There was lots of activity this week across multiple fronts as legislators push to get their priorities across the finish line before the end of the session, which is rapidly approaching. Legislative leaders have already indicated that they expect to come back in late May for a veto session, so they are currently targeting the second weekend in May for adjournment; this effectively gives Committees two weeks to get bills back to the floor, if they are to pass this year.

Housing

Let's Build Homes testified in the House, sharing a number of insights about the current housing crisis in Vermont. Their coalition has expanded to over 200 organizations and 700 individuals advocating for increased housing supply. Vermont is facing a significant housing shortage, with a goal of constructing 30,000 homes over the next five years. The current housing production levels are significantly lower than historical averages, necessitating dramatic changes to meet demand.

The aging infrastructure in municipalities poses challenges, and the bill (S.127) aims to address these through strategic investments that can enhance housing development. Continued public investment in permanently affordable housing is essential, in their view, as many Vermonters will require assistance regardless of the overall housing supply increase.

Many municipalities are recognizing the severity of the housing crisis and are actively engaging in discussions to facilitate housing growth. There are examples of municipalities like Essex Junction, which have passed significant upzoning measures, demonstrating proactive efforts to address housing needs.

The cost of construction has increased dramatically, making it difficult for developers to make projects financially viable. Testimony emphasized the need for a long-term vision in housing development, considering the demographic shifts and economic changes in Vermont.

Housing advocates also warned this week that a potential reduction in federal funding could severely disrupt ongoing projects and the overall housing delivery system, leading to increased homelessness and housing instability. $55.7M in federal funds are currently committed to projects, with 567 housing units under construction; these are at risk of being left unfinished if those funds go away. Thirteen additional projects in the pipeline would also be jeopardized if this funding went away, affecting future housing availability.

There is also an anticipated $67M in disaster recovery funding that the state is expected to allocate to flood-impacted communities, providing critical support.

The Senate is still working on the House's housing bill (H.479) and was exploring the concept of establishing a statewide land bank (both statewide and regional models) to facilitate the redevelopment of distressed properties. James Tishler, a guest speaker from Michigan, provided insights into the successful implementation of land banks in his state, emphasizing their role in addressing blight and promoting housing development.

Vermont has an existing program aimed at this issue, called the Vermont Housing Improvement Program (VHIP) which has shown some success. The program provides financial assistance to property owners for rehabilitation, creation, or conversion of rental units. Many of these units are vacant or blighted and require significant investment to meet Vermont Rental Housing Health Code guidelines. The current offerings of the program are a 5-year grant or a 10-year forgivable loan (0% interest) that may be funded up to $30K for a 0-2 bedroom unit or $50K for 3+ bedrooms, and rent must be affordable for the duration of the grant/loan.

Economic Development & Infrastructure

The Senate is drafting a resolution concerning the economic and diplomatic relationship between Vermont and Canada. Discussions have focused on the implications of tariffs imposed by the U.S. government on Canadian imports and the importance of maintaining strong ties with Canada. The resolution aims to support cooperative relations and urges President Trump to remove existing tariffs on Canadian imports and refrain from imposing new ones. Discussions highlighted the importance of honoring the U.S.-Canada-Mexico Agreement (USMCA) and the need for stability in trade relations.

In 2023, Vermont exported $680M in goods and $165M in services to Canada. Conversely, Vermont imported $2.6B in goods from Canada, with Canadian investments supporting over 17K jobs in the state. Additionally, around 24% of Vermont's electric supply is provided by Hydro Quebec. The effort highlighted the need for clarity and stability in trade relations, as well as the importance of maintaining strong personal and economic ties.

Health Care

Over the past two decades, healthcare costs have surged, with hospital prices increasing by over 200% since 2000, according to experts. This significantly outpaced the overall inflation rate of 75% during that timeframe. Some argue that the increase in healthcare costs has resulted in worker pay increases being offset by rising healthcare expenses, leading to stagnant take-home pay for workers. 

In Vermont, there is significant variation in hospital prices, with some hospitals charging as low as 150% of Medicare rates while others charge around 300% (average is near 275%). This disparity raises questions about the underlying factors driving these differences, the sustainability of hospital reimbursement rates, and the possibility of overspending (national average is around 250%). Experts noted that there is no consistent correlation between hospital prices and quality ratings, indicating that higher prices do not necessarily equate to better care. Testimony from UVM Medical Center highlighted that their daily operational cost is $6M, with over 60% of that attributed to labor.

NOTE: That means each and every Vermonter is paying around $10 per day just to keep the lights on at UVMMC.

The bill moves the State towards global budgets and reference-based pricing, although there are lingering questions about whether both could coexist effectively. California has successfully implemented reference-based pricing, resulting in significant savings and improved access to care for patients. If Vermont were to adopt a reference-based pricing model, it is estimated that the state could see a reduction in healthcare spending of approximately $400M.

Oregon also has experience with reference-based pricing for public employees, which has shown that hospitals can remain financially viable while reducing prices, suggesting that similar models could be applied more broadly. Most of the savings seme to come from streamlined administrative processes that reduce the complexity of negotiations between providers and insurers while also creating more transparency and equity in the pricing structure as it ties a hospital's reimbursement rates to Medicare. There are, however, potential pitfalls. For instance, Medicare reimbursement rates are significantly lower in Vermont compared to other states.

Dr. Elliott Fisher, Professor of Medicine and Health Policy at The Dartmouth Institute, advocated for a shift towards global payment models that incentivize collaboration among healthcare providers to improve quality and reduce costs. In his view, the Green Mountain Care Board (GMCB) should be equipped with the necessary tools to respond effectively to healthcare challenges.

Representatives from the GMCB, however, viewed reference-based pricing is a step forward, but emphasized that it must be part of a broader strategy to control costs and improve access. They want the flexibility to establish methodologies for pricing without being overly prescriptive, as this could complicate the process and hinder the intended benefits of reference-based pricing.

A five-member working group has been established to find cost savings and system stability. Representatives from hospitals, insurers, and regulators are all present and Mike Smith has been appointed to represent State interests.

Most hospitals that have testified supported one of the two paths forward represented in the bill; with larger hospitals tending to prefer global hospital budgets to reference-based pricing (likely because they are able to negotiate higher rates currently). They also stressed the importance of keeping care local and accessible, particularly in light of lessons learned during the pandemic. There is a need for hospitals to invest in community health initiatives; suggestions were offered for how hospitals could better support preventative care .

Tax Policy

The House Ways & Means Committee took testimony that underscored the critical role of tax credits in supporting low-income families in Vermont. Stakeholders emphasized the need for legislative changes to enhance the effectiveness of the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC), ensuring that more families can benefit from these essential programs. The discussions highlighted the interconnectedness of economic security, child welfare, and community well-being, advocating for a holistic approach to address the challenges faced by vulnerable populations.

For example, a $1K increase in income via the EITC is associated with an 8-10% reduction in child protection system involvement for low-income single mother households. Further, the expansion of the CTC during the pandemic moved 3K children out of poverty due to these credits.

Education

The House Ways & Means Committee circled back to the school construction issue now that H.454 has been sent to the Senate. The "Rhode Island model" has been highlighted as a successful example, where significant funding was allocated for school construction without negatively impacting the state's bond ratings. Local districts still bond in this model, but they're subsidized based on a multi-stage process to prioritize projects that lead to "newer and fewer" school buildings. One option for implementing this in Vermont is to provide aid based on a percentage of the districts' debt service costs, rather than directly paying the debt service.

The Treasurer's office emphasized the importance of structuring the new aid program to avoid it being classified as "net tax-supported debt," which could adversely affect the State's bond ratings. Maintaining high bond ratings is essential for keeping borrowing costs low for both the State and school districts.

The proposed legislation includes provisions for annual appropriations and clarifies that the State is not legally obligated to pay for future debt service if appropriations do not exist in any given year. It was suggested that the Vermont Bond Bank act as the fiscal agent for the state construction aid reimbursement program, ensuring efficient management of funds.

Concerns were also raised about the potential inequities that could arise if districts forced to merge under H.454 carry different levels of debt. This was also a significant concern during Act 46 mergers and became a show-stopper in some instances.

We also learned new information about what the new foundation formula would mean for school districts across Vermont. Sixty-eight districts would see an increase in funding while 53 districts would see a decrease on a cost-per-student basis (unless they chose to spend above the base amount). There was also a discussion about whether districts could run surpluses or deficits and how these would be managed under H.454. It was clarified that districts have some autonomy in managing their budgets, including the use of reserves.

One other tidbit is that the Senate is considering adding Career and Technical Education representatives to the school district boundary subcommittee. That is a positive step in an otherwise pretty bleak education governance reform package. To that end, we released an action alert this week urging the Senate to and quickly and take reform seriously.

Good Government

The House continues to work on S.23, the deepfakes bill. The Vermont ACLU raised concerns this week that the bill could potentially restrict core political speech, which is highly protected under the First Amendment. The enforcement mechanisms could lead to candidates using the law to suppress opposing political speech (although this seems unlikely because the opposing campaign would need to be using AI generated deepfakes of their opponent in order to mislead the public).

The Senate Government Operations Committee also resumed testimony on H.1 this week, signaling they intend to pass some version of the bill this session. Some members of the Committee are included to delay the implementation of new Ethics Commission powers that go into effect later this year in order to give them more time to work on this issue. We are scheduled to testify next week in hopes they will change course.

On behalf of Vermonters,