All will become clear shortly. The last few bills to make crossover will be finalized this week. Last week had some ups and downs. First, the legislature is now expecting to have $200M on hand from the latest round of stimulus funds to put towards broadband buildout. This is nearly a 670% increase over what the state had planned to spend in FY2022. Also on the upside, stronger voices have started testifying on the state of our pension funds. The downside? We can't really tell if they are being taken seriously. Also disappointing, the Senate doesn't seem to be interested in passing an ethics bill this year despite the House sending them a pretty cut-and-dry one.
House Energy and Technology is preparing to present their broadband bill on the House Floor this Tuesday. After widespread pushback from the Vermont Economic Development Authority (VEDA), the state Treasurer, and even the banking industry because of the risk associated with state-backed broadband development, the federal government seems poised to bail them out. The money committees advised them to pursue the $2.7B in federal funds headed to the state. In response, the $30M in state funding was dropped in favor of $200M in federal funding. This is excellent news because (if properly deployed) funding of this scale could catapult the state years ahead of our current implementation schedule.
Speaking of federal bailout money, the Senate Economic Development Committee got a breakdown from the Joint Fiscal Office on what they can expect the federal funds to cover. $2.7B is the floor, the actual dollars could be much higher. The funding is also organized differently with large direct payments to businesses, which economists called "an amazing opportunity to shape Vermont for the future." There is also significant funding for workforce development which could dovetail nicely with the Vermont State College (VSC) reorganization (more on that below).
Another effort, the economic recovery grant program, which provided $330M to keep Vermont employers (primarily in hospitality and food service). Despite the historic nature of this funding, the Department of Economic Development is projecting an additional unmet need of $550M which will hopefully be met by the new round of incoming federal dollars. Also worth noting here, the Department of Tourism is requesting an additional $1M to support exactly these two industries with marketing needs.
Ever a contentious subject, the legislation known as the "baby TIF" bill devolved a Committee into chaos in the Senate this week. After lots of circle talk and a few flaring tempers an amendment that allows up to ten projects under this new pilot program is set to move forward. The central issue is a concept called a "but for" clause. TIFs assume that the development would not have occurred, or would have occurred somewhere else but for the public infrastructure investment supported by the TIF. This determination is made by the Vermont Economic Progress Council during the TIF application process. The financing mechanism works by using 70% of the increased education tax revenue (for a period of time) to pay for the financing of the public infrastructure investment. If you believe that the project would not have happened without public investment then the education fund nets a 30% gain. If you believe the development would have happened anyway, then the education fund nets a 70% loss. Regardless of which camp you land in, the existing TIF program is only within reach for large towns with abundant public planning and financing expertise. These project-based TIFs proposed in the bill would open this financing mechanism up to a much larger number of municipalities because of their more manageable size. In fact, two towns have already lined up for this program: Westford and Middlebury.
The Chancellor of the Vermont State Colleges (VSC) pitched their re-alignment plan in the Senate this week. It was met by a lukewarm response from some of the Rutland County Senators who are concerned about diluting the Castleton University brand. That issue aside, the plan actually seems to be pretty solid. With the changes being proposed they are reducing their requested state expenditure from $81M to $66M and are going through a process to re-align their programs across all locations to meet the workforce needs of the state.
The plan put forward by the VSC board of trustees would combine Castleton University, Northern Vermont University, and Vermont Technical College into one institution, eliminate duplicative programs, expand offerings to all locations, and reduce administrative costs. The resulting institution would be somewhat reminiscent of the SUNY system in New York where resources, programs, and classes are offered across locations but some campuses may have specialties depending on equipment and expertise available.
Pensions. Pensions. Pensions. The legislature continues to take testimony and continues to ignore experts. Tom Golonka (Chairman of the Vermont Pension Investment Board) about how little investment experience the board has and there is no conflict of interest reporting. They need to maintain a cash flow of $150M per year and when the economy downturns (like in 2020) they are in trouble because they can't generate enough revenue to pay existing liabilities, let alone future ones. Because of below average returns, he recommended that VPIC bring in more investment and actuarial experience and hire a different investment consultant to make our pension management "more professional."
John Pelletier (Director for the Center for Financial Literacy at Champlain College) argued that the state isn't stress testing our pensions enough. This is a process whereby we take the worst-case scenario (like a pandemic) and model what the impacts to the fund would be and the downstream implications of that. We are somewhat lucky that markets largely recovered by the end of 2020, and end-of-year losses weren't as bad as they could have been. He also thinks that our pension fund actuaries are STILL being overly optimistic about market returns. This is largely how we ended up in this mess, after a decade of the legislature consistently short-funding the recommended contribution for the pension funds the assumed rate of return magically started rising in the mid 2000's. When your projected rate of return is higher, you don't need to put as much in up front because it will gain more interest (supposedly). All of a sudden, virtually the same dollar value contribution was now considered to "fully fund" the pensions. He even asserted that the actuaries weren't acting in the state's best interest. This would not be surprising given the history around this issue.
So far the legislature seems either unable or unwilling to respond to the pension fund crisis. Some legislators have even gone so far as to say it doesn't exist or is being contrived by the state Treasurer and other stakeholders like the Vermont Business Roundtable and financial experts like David Coates. We are advocating for the legislature to take action THIS YEAR on pensions. In the coming weeks we will be reaching out to let you know how to get involved!
The elections bill that has been under debate in the Senate finally passed last week. It will extend universal mail-in voting for general elections. Senator Parent asked that mail in ballots be sent for all elections, but the Senate Government Operations Committee disagreed. A compromise included in the bill asks the Secretary of State to come back with a proposal on how mail in ballots would work for Town Meeting Day, statewide primaries, and other elections. The bill also makes some other technical corrections to election laws and lays the groundwork for more accurate and frequent updating of our voter checklist.
There was disappointing news from the Senate last week. They will not pass the ethics bill out this session because of "extensive testimony" they want to take on the proposed code of ethics. There are several things this bill would do to strengthen financial disclosures for public officials, hire additional staff, and even advisory opinions. There doesn't seem to be much disagreement from the Committee, either with the House bill or with the requests from Ethics Commission Executive Director, but never the less they don't see it passing this year.