The bill creating a statewide code of ethics is headed to the House floor this coming week after the Government Operations Committee agreed with most of the provisions we and others asked for.
Pensions are heating up again, on multiple fronts. The "benefits overhaul bill" is being worked on in the House and there are two bills in the Senate that could negatively impact pension liabilities. One that would divest fossil fuels from the investment portfolios and another that would potentially allow retired teachers to temporarily come back to work while retaining their pension benefits.
Other bills, such as workforce development and housing are also gaining steam in the House and Senate. We are likely to see those bills move to the floor in the next week or two.
Quote of the Week:
“We have had a dysfunctional [Natural Resources Board] for decades... everyone wants the working landscape to be successful and that is what Act 250 is for.” - Rep. Seth Bongarts
CFV President, Pat McDonald
Message of the Week:
We are so pleased that the House and Senate Government Operations Committees have agreed with us that all public officials in state government should be held to a uniform set of standards of conduct. We will continue to shepherd this bill through final passage, but it has cleared the major hurdles at this point.
Vote for Vermont:
Chris Winters joins Pat to talk about his work in state government and his bid to replace outgoing Secretary of State Jim Condos, who is retiring.
Note: Any statewide candidates who want to appear on Vote for Vermont should contact us.
S.286 - Amending Public Pension and Other Postemployment Benefits
On March 30th Senator Brock introduced an amendment on the Senate Floor that would allow for new hires to make a choice between defined contribution and defined benefit plans. The Vermont State Employees Association has been opposed to offering a defined contribution plan for years. They worry seems to be that employees and teachers won’t have the ability to manage their own funds – we disagree. There is a defined contribution system in place for exempt employees that is working quite well, so the state wouldn't even need to stand up a new program, just give access to non-exempt employees.
The Chairwoman of the Senate Government Operations Committee said that the Pension Benefits Task Force discussed offering a defined contribution plan but decided it best to focus on what was in place for state employees and teachers already. She said that the newly formed Joint Pension Oversight Committee could pursue defined contribution plans if they so choose. The Senate voted not to accept the amendment offered by Senator Brock.
On April 1st, Senator Kitchel presented an amendment that was focused on amending the Cost of Living Adjustment (COLA) language in the bill. It provided for incremental increases in COLA – as the plan becomes healthier. They are hopeful that by 2038 COLAs will move from 50% of GDP to be more on-par. A roll call was taken and the amendment adopted 28 - 0.
We would suggest that the House Government Operations Committee include a requirement for the Joint Pension Oversight Committee to study whether a defined contribution plan is feasible and should be offered as a choice to new hires. See the letter we sent to this effect.
Last week, the Joint Fiscal Office discussed S.286 and presented an overview of final recommendations to the House Government Operations Committee. Based on preliminary actuarial estimates the bill is expected to reduce Vermont’s long-term unfunded retirement liabilities for state employees and teachers by approximately $2 billion by prefunding other post employment benefits, modifying the pension benefit structure, and making additional state and employer contributions into the retirement systems.
Here is a brief overview:
- This bill contains $200M in one-time General Fund appropriation in FY2022 to the pension systems to pay down unfunded liabilities
- $75 million to the Vermont state employees’ (VSERS) retirement system.
- $125 million to the Vermont state teachers’ retirement system.
- The bill also contains $13.3M one-time Education Fund appropriations in FY2022 to begin prefunding health care benefits for retired teachers.
- No changes to the benefits of current retirees, beneficiaries, or terminated vested members are being proposed.
- Employee contribution rates increase to 35% for active members of both systems.
- Modifications to the cost-of-living-adjustments formula for all employee groups, plus changes to other terms of the pension benefits for VSERS, Group C and D
- State commits to ongoing additional payments of $50M towards the unfunded liabilities in both systems.
State Treasurer Beth Pearce testified to House Government Operations Committee in support of S.286. She views this bill as a "very good step forward and we appreciate the work of the Pension Task Force." However, she sees a need for some more work and will be working with retirement boards in the coming weeks, particularly on the Cost of Living Adjustment (COLA) issues.
Pearce discussed the VSEA proposal around creating a Group G for corrections personnel. The proposal will not negatively impact current retirees or active employees who are within ten years of current normal retirement eligibility.
The bill contains a $200M one-time General Fund appropriation in FY2022 to the pension systems to pay down unfunded liabilities – $75M to the Vermont State Employees’ Retirement System (VSERS) and $125M to the Vermont State Teachers’ Retirement System (VSTRS). The bill also contains a $13.3M one-time Education Fund appropriation in FY2022 to the Retired Teachers’ Health and Medical Benefits Fund to begin prefunding health care benefits for retired teachers.
H.572 - Retirement Allowance for Interim Educators
The Senate Government Operations Committee took testimony on H.572 on Friday. The bill would allow beneficiaries of the Vermont State Teachers Retirement Systems (VSTRS) to resume service as an interim educator for a one-year period and continue to receive a retirement allowance for that period of time. The basic premise is to allow temporary "un-retirement" of teachers to help meet the workforce needs of school districts.
The Vermont Superintendents Association and Principals Association both supported the bill. There was a sentiment that this isn't a 'golden goose' situation and that whatever needs to be done to safeguard pensions should be done. It's about filling positions with qualified people. The Committee is putting together a list of questions they will want answers to, for example, if there would be a sunset or how healthcare benefits would work.
Beth Pearce was confident that there would there will be an impact on the pension funds. It would increase the retirement liability, particularly if you have people work more than a year. Five years is the current vesting period so additional retirement contributions would have to be made by employee. This could be a challenge for the program. When someone leaves they are entitled to their contribution plus interest. This would cost the state pension funds $26K per year for each of these temporary hires. She believes the program is likely to change behaviors around retirement decisions.
There was a suggestion from the Committee that schools could hire somebody as a contractor so they are not considered part of the school staff. This way they wouldn’t be paying in or receiving benefits. Pearce was not prepared to offer an answer last week, but she is worried about people who might retire early if this benefit existed. The Committee was reminded that teachers are unionized and their contracts prohibit the use of non-employee workers.
Potential Revenue Sources
The Senate Finance Committee took testimony on Thursday around raising state funds through fee adjustments. One area that the Committee was interested in was insurance appointment fees. There are fees that are charged to insurance agents when they want to register to sell on behalf of a new insurance provider. There are over 400k of these appointments registered in Vermont. Many out of state insurance agents want to register in Vermont so they can sell insurance products to Vermont residents and agents often hold appointments for multiple insurance products which leads to such a large number of registrations.
The Joint Fiscal Office warned that increases in this fee would eat into another fee category called "retaliatory fees." Apparently, for specific fee types, the state can charge agents based on their home state's fee rate so if the agent's home state has a higher fee than Vermont can charge at that rate and vice versa. This means that there could be domino effects on Vermont-based insurance agents if this particular fee is increased.
Vermont Training Program
John Young (Director, Vermont Training Program) gave a lengthy presentation to the House Commerce Committee on Wednesday. They are utilizing carry-over ARPA funds this year and because training grants have a rolling application basis this allows for continuity and responsiveness for mid-year issues or opportunities that come up for businesses (like Covid).
The turnaround time for training grant on approvals is typically 18 business days. Instead of providing payment up-front, the program re-imburses employers for costs associated with training they provide to their employees. There were some questions from the Committee about the possibility of businesses offering joint trainings. This doesn't seem to happen very often because businesses are typically training new hires and the timing typically doesn't line up with other businesses training the same skillsets.
In FY2021 the Vermont Training Program issued about 70 grants to employers. One of the grants issued was for a nurse training program at Central Vermont Medical Center to upskill LNAs and CNAs to RNs and LPNs. Other participants included Casella, Bellavance Trucking, and Jackman Fuels (all for CDL licenses). In total, it's about $1.6M in grants annually to provide training to more than 700 employees.
There was interest in the Committee for having the Department of Labor and the Department of Taxes take a look at the program to determine an ROI. It seems likely that the program is a net-positive in terms of tax revenue.
Young had metrics that showed median wages of employees post-training increased an average of 16.2%. In FY 2021, 494 new jobs were created at a cost of $1,435 per employee and median wages of $19.85 (per our calculations, these grants would pay for themselves in about 13 months).
H.703 - workforce development
The Senate Economic Development Committee came back to H.703 on Thursday. The Vermont State Colleges (VSC) testified that the state needs to address both the student pipeline and the faculty and teacher pipeline. Multiple sectors in the economy are experiencing worker shortages. There was also much concern around the lack of teachers and health care providers. VSC is ramping up new program and career pathways programs to address these.
There is funding in the bill for VSC, UVM, and private colleges to engage on filling this need.
Housing Presentation to House Appropriations
Chris Donnelly (Director of Community Relations, Champlain Housing Trust) told the House Appropriations Committee on Tuesday that they were concerned about the return on investment of Priority Housing Projects because they were expecting a market crash within the next two decades. They would prefer more investment in shared equity programs (which they operate) because the initial subsidy keeps the housing unit permanently affordable. This is done by an equity covenant, where a subsidy covers a portion of the purchase cost of a property in exchange for a share of the equity increase. This equity gain is then rolled into a subsidy for the next homeowner. This way the home remains affordable in perpetuity. The trade-off for purchasers is less equity gain but the program covers your down payment costs.
Some members of the Committee were concerned that the numbers showing really no progress in housing, just more folks living under subsidies in hotels and rent-adjusted apartments. Essentially, we have "done nothing but spend a lot of money and not actually changed the economics." Donnelly pointed to national standards hindering the housing placement process. We would argue that this is because there are not enough home-ownership opportunities so families are getting stuck in "affordable" rentals that are being subsidized by state and federal housing programs.
There were also questions about how to incentivize developers to build middle-income housing (currently it's not profitable). Maine may be considering assistance along these lines, but there is no clear programmatic path forward according to Donnelly.
Changes (housing related) to Act 250
The House Natural Resources Committee did a section-by-section walk-through of S.234 on Thursday. There were few changes to the bill following testimony earlier in the week. However, it seems like the Committee might strike the existing forest block language in favor of making it explicit that forest fragmentation should be a consideration that the Agency of Natural Resources takes into account when they are doing their permit review. They do this now but there is no requirement in statute, so this would make it explicit. This would also allow for better and more flexible outcomes without being too prescriptive.
The Committee questioned the thresholds that the Senate put in place for the road rule. They seem more interested in a straight 2,000 foot trigger. There was also some discussion about the difference between a road or a driveway (driveways only service one or two homes per court rulings).
The Committee came back to the bill on Friday and it became clear there was discomfort with leaving the definitions of forest blocks up to the Natural Resources Board (NRB). They asked legislative counsel to come back with the language from H.233 from 2017 to review.
There was some debate about hours of operations limits for some (largely forest products) businesses because of noise impacts on habitat. While there was agreement that activity should be limited, they couldn't agree on which activities should be allowed (such as deliveries, etc.). The Committee plans to have the Secretary of the Agency of Natural Resources (ANR) and the Chair of the NRB testify before moving forward.
However, Representative Bongartz argued that all these problems are here “because we have had a dysfunctional NRB for decades.” He says that, "everyone wants the working landscape to be successful and that is what Act 250 is for."
Legislative Counsel provided a side-by-side of the 2017 bill and S.234. The Committee seemed to favor the language from the older bill. While the House language is still being drafted, the Senate version sought to limit the ability to sub-divide plots of land. The House does seem interested in keeping this provision which could severely curtain the development of single-family homes.
H.159 - Community and Economic Development and Workforce Revitalization
Senator Pearson offered an amendment to S.248 on Thursday around project-based TIFs. The amendment would fix reporting requirements that were different than the typical TIF process and were to be completed by contractors. Also, it would re-instate audits from the State Auditor's office. He also addressed a shift in the bill from the House that relaxed requirements for regular TIF districts; he wants to undo those.
The Senate Finance Committee is likely to support those changes, most of the conversation on Friday focused on the TIF language in the bill.
The House Energy and Technology Committee talked about broadband and wireless deployment on Friday. Traditional revenue streams for telecom and connectivity have diminished significantly over the last few years. There are a variety of fixed telecom providers that pay into the Connectivity Fund, but the FCC is looking at doing away with support for wireline telephone service. Due to pushback from rural states, the federal government has postponed this but they could still move forward at a later date.
This decision could lead to loss of support for e911 across the country. Representative Sibilia is very concerned about this as 48% of homes are wireless only. The Department of Public Service is looking at revenue sources to replace the federal money in order to maintain these emergency services, however, the Administration does not yet have a position on what revenue stream(s) should be used.
S.171 - Adoption of a State Code of Ethics
The House Government Operations Committee seemed very supportive of S.171 on Tuesday, with only a few issues remaining to be resolved. There were some lingering concerns around conflict of interest because the Legislature is part time and most have to work other jobs in order to serve, generally the legislators outside jobs would allow them to perform their core functions so they would already be exempt.
It was agreed that the training provided for in the bill should be for training on the code of ethics specifically, no other ethics training. For the judiciary, training would be coordinated through two entities: the Supreme Court and the Court Administrators Office. The Committee also added an annual reporting requirement for the Ethics Commission to coordinate with departments in state government to report on how things are progressing - particularly in regards to training.
There was also an open-ended discussion about when to report gifts and what other states do. The bill sets a $100 minimum – anything above the $100 should be reported, everything below does not need to be. But, there were questions about whether was (or should be) a cumulative number and who would keep track of it.
The Committee reviewed two amendments on Thursday prior to voting. The first would require the Ethics Commission to include an annual report on training – number of individuals trained, summary of training and summary of comments for improving, expanding changing training. The second amendment was around gifts and free tickets provided to a widely attended events where the legislator attends in his/her official capacity for event participation, food and travel expenses. The example given for this was attendance and National Council of State Legislators events.
All the amendments were agreed to and the bill was voted out of the Committee unanimously.
Per Pupil Weighting and Cost Factor Adjustments
• Will drive significant changes in equalized pupil counts.
• Significant changes in education spending per equalized pupil and subsequent homestead tax rates.
• The change in tax rates requires a change in the statewide property yield to keep the Education Fund whole.
• The ‘base’ FY2020 tax rates are not what districts actually saw/spent in FY2020.
The weights account for the portion of students in a certain demographic categories, however districts would still subtract offsetting revenues (usually grants) from total voted education budget. Districts would still have voter approved school budgets and any remaining education revenues would still be funded through spending-adjusted tax rates
However, there is a competing proposal on the table to use block grants (called cost factor adjustments) that would be calculated using the weighting factors but would come in the form of offsetting revenues instead of property tax abatement. The advantage of this is that districts get dedicated revenues to offset the cost of educating their student populations, but it is also more likely to drive up tax rates.
Under this proposal, the spending per student number used to calculate tax rates would revert to the long-term average daily membership (LT-ADM), not equalized pupils as it currently is. A transition phase-in is proposed to smooth the impacts of these changes. The transition period would being in FY2024 and complete in FY2028
Setting Property Tax Rates
Senator MacDonald offered an amendment to H.737 in the Senate Finance Committee this week. The purpose of the amendment is to help people claim their homestead property tax rebates (and income sensitivity). He argued that many people miss out on this tax break as a result of not understanding how to apply. Since more people pay based on their income, he was concerned that we were subsidizing people who pay on property tax given that we have been trying to lower property taxes.
There was some confusion in the Committee over how to address this and they want more analysis to look at the issue. The Joint Fiscal Office ran several simulations to look at how to give a tax break to to roughly the 80% of property taxpayers who qualify. The Committee does not have a lot of time to review this proposal to get it into the budget, and there are a lot of potential moving parts. It seems likely this might get punted to a summer study committee.
Things to watch for next week:
VOTE - Creation of the Statewide Code of Ethics (S.171) - House Floor on Tuesday
VOTE - Economic Development and Workforce Revitalization (H.159) - Senate Floor on Tuesday
Act 250 Changes (S.234) - House Natural Resources on Tuesday
Workforce Development Bill (H.703) - Senate Appropriations on Tuesday and Wednesday
Pension Overhaul Bill (S.286) - House Government Operations on Tue and Wed
Expansion of Affordable Housing (S.226) - House General on Tuesday and Thursday
Rewriting the Rules on Act 46 Mergers and Divorces (H.727) - Senate Education all week
Adjusting Student Weighting in the Education Funding Formula (S.287) - House Ways & Means on Tue and Wed
Vermont Child Tax Credit and SSI Exclusion (H.510) - Senate Finance on Wednesday
Homestead Property Tax Yields and Rates (H.737) - Senate Finance on Wednesday
We reviewed 23 hours of legislative testimony to bring you this report, please consider supporting our work.