Goslant and me. There is a lot going on, so if you have questions about something – ask, and we can try to find out for you. It is an honor to serve you. kgoslant@leg.state.vt.us; adonahue@leg.state.vt.us Please note that the archives of my legislative updates can be found at representativeannedonahue.blogspot.com