February 24, 2024 Legislative Update

 

Urgency versus deliberation. Inclusion versus inaction. Complexity versus fairness. Unintended consequences. Some of these real-life conflicts in the process of lawmaking are front-and-center before us in the issues we will debate in the weeks ahead.

A report updating the progress of implementation of last year’s Clean Heat Standard bill makes some of these tensions dramatically clear. That was the bill that requires a financially-forced transition away from fossil fuel heating sources. Some believed it would be unsustainably costly; others that it was essential to address climate change; and others also believed it was being imposed far too rapidly.

The Public Utility Commission, working on the first phase to develop the rules that will be brought to the legislature for approval in 2025, had a message in its “check-in” status report this year. The executive summary is worth directly quoting.

“…[M]ost participants have expressed serious misgivings that the quality of the rule and the success of its implementation will suffer as a result of the aggressive schedule required by Act 18…[It] sets such an untenable pace that it will be extremely challenging for the Commission,

the Equity Advisory Group, and the Technical Advisory Group to carry out their responsibilities

in a manner that allows time for deliberative process, thoughtful input from all stakeholders, and

sufficient public participation to design such a transformative, first-of-its-kind, highly complex,

and technical program. The Commission shares stakeholders’ serious concerns that any draft rule … will suffer from the haste demanded [which] … allots mere months to the creation of an unprecedented, complex program with the potential for unintended consequences that impact the lives of all Vermonters…” The full report can be found at: legislature.vermont.gov/assets/Legislative-Reports/Checkback-report-1-FINAL.pdf

There is no indication that the legislature will agree to any delay. Instead, we are now moving ahead on a new initiative to change our current Renewable Energy Standard to require 100 percent renewable sources by 2035. That, according to some testimony, will cost Vermonters $1 billion over the next 10 years.

It does respond to a criticism over both the Clean Heat Standard and our recent past targets to significantly increase electric vehicle use: the facts that shifts to electricity result in demands that our current electric grid can’t handle, and production of more electricity requires use of more fossil fuels and thus also increases greenhouse gasses. So this next bill would block that impact by shifting electric production to all renewable energy.

We are acting in response to urgent issues but creating significant risks of failure at multiple levels. Prominent in my mind has always been the size of our state relative to the impacts caused by others, and thus the fact that when we act alone – or are first off the block – we take on a disproportionate burden that causes danger to our economic competitiveness and thus sustainability as an affordable place to live.

Across Other Issues

The same goes for a plethora of issues in front of us. We are currently looking at new tax sources to pay for ongoing costs of how we want to sustain the costs of our state responsibilities.

The costs of education have skyrocketed this year, for reasons I’ve discussed previously. News media have referenced an average 20% increase in property taxes, but for Northfield it is 24% and for Berlin it is 26%. The legislature is contemplating reducing that harm by raising new funds from elsewhere. There’s also a lot of talk about reforming the whole funding structure and school spending, but that talk has happened many times before, with only new bandages resulting. The efforts at fairness over the years have led to incredible complexities.

There are other reasons for wanting tax increases.

We locked in new burdens to the state budget and on wage-earners last year with the mega-childcare support package and now are looking at needs for significantly greater expenditures to address homelessness, record drug overdoses, mental health, a juvenile justice system in crisis and health care underinsurance. We suspended school construction contributions by the state in 2014 and the infrastructure is crumbling; we hear regular complaints about conditions of roads. The list goes on. These pressures are, at least, taking two other new initiatives off the table for now: a paid leave program, and salary increases for legislators.

But who pays?

In answer to the momentum to “tax the rich” I would warn that we already have one of the most progressive tax rates in the country. The rich do pay more. At last count, 16 percent of our state’s revenues from income tax were paid by the .17 percent wealthiest Vermonters. A full 25 percent of income tax revenues were paid by the next wealthiest bracket, made up of only 2.7 percent of taxpayers. Ergo, 41 percent is paid by the fewer than three percent of Vermonters who represent the wealthiest wage earners.

If we become radically out-of-step with states around us, economic drivers will move out.

Policy versus Cost

The budget raises another question that legislators face based on different committee assignments. Policy committees are expected to make budget recommendations to help guide the decisions of the Appropriations Committee. The Appropriation Committee then must balance among the competing “asks” and also turn to the Ways and Means Committee, which controls tax policy. What will be included in the budget, and when that exceeds the balanced-budget total recommended by the governor, how will the added money be raised?

As a member of the policy committee which oversees all of human services, I’m told that I should be recommending what would be needed to serve the wellbeing of all Vermonters, regardless of total price. While we do identify by priority levels, we are not expected to look at the bottom-line increases in the budget. That’s because we don’t have the context of the other parts of the budget, nor the decisions about the total taxes that will be raised to be available to pay for it.

If I vote now for ideal policy – regardless of cost – wouldn’t it be duplicative to vote against the future budget, no matter what taxes it requires? Usually, I think not since I can argue the money should have come from other budget lines rather than increased taxes. This year, knowing that we are dealing with revenue downfalls, that doesn’t seem legitimate.

Nicotine

A similar issue has already been through my committee and will be up for a full floor vote this coming week: the clamping down on flavored vapes and menthol cigarettes. As a public health policy, I voted in support of the bill; our committee vote was 10-0-1.

Vape products are getting into the hands of schoolkids because adults are buying them for them. These are incredibly addictive, and we know that the majority of lifetime nicotine addiction occurs if it starts at a young age. Menthol, by blunting the harshness of tobacco, also increases the appeal. If adults are the suppliers, it seems that we need to take these specific products off the adult market in order to protect kids.

But we didn’t look much at the budget consequences. That wasn’t our jurisdiction. The Ways and Means Committee looked at it last week and it will likely end up costing some $14 million to implement in direct lost tax revenue. That committee supported it on a 7-5 vote, and pushed back the implementation date by a year, to January of 2026. That’s a sly move: it means we can ignore it for the upcoming budget year, since the lost revenue won’t begin until halfway through fiscal year 2026’s budget. Clearly, the long-range cost benefits are likely massive in future saved health care costs, but that’s more amorphous.

In the shorter term, that $14 million annually is equal to thousands of nights of emergency shelter stays; hundreds of new recovery beds for those fighting addictions; one major school renovation every year; or more than half the annual cost of the universal school meals program we passed last year.

Feed our schoolchildren, or protect them from nicotine addiction? These may not be good things to present as an example of choices. But one way or another, government needs to make choices.

There are some choices I make on bills every day that I see as decisions that clearly represent my values, and thereby, represent the choices you made in the aggregate by electing me as a person closest to meeting your own values.

They are not all as clear, and that is why your input is so important to me. Please reach out, especially during the coming town meeting break. I’ll be at town meetings in both Berlin and Northfield, so it’s a great time to catch me for direct conversation.

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Thank you for your support. You can always reach me at adonahue@leg.state.vt.us, and Rep. Ken Goslant at kgoslant@leg.state.vt.us. It is an honor to serve you.

February 10, 2024 Legislative Update

 

Now that the governor’s proposed budget is before the legislature, my committee has pivoted to a deep dive into the Human Services elements of the budget.

We are all facing an average property tax increase of close to 20% on the one part of the state’s overall budget that the legislature has little control over: education spending. This is adding to the pressure on the Democratic majority to hold down increases in the general fund budget, yet additional new taxes are still under consideration to pay for other increases. The governor’s budget holds growth to match existing increases in revenue, but in reality, that will result in some cuts in services because just paying overhead absorbs those revenues.

That’s the dilemma our school boards have faced, and their response has been to increase budgets to meet perceived actual needs. The tally from around the state is a proposed $240 million increase in budgets, compared to a usual average increase of about $30 million. While local voters approve their own budgets, each district also bears a big part of the costs of what every district does in combination.

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How Did We Get Here?

There are multiple factors, ranging from inflation to the desire to backfill lost federal bonus dollars. One of them, however, was directly tied to the change in “pupil weights” the legislature made last year. One student does not equal one student, when it comes to counting them for the purpose of the state’s contribution to a local budget. They are “weighted” based on the fact that some students cost more to educate in order to spread the statewide funds equitably based on actual costs.

Towns such as Berlin and Northfield did not see any significant change, but some wealthier districts lost pupil counts. They were protected from mega-one year tax increases by a cap set on how much would be attributed to them, so that the increase would be spread over five years. There was an unexpected result of that 5% cap. Other school districts took advantage of the cap to bolster their own budgets, knowing that they could go above 5% without increasing the local share. That was a big contributor to the $240 million statewide increase.

It’s important to note that neither the Northfield nor Berlin districts did this and as a result, will not be harmed by the current legislation that is attempting to fix it. That bill is now moving through the legislature, and towns that made larger budget increases will have to pay more on their own; the hope is that they will whittle some of that down, with the result of reducing that 20% statewide increase at least by a bit.

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The State Budget

While the education budget is in the hands of the cumulative votes of school districts, the rest of the state’s spending falls in the lap of the legislature, which faces all the same cost pressures. Do we cut services to balance the budget? Do we increase taxes to keep all else level? Do we meet new needs by greater tax increases? Which are needs, and which are merely desires? How do we choose among these priorities? 

This is the time when I truly despair in facing my own committee’s work. The fact is, we do have real needs that are not being addressed. Our committee has the job of identifying the amount of money needed to address them, and then leaving the Appropriations Committee to choose from what can or cannot be down. Approps must weigh those against all the other components of the budget: funding to address climate change, the judiciary (which still has a major COVID backlog), all of health care, investments to improve the economy, just to name a few. Next week, we face a bill that will add major costs to electric generation in the important interest of achieving cleaner energy production. Where does that fall on the difficult priority item list?

Homelessness, with increases that have come about primarily because of decades of lack of maintaining adequate housing stock, is high on our agenda. Virtually everyone agrees that the top priority is increasing the backlog in housing unit construction. But that takes time, and it is how to bridge the gap in the interim that is in dispute.

The governor’s budget proposes to eliminate open access under the “cold weather exception.” It would keep the exemption only for households with children, adults over age 65, third trimester pregnancy, and those on disability income. The proposal goes further than just a return to pre-COVID criteria, because the 28-day per year limit would be reinstated, but the special 84-day limit that applies in certain catastrophic situations would be eliminated.

These limits only apply to the “emergency housing” criteria, meaning receiving a voucher to stay in a hotel. There are no such exclusions for staying in an emergency shelter. A major problem, however, in that we do not have enough shelter beds to accommodate everyone who could otherwise be left on the streets.

The governor’s budget adds millions to increase these shelter capacities, but even those take time to open. By next winter – even under the assumption that some folks can find housing on a friend or relative’s couch – we would likely be seeing more people with no access to shelter at all. There are some being turned away on the coldest days even this winter, for lack of capacity. Experts do agree that mental health needs, addiction disorders and the like contribute to the challenge of stable housing but are not the primary reason for our crisis, which is simply not having enough housing.

If this was our only state need, we could probably find a way forward. By holding the budget at a level of growth that is below inflation growth factors, numerous agencies funded by the state are effectively facing cuts. These include our skilled nursing and home health agencies, the agencies which provide mental health and development disability supports, and support to children through such as our parent-child centers.

As with schools, we have some staggering and critical “deferred maintenance” costs. The IT systems supporting child welfare, for example, are the very oldest and most antiquated in the country! A worker addressing a child taken from a home for abuse can’t open just one computer file to check on history or even the child’s current status. It puts kids in danger, and there is almost certainly a tie to the fact that we have a rate of removing children from families that is high above the national average.

Our juvenile justice system is scrambling without the capacity to provide secure places for children in major crises with high levels or risks of violence. That is driving plans to build new institutional beds for them in a way that I seriously fear is a pendulum going out of control in the opposite direction. In the next two years, plans are rolling out that will add 42 locked institutional beds to hold or treat those ages 19 and younger, contrasted to about 24 currently.

I am not trying to make a case for major increases in spending. We can’t achieve that. But it does means assessing every expenditure carefully and identifying the truly highest needs. One item that has laid our budget so thin this year has been decisions made over the past several years, such as the massive investments in making childcare more affordable. It was an important investment that had wide support, but that I voted against because of the weight of contrasting needs.

And every citizen and each legislator representing their constituents sees the priorities differently. Democracy is about coming to sometimes unhappy outcomes. The weight of statewide voter opinion right now – based on elections – is to spend more to achieve a greater number of priorities. I believe we need to be far more discriminating in how we spend tax dollars, but I have my own priorities that cost money, and if each of everyone’s were fully met, we’d collapse financially as a state.

Based on strong constituent input, one of mine is to reduce taxation of military retiree benefits, which comes at a very small loss to the state’s tax revenue. In the latest survey data, Vermont ranked a dismal 50 out of 50 among states with financial stability for military retirees. These folks are often still in prime wage-earning years and can fill critically needed occupation gaps and contribute to the tax base if we don’t chase them away.

My other is the Medicare cliff: the way Vermont drops health care support like a hot potato when someone with low income turns 65. There was an excellent news piece describing this last week in VPR, which you can read at: https://www.vermontpublic.org/local-news/2024-02-02/capitol-recap-some-low-income-vermonters-face-sudden-spike-in-health-care-costs-when-they-turn-65

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Thank you for the honor of representing you. Please reach out anytime to me (adomahue@leg.state.vt.us) or Rep. Ken Goslant (kgoslant@leg.state.vt.gov) with questions or input. You can receive my biweekly reports by email request.