Friends, Governor Scott presented his FY2024 budget to the legislature this week. He largely focused on making strategic investments that draw down the historic amount of federal funds available (infrastructure, Covid, etc.). He indirectly challenged the legislature by proposing nearly $1M for “our Climate Office to develop a real plan, outlining exactly what work needs to be done," implying that the legislature's Climate Action Plan is not a workable solution.

Also, after much testimony in the House Education Committee this week it is becoming clear that there will be a bill to limit which schools can access public tuitioning dollars by leveraging the review and approval process already in place by the Agency of Education and the State Board of Education.

 

Quote of the Week: "[This budget] is focused on investing, not just spending, to get the best results and grow revenue, so we can move families and communities ahead.”		Phil Scott, Vermont Governor
CFV President, Pat McDonald		Message of the Week: It is clear that neither the legislature or Vermonters are ready for the implementation of the Clean Heat Standard (as it was originally envisioned). We are encouraged to see that Governor Scott is proposing to invest resources into an actionable plan that can move our state forward on carbon reduction.
Vote for Vermont: Pat and Linda are joined this week by Larry Crist and Bill Young to discuss a shocking new report detailing how Vermont's system for identifying and reviewing cases of child abuse and neglect is lacking critical due process requirements and cannot accurately determine who should be placed on the Child Protection Registry. Watch Latest Episode

 

Governor Scott's Budget Address

Key Points:

• Focused on leveraging federal funds.
• Renews call for permitting reform on housing.
• Puts veterans tax exemption back on the table.
• Directs nearly $1M towards developing a “real plan” for addressing climate change.

 

Governor Scott presented his FY2024 budget to the legislature on Friday, calling on them to help rejuvenate small towns during the 2023 legislative session, following up his call to action in the inaugural address from a couple weeks ago. The Governor’s $8.4B budget is generally broken up into the following categories:

• $2.3B in General Fund spending
• $2.1B in Education Fund spending
• $335M in Transportation Fund spending
• It would also:
  • Fully funds pensions to the tune of $444M.
  • Lays out $108M in capital investment.
  • Continue allocating $1B in ARPA funds drawn down over the last two years for broadband; water, sewer and stormwater; climate change; housing, and economic revitalization.

The proposed budget would direct surplus and growth funds towards one-time expenses and Initiatives, because, as Scott puts it, “if we allow the base budget to grow with temporary and unsustainable revenue, we will create a cliff when these stimulus dollars go away – putting us on a path that eventually leads to deep and painful cuts.”

He highlighted the importance of trying to leverage the historical amount of federal aid available to sates currently, levels which have not been seen since the New Deal nearly a century ago. “Over my life,” he said, “I’ve found that spending money is actually pretty easy. But investing it to get the best return is much more difficult… But to draw down this money, we must be able to pay our state share. So, my budget commits $150 million to take full advantage of these federal programs.”

He reiterated that there are many projects that “have been on the books for decades” and we now have a chance to complete them. He warned the legislature that he feels “very strongly about this strategy” and to keep that in mind as they go through their process.

Without mentioning the Climate Council or the Climate Action Plan directly, Scott’s budget dedicates $900M in funding to “our Climate Office to develop a real plan, outlining exactly what work needs to be done, on what timeline, and at what cost. And we’ll bring this plan back to you, so everyone can see the details.” A subtle dig at the lack of details or analysis provided by the climate council’s plan the legislature is currently debating.

 

Less subtly, he followed with “like roads, bridges and buildings, the Legislature has an obligation to debate and vote on these specifics, in bill form, and then send it to the Governor for action. Real plans get real results, so let’s join together to do what we’ve done with transportation projects, capital projects and clean water – and do this work right.”

Scott also proposed addressing mental health challenges by increasing capacity for residential treatment. This effort would first start in the Northeast Kingdom, but then spread across the state. The Administration would dedicate $10M to help communities “unify the work of local public safety and human services teams on the ground.”

Even though he is recommending putting another $26M towards General Assistance housing, Scott stressed that this is meant to be transitional housing and we need to continue to build affordable housing. Two tools he identified to work towards this are VHIP and Healthy Homes Initiative. He is recommending investing $21.5M towards VHCB and $20M for a “missing middle” revolving loan fund. Finally, he is putting $500 towards helping municipalities updating their zoning laws and strongly encouraged the legislature to update state regulations as well.

This budget makes an additional ongoing annual investment of $56M per year to expand access to and affordability of child care. To further our workforce development efforts, Scott proposed another $2.5M in annual base funding, $19M in one-time investments in infrastructure, and another $10M in a two-year pilot program to cut CCV tuition in half. An additional $6.4M would go to the 802 Opportunity program to give low-income Vermonters access to free courses.

Scott again proposed a $17M tax relief package that would fully eliminate the tax on military pensions. It would also expend the social security tax exemption for seniors and leverage to Earned Income Tax Credit to put reduce the tax liability for working families.

He described his budget as “focused on investing, not just spending, to get the best results and grow revenue, so we can move families and communities ahead.”

 

Government Accountability

Ethics Commission

The Senate Government Operations Committee heard from Christina Sivret, the Executive Director of the Vermont Ethics Commission, on Tuesday. With a brand new Committee, the Chair wanted to introduce many of the departments of state government as possible, the Ethics Commission being one.

Sivret mentioned that the Commission just issued their first advisory opinion which is now posted on their website. One of the main functions of the Commission is to provide training – over 6,000 training sessions have been administered so far.

The Commission also filed their annual report with the Committee. Sivret pointed to municipal ethics as a potential area for improvements. Twelve people have called the Commission about municipal officials and the Secretary of State received more than sixty.

Sivret also brought up enforcement powers. She is not asking for immediate action here (they want to let people get used to the relatively new code of ethics) but they do want to see movement that direction in the near future. One area that could be a starting place on this front is the ability to fine public officials for failing to file their financial disclosure forms (apparently five statewide officers failed to file in 2023).

 

 

Fiscal Responsibility

Thermal Sector Carbon Reduction

Key Points:

• UVM “expert” says that S.5 doesn’t go far enough to take low-cost heating options away from low-income families.
• The Senate heard testimony that the workforce does not currently exist for a large-scale shift to electric heat.
• Fuel Dealers claim that S.5 “makes no sense” as it is currently written

 

On Wednesday, the Senate Natural Resources Committee heard from Jon Erickson, a Professor in Sustainability Science and Policy, University of Vermont.

Chairman Bray invited Erickson to testify after reading the professor’s new book, The Progress Illusion: Retaking Our Future from the Fairytale of Economics. The Committee asked him to reflect on the draft of S.5, which would establish a Clean Heat Standard policy for the thermal sector as part of the Climate Action Plan under the Global Warming Solutions Act of 2020. “what are we doing and how can we make it better,” they asked.

Erickson’s basic premise is that our economy is “hooked on fossil fuels,” and we need to focus on policies that break this dependency. We need to abandon policies and attitudes that re-enforce what he calls “carbon lock-in.” This “lock-in” occurs with investments like a new furnace, hot water heater, etc. When you buy a fossil fuel based appliance, “you’re making a 10-20 year commitment,” according to Erickson. The implication is that the state needs to ban the purchase/installation of any new appliances that are based on fossil fuels for energy or operation.

Erickson also argued against allowing natural gas, biofuels, and even new hydrogen technology as a means of reducing “carbon intensity” because, although effective in the short term, requires new infrastructure that “locks in” fossil fuel (in the case of hydrogen, liquid fuel) use for the long term. S.5 would allow installers to earn credits for putting in more efficient oil furnaces and other appliances, which he feels should be removed from the bill.

Most eye-opening, Erickson calls out the policy of government subsidizing low income fossil fuel use in winter through programs like LIHEAP as a “frustrating” example of “carbon-lock in.” And he showed contempt for people in the heating industry losing their jobs: “fossil fuel jobs are few and far between. They’re in dealers and gas station attendants. They are not fundamentally part of the Vermont economic model, or the Vermont economic brand.”

COMMENT: Try telling everyone who heats their homes in the winter or drives their car to work that those jobs aren’t essential.

In Erickson’s estimation, the CHS bill does sort of head in the right direction, but fails by still allowing biofuels, allowing logging, encouraging industrial farming practices, etc. "CHS only works in the long run if we are retiring existing and not allowing new. How are the credits working to accomplish this?" The Committee seemed to generally agree with this analysis.

 

The Committee came back to this on Friday and heard from Mark Stephenson (Vermont Energy Contracting), who installs cold climate heat pumps. The purpose of this testimony was to get an idea of what the market conditions are like for the kind of business that will be doing the on-the-ground work of carrying out the necessary thermal transformations in homes and businesses to meet the mandates of the Global Warming Solutions Act.

Vermont Energy Contracting started out as a seller and installer of high efficiency heating and cooling appliances of all kinds, including traditional oil, propane, etc. In 2012 they signed a contract with Sun Common, and by 2018 had eliminated all aspects of their business model except heat pumps.

Testimony and lines of questioning from the Committee focused on some positive aspects for this technology: there is demand (however, enough demand to keep this particular company busy does not translate into anything close to widespread demand on the scale necessary to meet the GWSA goals), and as the technology improves it becomes more efficient and effective in Vermont’s cold winter climate.

The problems facing the industry are primarily a lack of trained technicians to do the work, and the upfront cost of switching from a fossil-fuel based system to an electric cold climate heat pump system.

There is not a sufficient labor force to install and service the number of heat pumps called for in the Climate Action Plan. Vermont Energy trains its own employees through an apprenticeship program, which Stephenson acknowledged is not an option for smaller or start-up businesses due to the expense. Vermont Tech is not producing workers trained to do this work, and he noted he has not hired someone out of Vermont Tech ever in the history of his business. Starting jobs at Vermont Energy earn $20-$25/hour.

Another bottleneck raised is that it is “almost impossible” to get an electricians license in Vermont. Nine out of ten of the people who take the test fail, according to Stephenson. The training classes to prepare for the exam are inadequate. The last class for the S License (offered every six months) was cancelled when only six people signed up.

Senator White commented that her father is an electrician, and nearing retirement age, as are a large number of his peers. There is not a new cohort of young people coming in to fill that demand.

A number of committee members asked about the comparative costs of switching to heat pumps versus maintaining or replacing a fossil system with a newer version of the same technology. One specific example given to, “How much more expensive is it to get started with heat pumps than sticking with propane?” was it would be $6k for new gas system, and $12k to install heat pumps, less rebates. Older houses can be more expensive, and Stephenson cited a project he was currently working on (buried oil tank, ductwork under the slab, etc.) where the upfront cost to switch was $25,000.

Given the significantly higher upfront costs, what is the long-term ROI? Interestingly, Stephenson never answered this question with a number or calculation, stating rather that his customers almost never (1 out of 100) ask for a financial payback. “It is an ethic,” he said.

COMMENT: This begs a question not asked, what is the average income of people switching to heat pumps?

Asked if the price of the technology was coming down, Stephenson said no, but it was becoming more cost effective and efficient to operate.

When asked what S.5 should address, he highlighted “marketing” that there are job opportunities in the clean thermal sector, and investments in training workers to do these jobs, as well as reforming the path to licensing.

 

Matt Cota, a representative of the Fuel Dealers Association, also testified on Friday. While the Chairman Bray wanted to delve into the logistics of how fuel enters Vermont, Cota preferred to use his time to discuss what he sees as serious problems with S.5.

“We are not transferring money from a big oil company in Texas to Vermont homeowner on Main Street. What we are doing, as the bill is written, is we are having existing retailers and wholesalers pay for ‘credits’, the proceeds of which go to companies like [Vermont Energy] who are installing these devices, instead of incentivizing the individual fuel companies into getting more into that business than they already are. We are transferring funds from one local business to another local business.”

We don’t have a pipeline, we don’t refine our own fuel. According to Cota, we bring fuel into Vermont by train or truck from Albany (12 wholesalers), Springfield MA, (6 wholesalers) or Canada. Propane comes in by ship from Europe into Portsmouth NH, or by rail from Quebec. And from those places, the fuel is coming from all over the place.

According to the bill, the “point of obligation” for the carbon credit to be paid is when the fuel crosses the border into Vermont, so the standard is (unfairly) different for different fuel dealers. Small companies that become “obligated parties” are going to be at a significant disadvantaged compared to other small companies that do not, simply by virtue of geography.

Not only is this an unfair situation, per Cota, it is incredibly complicated from a monitoring and compliance perspective. “The more complexity you bring into the system, the easier it will be for non-compliance.” He questioned how the state is going to track those gallons of fuel and argued that this would be less complicated if it were a regional policy, not a Vermont go-it-alone policy. A good example of this is the national effort to reduce sulfur content in diesel fuel.

Another complication is tracking what the fuel sold is being used for, which often the “obligated party” doesn’t know. This is a Clean HEAT Standard dealing with air and water heating, but some of the same fuels that go into furnaces (regulated under the current version of the bill) go into electric generators or farm equipment (not obligated under the bill as written). How do you deal with that under the law and compliance?

Cota argues that there is a danger if we pass S.5 that Vermont loses the flexibility necessary to continue using fossil fuels to heat enough of our homes during the transition to other fuel sources. He pointed out that “on December 24, 2022, we used oil to keep the lights on in New England. We will still need to be able to do that for at least the next 50 years.”

 

 

 

Housing

Housing Stakeholders

On Tuesday, the Joint Fiscal Office (JFO) presented information to the Senate Economic Development Committee about Housing impacts on many aspects of the economy; demographics in Vermont; characteristics of the housing market; and then considerations for the legislature.

The areas of the economy that housing impacts are workforce - both direct housing workforce and availability of other workers; construction and services for housing; transportation and accessibility; heating and cooling, including the age of housing stock; wastewater treatment and the ability to develop denser housing. Housing also has an impact on education and child care.

According to the U.S. Census Bureau, home building has decline statewide in Vermont. That is coupled with the fact that Vermont’s population is aging. Over 1/5 of Vermont’s population is age 65 or older and as of 2017, and 69% of all Vermont households had 2 or fewer people.

According to Graham Campbell of JFO, it is difficult to distinguish second homes from commercial property when going to the grand list. In 2017 the American Community Survey and self-reported property use identified that owner units were 56%, rental units were 25%, seasonal units were 16% and vacant units were 3%. In addition, as of 2017, more than ¼ of housing units were built prior to 1940.

Investors, as defined by CoreLogic data, are buyers who have owned three or more homes simultaneously over the past 10 years. These include single-family detached homes, townhouses or condominiums. There was no data identified to substantiate if the properties generate income through rentals or are for personal use. In Vermont, until 2021, investors had the lowest presence in any state, then in 2021, investors’ share in Vermont jumped to 17% of the 13,999 homes sold, which showed Bennington County with 25% purchased by investors. In 2022, investors went back down to 7% of buyers (presumably as they sold off holdings).

Some considerations that JFO recommended be thought about when discussing the housing situation included Act 250-statewide land use and development; local zoning rules—minimum lot sizes, prohibitions on second or third dwellings or accessory dwelling units and setbacks. Programs to help older people age at home, including tax issues and health care should be considered as well as support for low-income and middle-income households. Incentives for short-term rentals vs. long-term rentals and policies to encourage diversity at the local level were suggested for consideration. Infrastructure to support more dense housing and the role of investors in the housing market were offered as considerations.

On Wednesday, the Committee heard from Commissioner Josh Hanford and Deputy Commissioner Alex Farrell at the Department Of Housing and Community Development (DHCD). The DHCD’s mission coordinates and oversees the implementation of the state’s housing policy, works to support vibrant and resilient communities, promotes safe and affordable housing for all, protects the state’s historic resources, and improves the quality of life for Vermonters.

Program spotlights were identified:

• Vermont Housing Improvement Program (VHIP) offers grants up to $50,000 per unit for repairs needed to bring vacant rental units up to Vermont Rental Housing Health Code guidelines or to add new or accessory dwelling units (ADU’s).
• The Missing Middle-Income Homeownership Development program is administered by the Vermont Housing Finance Agency (VHFA) and provides subsidies and incentives for home builders to construct or rehabilitate modest homes affordable to Vermont homebuyers at 130% Area Median Income or lower.
• There is also a Manufactured Home Improvement and Repair Program (MHIR) which allocates funds to park improvements, home repair and pad installation.
• Better Places: a non-competitive, community matching grant program to create inclusive and vibrant public places serving Vermont’s designated downtowns, village centers, new town center or neighborhood development areas.
• The Downtown & Village Tax Credits program spurs investments in traditional commercial centers and provides incentives to encourage investments that make existing buildings safe and accessible.
• The Vermont Community Development Program, the Block Grant program, is a federal program administered by VCDP of $7 million annually. It’s funds are to address local community development needs and expand economic opportunities geared to low and moderate income individuals.
• The Downtown Transportation Fund supports revitalization efforts in designated downtowns.
• The Historic Preservation Activities serves as the State Historic Preservation Office and plays an essential role in guiding the state’s historic preservation agenda.

The DHCD has major partners, not limited to Regional Planning commissions, Vermont Housing Finance Agency, Vermont Housing Conservation Board and the Vermont State Housing Authority.

Gus Seelig, the Executive Director of the Vermont Housing & Conservation Board also testified on Wednesday, along with Pollaidh Major, their Director of Policy and Special Projects. The VHCB’s statutory purpose under 10 V.S.A. 15, SECTION 302, identifies the dual goals of creating affordable housing for Vermonters and conserving and protecting Vermont’s agricultural land, forestland, historic properties, important natural areas, and recreational lands of primary importance to the economic vitality and qualify of life of the State.

When working on projects VHCB sees as opportunities:

• The property transfer tax
• Onetime allocations (ARPA, surplus, etc.)
• Smart Growth resources and local zoning updates
• Leveraging infrastructure funds for housing
• Housing revenue bonds
• Municipal support for housing

The challenges they find include:

• Local opposition/the appeals process (often related to local zoning and Act 250)
• Cost of construction
• Cost of energy investments (think Clean Heat Standard)
• Income and interest rates
• Need for supportive services

The VHCB sees as its future pipeline, housing, conservation and historic preservation. It has identified that $185 million would be for more than 2,000 rental housing developments, homeownership and accessibility and that agricultural and natural resources projects in the near term will exceed $30 million in requests to conserve over 43,000 acres including 56 farms.

The status of its FY22 and FY23 special appropriations is at total of $229 million for housing. These funds come from commitments and anticipated commitments (ARPA, SFR, and one-time State General Fund allocations). The Rural Economic Development Initiative (REDI) assists small towns, businesses and organizations with accessing critical funding for economic development projects. The focus is on working lands, outdoor recreation, and community-based economic development. The Vermont Farm & Forest Viability Program has been in existence for 20 years. It serves over 900 farm, food and forest products businesses and has received feedback from businesses that there has been skills improvement in financial analysis, accessing resources, planning investments, strategic planning and marketing and sales.

 

The House General and Housing Committee also took testimony on this topic last week, hearing from Kathleen Berk, Executive Director of the Vermont State Housing Authority, on Tuesday. She broke the presentation into four topics: the mission of the Vermont State Housing Authority (VSHA); the history and overview; program areas and new initiatives and an outlook for 2023 and beyond.

Their Mission was to promote and expand the supply of affordable rental and homeownership opportunities on a statewide basis. Each new endeavor is charged to enhance or increase the organization’s capacity to continue its mission and assure effectiveness of VSHA as a provider and administrator of affordable housing programs.

VSHA provides direct housing services that reach approximately 8500 Vermont families. The actions at the federal level have a strong impact on the core programs of the Authority. HUD’s Section 8 and Continuum of Care programs and the housing programs of USDA’s RD are funded by acts of congress. It is important to understand that VSHA is not a department of state government but is referred to as a quasi-governmental body whose enabling statute permits it to own and operate affordable housing. The VSHA Board of Commissioners is appointed by the Governor and confirmed by the Senate.

VSHA partners with private landlords and collaborates with nonprofits, other statewide agencies and municipalities, dedicated to promoting and preserving affordable housing and improvement of qualify of life for Vermont families. VSHA administers the largest portfolio of Section 8 rental subsidies in the state and this depends on the participation of private landlords. They also administer grants of homeless funding and management of multi-family housing and mobile home parks.

VSHA administers grant funding from HUD programs. As a grantee, VSHA administers a Shelter Plus Care and a Rapid Rehousing program — collaborative programs working with homeless shelters, providers and community based mental health centers with assistance targeted to homeless, disabled households. VSHA works with program sponsors from the community organizations and those funds represent the most important source of federal housing assistance for homeless/disabled people, especially those with mental illness.

In 2019 VSHA undertook the administration of two year pilot program which has been extended - the Accessory Dwelling Unit program (ADUP). The program is initially in Montpelier and will be evaluated for targeting other communities around the state. It aims to assist with building and initial leasing of an accessory dwelling unit, help with pre-construction design and securing of finances, contractor procurement and project management, tenant selection and lease up procedures. The funding for this pilot comes from the City of Montpelier Housing Revolving Loan Fund, Community Development Block Grant funds and funds from the VSHA Independence and Housing Preservation Revolving Loan fund.

In June 2020 VSHA was awarded $25 million under the CARES Act to establish a Rental Housing Stabilization program (RHSP). Bill H.966 launched RHSP on 7/13/2020 and retired the program 7 months later. The program funded landlords on behalf of tenants in need of rental arrearage assistance due to the COVID-19 pandemic. The primary goal was to keep Vermonters housed and avoid homelessness. The secondary goal was to compensate landlords for some of their losses due to the CARES Act, judicial emergencies and stay of evictions proceedings. ERAP, the Emergency Rental Assistance Program, was funded through the Federal Consolidated Appropriates Act in 12/2020 and ARPA in 3/2021. A total of $32M in funding was allocated to Vermont.

New initiatives through VSHA launched January 2023 are Landlord Relief Program which is a partnership with the Agency of Human Services Office of Economic Opportunity and will operate with $5 million in General Funds through the State for up to two years as funding allows. It is a “Risk Pool” or “Mitigation Program” critical in developing supportive network of resources for a healthy rental market. The goals are to open doors for landlords and tenants to establish successful and trusting relationships that result in successful tenancies and housing stability; increase the inventory of rental units available to Vermonters who are experience or at risk of experiencing homelessness; and to provide resources to prevent loss of housing opportunities for tenants and prevent vacancies for landlords.

Another new initiative through VSHA is the Mobile Home Improvement and Replacement Program which was set up to support manufactured/mobile home parks by offering grants and financial assistance to help with the recovery of the COVID pandemic.

VSHA competes for rental assistance on a national level. The Omnibus Appropriations bill passed 12/29/22 by Congress provides increases for the voucher budget by 10% to fund existing voucher costs. VSHA is actively issuing vouchers to waiting list. They consider the outlook for 2024 concerning. Industry professionals are seeing flat funding for HUD-assisted programs and Congress needs to address the Budget Control Act (debt-ceiling). VSHA has concerns that the likelihood of a government shutdown, possible sequestration is the highest that it has been in many years.

 

House Builders and Lenders

On Wednesday, the House General and Housing Committee heard from Chris D’Elia, the President of the Vermont Bankers Association (VBA). The focus was on introducing VBA and summarizing the Banking industry and seeing how they could work with the Committee. They are a membership based trade organization representing the banking industry in Vermont focusing on advocacy, education, products and services. They have 25 member banks, 7 of which are state chartered and 18 are national chartered. Their banks have between $80 million to $10 billion plus in assets and are not just Vermont based, but also in NH, ME, MA and NY.

The banking industry if one of the most heavily regulated industries in the marketplace. Regulations exist both at the state and federal level, with the banks subject mainly to deposit regulations and lending regulations.

Even though technically the House General Committee is not their committee of jurisdiction, the Banking industry is interested in a number of issues addressed by the House General Committee: its work on a variety of statutes that impact the industry and their customers; Title 8, Title 9 and Title 20. Hence, all committees can impact banking depending upon the bill.

No specific policies were discussed during the meeting on Wednesday.

 

The Department of Housing and Community Development

The House General and Housing Committee met briefly on Friday morning to get an introduction to the leadership of the Department of Housing and Community Development (DHCD). Staff introduced where:

• Josh Hanford - Commissioner, DHCD
• Alex Farrell - Deputy Commissioner, DHCD
• Shaun Gilpin - Housing Division Director, DHCD

Following the intros, Commissioner Hanford gave an anecdotal testimony of his own life struggle as a child with housing security. He proceeded to give the Committee an overview presentation of the department.

 

Senate Draft Bill

The Senate Economic Development Committee reviewed a draft bill (Req 23-0091 – Draft 5.1) introduced by Chairwoman Kesha Ram-Hinsdale. The purpose of the bill is to increase the supply of affordable housing in Vermont, promote homeownership and broaden housing opportunities in the state.

Section 1 amends parts of Municipal Zoning Statute 24 VSA Section 4414 regarding parking and loading facilities. Section 2 focuses on amendments to land development provisions in order to allow duplexes and accessory dwelling units in districts that allow residential development. The bill further addresses by-laws to make them universally over-ridden by the amended statutes and requires the Department of Commissions to provide a report to the Department of Housing and Community Development.

In the bill, the sum of $500,000 is appropriated from the General Fund to the municipal and regional planning fund for the purpose of assisting municipalities in updating their bylaws to reflect changes in this bill.

The Planning Commission Section authorizes the Vermont Association of Planning and Development Agencies to hire Housing Resource Navigators to serve underserved communities. $300,000 is appropriated in FY2024 to the Vermont Association of Regulated Planning and Development Agencies for the purpose of hiring the Housing Navigators.

The Bill allows for municipal TIF’s and approval process through the Vermont Economic Progress Council. The Bill addresses Homeshare opportunities, mobile homes and mobile home parks and the use of the Covid-19 relief funds as well as VHFA Whole Loan Fund appropriations. It also makes appropriations from ARPA and VHIP funding.

The bill also deals with discrimination and allows for referrals to the Attorney General or State’s Attorney for investigation and enforcement violations of the equity portions of the bill. Criminal penalties will be not more than $10,000 per violation.

 

Education

The Education Associations

On Tuesday, the House Education Committee heard from a parade of lobbyists for the various education associations (teachers, principals, superintendents, school boards, etc.)

Jay Nichols, Executive Director of the Vermont Principals' Association (VPA), provided his testimony to the Committee first. The first issue he highlighted is that VPA is currently seeing an annual turnover rate of 31% among principals in Vermont schools.

One major concern they hear is that people’s expectations are that things will be “going back to normal” however most learning deficits resulting from closures and insufficient remote learning remain and are not easy to overcome. There are also increased mental health and social deficits as well (with a lack of qualified staff to assist).

He stressed the mental health crisis because there has been a sharp increase in school staff being assaulted and subjected to aggressive behaviors. They want to increase the budgets for mental health professionals in schools.

Nichols then pivoted to Housing and Childcare supports and suggested these are connected to the job market and are how we solve the education workforce problem (really it is just an overall workforce problem) and get some 19-44 year-olds to move to Vermont.

He stressed that we should be “keeping the Education Fund as pure as possible” and that we can lower the cost of providing education if we “giving the kids the services that they should be getting for mental health and other programs” out of the General Fund.

NOTE: While he has a point about keeping the Education Fund spending focused on education, it does little to address the overall cost of services unless it can be shown that more spending on early childhood behavioral issues will generate savings later on.

Sue Ceglowski, Executive Director of the Vermont School Boards Association, also testified on Tuesday, but her remarks were fairly similar to what she provided the Senate Education Committee (which can be found below).

She yielded to the next witness but reiterated the points Nichols made regarding mental health needs. She would like to see the Education Fund Surplus used for this purpose instead of general fund revenues.

Ceglowski also mentioned the recent history of “failures to support” school facilities construction which, according to her, causes variations in the quality of school facilities quality and inequities in outcomes.

Jeff Fannon, Executive Director of the Vermont National Education Association (VT-NEA), testified next. His presentation mirrored that of the others, but he called out the workforce shortage more aggressively, saying that Vermont needs for minimum salary “incentives” for retention and recruitment purposes. Starting salaries below $40K are insufficient bearing in mind student debt, also funding for “student teaching” as a requirement rather than a paid internship would help and should be pursued.

Jeff Francis, Executive Director of the Vermont Superintendents Association (VSA) was up next with his presentation to the Committee in a friendly and conversational way.

Francis finds his work dynamic as it touches every area of people’s lives. He encouraged the Committee to think hard about balancing aspirations & obligations in public education, saying that we need to “vet new ideas as they arise.” He questioned how we balance resources against these tremendous demands.

It is “time to take stock,” he said. Our, “appetite for new things” has been “pretty grand” in the last several year. He encouraged that it is “time to take stock” of the current situation before pursuing new policy goals and evaluating any new policies purpose, and whether “we can actually car it out.”

 

On Wednesday, the Senate Education Committee heard from the Vermont School Boards Association (VSBA) about their priorities for the 2023 legislative session. Prior to the discussion, Senator Hashim pointed to availability of teachers, healthcare, and incentives for people to enter the trades as areas of concern for him. He is also favorable towards universal school meals, civics education, and matched savings plans for students. Chairman Campion favors public-private partnerships in policy areas like these.

Senator Weeks would like to focus on financial literacy and pensions issues.

Senator Williams added declining scores as a priority. He thinks the state should be weeding out bad teachers and that disciplinary firing should be discussed.

Senator Hashim addressed the differences licensed requirements between independent and public schools. He wondered if independent schools have the ability to “choose their own way.” Campion said they will have folks in and get more clarity on these points.

NOTE: Similar questions came up in the House Education Committee this week. It does not appear that public schools have specific licensing requirements, whereas independent schools who receive public tuitioning dollars do.

Senator Gulick didn’t voice any specific priorities but is concerned about adding more mandates on schools.

 

Sue Ceglowski, Executive Director of VSBA, shared her organization’s priorities with the Committee.

She touted VSBA by saying that “to serve on a school board is to uphold the great American tradition of a free, public education for all. This tradition forms the foundation of our democracy: a well-informed citizenry. It is extremely important that students develop critical and independent thinking skills and that they understand how history can impact the future.”

After reviewing all the initiatives that VSBA is pursuing, Ceglowski moved on to her priorities. She talked about equity policies and also their model policy on curriculum to analyze achievement data and outcomes. Ceglowski asked about the “rural-urban” outcome discrepancy and whether it is real or more complex than that. Ceglowski “wants to see data on that” before she weighs in. However, she suggested that the new weighting factors may address any discrepancies that might exist.

Williams argued that changing definition of equity since Act 60 has not helped.

Pivoting back to VSBA priorities, Ceglowski highlighted that the school facility funds moratorium (which has been in place since 2007) has led to inequities in school facilities, and possibly even outcomes. She would also like to see some of the Education Fund surplus be used for mental health.

Finally, Ceglowski announced that VSBA would “advocate for ensuring educational equity in the wake of the United States Supreme Court’s decision in Carson v. Makin.”

The most recent VSBA resolution related to this topic passed in October 2022 at their annual meeting. The resolution calls for “public funds accountability” and advocates that “all rules, regulations, policies, quality standards, reporting requirements and laws regarding public schools in Vermont must apply to any school that receives funds from the statewide education fund, for any reason or for any purpose.”

Senator Gulick praised VSBA as a “high functioning, and student focused and student centered” group. She is a school board member and speaks from experience and appreciation for their resources and trainings.

 

 

Independent School Approval Process

On Tuesday, the Agency of Education’s (AOE) General Counsel walked the House Education Committee through AOE’s process and criteria for independent schools. There are multiple kinds of independent schools, the ones that are eligible to receive students on public tuitioning (what we call school choice here in Vermont) are Approved Independent Schools. There is another type of independent school called Recognized Independent School. This schools are not eligible to receive public dollars, but they do count for truancy purposes, so a student is not considered absent for attending one of these schools.

Approved Independent Schools are approved by the State Board of Education (SBE). On July 1^st of this year, schools intending to take additional steps outlined in Act 173 to ensure access to special education. It is unclear at this point how many of the current Approved Independent Schools intend to take these additional steps.

The State Board of Education will rely on site reports from AOE or on accreditation reports from approved accreditors in their decision-making around independent school approval. These approvals are typically for 2-5 year periods and then schools mush re-apply for approval status.

Much of the committee discussion and questions were around rules preventing discrimination. There was also interest in the lack of a quality assurance process for independent schools. The Committee will begin to pull a bill together over the coming weeks to start putting some of their thoughts down on paper.

 

On Wednesday, the Committee heard from Jennifer Samuelson, Chair of the State Board of Education (SBE), on the 2200 rule series that governs independent schools and Vermont’s public tuitioning program. The board just finished rulemaking on the 2200 series last fall and there were two main categories of changes:

1. Approved independent schools eligible to receive public tuition dollars must accept students requiring special education services.
2. Approved independent schools eligible to receive public tuition dollars must provide special education services to any students attending.

Additional rules, not related to Act 173, that the board put forward include:

1. Established more robust investigations for complaints.
2. Recognized the New England Association of Schools and Colleges (NEASC) and the Association of Independent Schools in New England (AISNE) as accrediting agencies for Approved Independent Schools.
3. Requires that Approved Independent Schools to comply with the Vermont Public Accommodations Act and the Vermont Fair Employment Practices Act.
4. Required schools operating boarding programs to be accredited by an approved external accreditor unless they are licensed by DCF.
5. Required anti-discrimination in enrollment and admissions policies at independent schools.

The most concerning civil rights issue that the Agency of Education was trying to address was students already on IEP’s that were previously receiving special education services from a public school, but then has to choose a tuitioning option where there may not be a convenient or preferable choice that provides those services.

The new process is a “blind” application process, meaning that a special need is not disclosed to the independent school during the initial application process. After a student is accepted, the supervisory union engages with the independent school to come up with a plan for providing those services to the student.

 

The Committee came back to this topic on Friday to hear from Mary Newman (Head of School at The Sharon Academy) about the Education Quality Standards (EQS) and why they are one of the only schools to pursue this certification. Students from up to 18 different towns choose to go to The Sharon Academy and almost 80% of their students are publicly funded.

Newman chose to go down the EQS path because they needed to increase tuition in order to continue to offer the quality of education that they wanted to offer their students. In many cases, public schools in their area were charging $2,000 more per student in tuition at the time.

She described the New England Association of Schools and Colleges (NEASC) processes, which is a peer review assessment of the school with two separate site visits that include thoughtful feedback with a rigorous assessment. Getting a NEASC accreditation is one of the pathways to gaining approval status from the State Board of Education.

There were a number of questions from the Committee about how much tuition could be charged by the school and what cost-containment measures were in place. There was also a question from Chairman Conlon about whether there was anything preventing the ability for their teachers to organize. Newman said that being responsible members of the community prevented their tuition from growing out of step with other schools (also some of the competitive dynamics of school choice). She also indicated that there was nothing she was aware of that would prevent her teachers from organizing.

After Newman left, Conlon reviewed some of the options that a bill might contain. Some ideas included reviewing protections against discrimination, enforcing quality or accreditation standards on approved independent schools, limiting public funds to non-profit schools only, and preventing or limiting the out-of-state use of public tuitioning dollars. Designation was also brought up as an option. He is also going to have legislative counsel come in and present the bill the Senate worked on last year, S.219.

 

Human Services

RAND Child Care Report

Christopher Doss, policy researcher at the RAND Corporation - a nonpartisan, nonprofit research organization. Joining Doss were Lynn Karoly and Aaron Strong. Karoly is a senior economist and a leader in the early care and education field, particularly around the cost of early care. Strong is a senior economist who specializes in modeling the effects of policy changes at the state and federal level. His work has been influential in guiding investments in California, Puerto Rico, among other states.

Doss announced at the beginning of the hearing that he was not going to take questions but rather wanted to go through the entire RAND presentation and then return the next day or two and answer any questions the committee members have. The following is a summary of his presentation.

The study was statutorily commissioned by Act 45, touching on some of the most pressing policy issues today. First, Act 45 acknowledged that Early Childhood Education (ECE) is intertwined with the broader Vermont economy and can be seen as an investment to support the economy. Second, it acknowledges that early educators face very low pay and consideration should be give to pay that is commensurate with the required knowledge, skills and competencies. Third, it acknowledges that this act builds off the advancements we just delineated, including the redesign of the subsidies disbursed through the Child Care Financial Assistance Program (CCFAP)

The RAND study has two components: The first aims to reject the costs of expanding the State’s ECE benefits to more families, requiring commensurate compensation for providers and utilizing a cost of care model to reimburse providers. This last point means that when estimating the cost of a high quality ECE system, they estimate the value of the resources required to provide high-quality services instead of relying on prices charged by providers. The second component aims to identify feasible and stable long-term funding sources for this expanded system and estimate the expected fiscal and economic impacts.

Despite substantial investments, many families still cannot afford the high cost of ECE and thus may not participate in high quality programs. There is not enough money in the system to provide subsidies for all eligible families. So further investments present Vermont with two key policy questions: How much will expanded access for high quality ECE cost? And, how can it be paid for?

RAND focused on regulated providers (head start programs & public school pre-k) and family child care homes – a mixed delivery system of private and public providers. ECE educators in Vermont, like in many areas of the country, have relatively low pay. The Bureau of Labor Statistics data for Vermont show that the average or median annual earnings are below $38,000 for child care or preschool teachers, well below earnings for kindergarten or elementary school teachers. Despite these low wages, the ECE field increasingly expects lead teachers to have a bachelor’s degree, the same as public school teachers. ECE workers are also less likely to have employer-provided benefits such as health insurance and retirement plans.

There are currently three major sources of funding for ECE in Vermont:

1. Federally funded Head Start and Early Head Start
2. State-funded universal pre-k under Act 166
3. CCFAP which is funded by combination of federal and state monies

Smaller funding streams include federal and state tax credits for child care. In 2018-2019 all sources totaled approximately $109M towards ECE.

CCFAP is a key part of Vermont’s subsidy system and the main focus of our expansion of subsidies. In terms of the current system, Vermont is one of the more generous in that:

• Subsidies are available to families with income up to 3.5 times poverty, one of the highest levels in the country.
• There is no contribution from families with income before 1.5 times poverty.
• The family contribution does not vary with the number of children (this is perhaps one of the key policy areas we should focus on)

The current subsidy structure means that some families of size three (and also size 4) have family contributions that exceed 10 percent of their income..

Based on the resources needed for high-quality ECE, the commensurate compensation schedule, and estimates of the hours of care demanded, the estimated cost will total about an additional $64M per year in 2022. This estimate also includes system-level cost such as administrative costs, data systems, quality improvement supports, and workforce professional development.

The next step in RAND’s cost study was to estimate how much families would be expected to contribute toward those costs based on several subsidy schedules. The study considers five potential sliding-scale family contribution schedules:

Subsidy schedules	Total family contribution
Status Quo	$263 million
Capped at 10% of income	$260 million
Extended to families 5x poverty line	$246 million
Limit 7% under 3.5x and 13% under 5x	$240 million

 

 

 

 

 

 

 

RAND accounted for three components leading to their gap estimate:

Component 1: Total system cost of care - $645 million

Component 2: Family Contribution - $260 million

Component 3: Existing public funding - $125 million

 

In RAND’s accounting, the resulting gap under Schedule 2 is $258M. However, if the expected family contribution drops to the $240M mark it would increase the public funding gap to $279M.

RAND also looked at possible funding mechanisms and their economic impacts. Their economic model sees the Vermont economy as a circular system. Families pay taxes to the state government, which in turn distributed that money across different sectors. This is in addition to money families directly pay the ECE system through their foamily contributions. The ECE sector also provides wages to the families in the system, who in turn pay taxes and may themselves pay for ECE services.

In this study, wages increases for ECE workers were assumed, which will affect the amount of taxes that they will pay.

• Option 1: new payroll tax
  • A 1% tax would net $196M
  • Would require up to a 1.4% payroll tax.
    
    
• Option 2: increase sales and use tax
  • A 6% increase (doubling) the rate would net $85M
  • Would require up to an additional 19.7% tax rate (almost 26% total!) or secondary funding source
• Option 3: new limited service tax (personal services and equipment)
  • A 6% tax would net $105M
  • Would require up to an 15.9% tax rate or secondary funding source
• Option 4: new extended service tax (limited service tax – broadcasting and publishing)
  • A 6% tax would net $143M
  • Would require up to an 11.7% tax rate or secondary funding source
• Option 5: new soda tax, increase hospitality tax, new payroll tax
  • A 15% soft drink tax would net $24M
  • A 1% increase in hospitality taxes would net $14M
    
    
• Option 6: new soda tax, increase hospitality tax, increase sales tax

 

Options 1 to 4 are single-source options that rely on one type of tax to produce the needed revenue. Options 5 and 6 are options composed of bundles of different taxes meant to minimize increases in any one type of tax.

RAND recommends phasing in any of these funding mechanisms over a four year period.

They also estimate the effects of expanded subsidies on labor force participation. According to their analysis, between 612 – 2,800 persons would enter the labor force, depending on generosity of subsidies. This would likely lead to $89 – $218 million in additional Gross State Product and $1.5 - $18 million in state and local tax revenue. Other downstream benefits to children and society are expected from increased ECE investments, but they would accrue beyond the 5-year time horizon of the report.

 

 

Things to watch for next week:

Carbon Reduction in the Heating Sector (S.5) - Senate Natural Resources (Thurs/Fri)

Housing Policy - Senate Economic Development (all week)

RAND Early Care and Education Financing Study - Multiple Committees (Wed/Thurs)

 

 

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