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)