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