VEGI Changes (H.10) - April 4, 2023

Chairmen Marcotte shared on Tuesday in the House Ways & Means Committee that the impetus for the H.10 was that “others” saw what has been described as “mission creep” with some Vermont Employment Growth Incentive (VEGI) awards that did not fit within the statutory requirements. There was concern that they were moving away from the mission to increase employment. Testimony from Tom Kavet (the state economist) and the Joint Fiscal Office (JFO) indicated they were using VEGI as an “employment retention program” and that would be a policy shift that the Legislature did not authorize.

There was concern about oversight and some of the executive sessions that the board administering the VEGI program had taken. There is even broader concern about whether or not this is the best program to expand employment, particularly now that the workforce is a significant limiting factor. Marcotte mentioned that the Agency of Commerce is commissioning a study, and that might be “a better way to go” than the bill – letting the Administration take the lead. His sense is that they have gotten the message and improvements are in progress.

The bill, as it stands now, would require the state economist to sign off on the “but for” test, which basically means that the jobs would not have been created but for the VEGI investment. All grants must meet this test in order to be awarded. Additionally, the bill would require that an outside authority sit in on all executive sessions to provide oversight and accountability. There was also interest in more reporting to indicate whether or not the state is incentivizing higher- or lower-wage jobs.

Doug Hoffer (State Auditor) spoke next, saying that he originally supported H.10 and is somewhat disappointed with current draft but strongly supports VEGI oversight reform, noting that an “unbiased review is long overdue.” He also voiced concern about the board that oversees VEGI, the Vermont Economic Progress Council (VEPC) and its makeup.

Hoffer gave an anecdote about a massive award that was inappropriately given for job retention (as opposed to expansion) years ago. The case study found that they abused their power, and in no way, he commented, will they be held accountable for the $5M they “tossed away.”

Craig Bolio (Commissioner, Department of Taxes) shared that his office comes in after the applications are done and an award has been described so they can verify on the backside that the tax information was accurately described during the up-front process and that targets are met.

He noted that about half of awarded companies receive less than the full VEGI award because they fail to meet the targets. This was somewhat surprising to the Committee and they asked him to come back with more details about how many actually delivered on all their metrics. Bolio also asked for a few small language changes to clarify reporting requirements in the bill.

Abbie Sherman (Executive Director, Vermont Economic Progress Council) joined by Zoom. She echoed some of Bolio’s comments about confidentiality and reporting requirements. Sherman shared that she feels there was a disconnect between what they wanted in the bill and what is now in the bill. The original intent, she claimed, was to “have more information” surrounding the VEGI recipients’ claims of added jobs. She did not see that coming out of the current draft.

She also asserted that they may be changing the rules for the applicants that have already been approved, calling it “changing the rules midstream.” Representative Anthony took issue with this, suggesting it is not retroactive. He requested clarity. Sherman responded that it was not clear and that was her point.

Sherman also noted that VEGI applications are challenging and dwindled to only four last year (may be related to the availability of federal funds). The state economist also has staff demands, and the bill may add delays to the application process. VEGI spends $2-3M per year on incentives, so she was not sure the amount of oversight in the bill was warranted for this amount of funding. However, she did support doing full program audits.


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