Our first legislative update of the year always feels a bit special. This year it is extra special for two important reasons: first, the Governor focused the majority of his 2022 State of the State address on workforce development - a key priority for us that really helps to set the tone for the remainder of the year. Second, the legislature has launched right into discussions on key bills that we are engaged on, including housing, student weighting, pension reform, and yes even workforce development.

Quote of the Week: “Housing is at the top of everyone's list and there are more and more ideas on how to get there.” - Senator Sirotkin
		Message of the Week: “We are excited to see the Governor make workforce development the focus of the 2022 legislative session. We are looking forward to the robust discussions that are about to take place in the legislature around how we modernize our approach to building a 21st century workforce” - CFV President Pat McDonald
Vote for Vermont: This week, Pat covers topics related to the Office of Professional Regulation and who they are and what they do for Vermont. Watch the latest episode

Special Report: Governor Scott's 2022 State of the State Address

One of the most anticipated media appearances of the year, the state of the state address is the Governor's chance to chart a path for the upcoming legislative session and share their priorities for the coming year. This year, Governor Scott focused heavily on workforce development and accompanying issues like housing, education, and childcare. We are excited about the tone he set because we also recognize the importance of these issues and look forward to more specifics in his budget address, which is coming up in a couple weeks.

Governor Scott noted that despite the influx of pandemic refugees, our state has lost 30,000 workers and all 14 counties have see their workforce shrink (no, not even Chittenden County has escaped this trend). The Governor urged the legislature to avoid squandering this chance to make historic investments in our future - he is right. More than half of the federal funds have already been allocated and the window to use this historic level of funding is closing fast.

Scott is calling for nearly a quarter million dollar investment in the FY 2022 budget adjustment to:

1. Allow the Department of Labor to work with businesses across the state to fill internships.
2. Expand certification programs in the trades (electricians, plumbers, machinists, etc.)
3. Expand affordable housing, including the rehab of older properties and the streamlining of regulations to allow for new housing stock.

We agree with all of these priorities and look forward to seeing what bills are introduced and the language that gets negotiated during budget adjustment. We have already seen an uptick in committee discussions on these topics - a promising start.

Finally, Scott warned the legislature that any bill that makes the workforce problem worse will not get his support. It sounds like he is keeping his veto pen within reach.

Workforce Development

Senator Sirotkin (chair of the Senate Economic Development Committee) outlined the 2017 VT Supreme Court cases that decided LLCs could not be required "individuals" under current unemployment insurance (UI) law. The court said if the Legislature wanted to clarify this, it would have to act to address a situation where workmen's compensation (WC) coverage was allowed but UI was not required. This creates a duopoly where employees could be working next to contractors with different coverage requirements. Sirotkin has a bill which would view both workers as an "individual" for the purposes of UI and WC.

Michael Harrington (Commissioner, Department of Labor) identified workforce shortages has his top priority. Despite questions from legislators, he felt that they had a handle on the Covid nuances with testing, quarantine requirements and pay, etc. The only change here is the recent 5-day quarantine rules which reduce the need for "quarantine compensation."

Economic Development

Anson Tebbetts (Secretary, Agency of Agriculture, Food and Markets) presented an overview to the Senate Agriculture Committee on Wednesday. He mentioned that the BRIDGE program run by ACCD set qualifications that prevented many farms qualifying. Lots of money is still available so he and others are working with ACCD to distribute the funds equitably.

There are several issues in Agriculture in 2022:

• The Dairy Task Force offered multiple recommendations, including:
  • Conducting a legal analysis of State pricing options (e.g. over-order premium or milk taxes).
  • Pursue and advocate for increased purchasing and marketing of VT dairy products
  • Explore labor incentives or the Vermont dairy industry.
• EPA issued roadmap for regulation of PFAS in water, soil, and air, included declaring and setting benchmarks for PFAS a hazardous substance under Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) liability (also known as superfund law).
• Ongoing litigation in Addison County against a farm alleging nuisances, trespass, and water quality violations inspired question about the right-to-farm law and its application. These questions are likely to have a ripple effect across the state.
• On November 18, 2021 the EPA announced proposed rules to revise the definition of waters of the United States. The proposal would put back into place the pre-2015 definition of waters of the United States updated to reflect recent US Supreme Court decisions. This will have implications for Vermont farms.
• An unprecedented level federal funds have been appropriated to the State, including significant amounts for water quality. Much of this money will be administered by the Agency of Natural Resources.

The committee will be likely to revisit the workforce development topic at a later time.

On Thursday, the Senate Economic Development Committee heard from the Joan Goldstein (Commissioner, Department of Economic Development). Goldstein spoke about the Economic Recovery Bridge program which funneled $30 million in federal dollars into businesses operating at a loss due to Covid. Over 1,656 businesses have started applications for this program. One of the major barriers to entry that the Department is aware of is that businesses, specifically in
the Tourism and Hospitality sectors, spent their summers focusing on re-opening, rather than grant applications (and thus missed the application window). The application process was also lengthy and took a significant time commitment to complete.

The Department is recommending that the Legislature give them flexibility with the application criteria so they can "respond to businesses with the biggest financial impact."

Kristen Ziter (Administrative Services Manager, Department of Economic Development) reviewed the Worker Relocation Program, which has garnered much media attention for reimbursing workers for costs related to relocating to Vermont. This fiscal year they have approved 53 applications and denied 31. Most denials were because the occupation was excluded from the program (many are close calls according to Ziter).

Legislators on the committee debated whether to expand eligibility requirements or whether the program was actually influencing decision-making about relocating to the sate. Ziter noted that the applications were made almost always after the decision to move was already made, however this doesn't necessarily mean that the availability of the program didn't factor into the decision. She thinks both sides of this question could be simultaneously correct (i.e. it is factoring into the decision-making process but isn't the leading factor). Goldstein noted that many of the costs are incurred prior to the actual move (such as buying a house or a deposit on an apartment) so perhaps they could offer a leading grant that would be a stronger factor in removing barriers to relocating (the current grants are only accessible after the move).

Average grants at this stage are roughly $4,700, which is up from about $3,800 a year ago. Legislators are looking at this as a way to sweeten the deal, not necessarily a driving factor. They are generally happy with this as long as the program is encouraging people to move here. The most common occupation is teachers, but it's also popular among truck drivers and construction workers. Currently plumbers, LPNs, LNAs, and preschool teachers are excluded from the program. If it were up to Ziter, she would remove the occupational restrictions and double the appropriation for the program (currently $480k).

Housing

Chris Cochran (Director, Department of Community Planning and Revitalization) provided a number of updates to the Senate Economic Development Committee on Wednesday about the work he is doing to spread the word about the need for affordable housing. Among other things, he shared that 41 communities have begun modernizing their zoning bylaws. His focus has been on this modernizing work and retooling regulations to allow for more housing growth.

The Committee discussed last year's bill, S.101 and how to move it forward. Cochran preferred the Senate version of the bill that included TIF funding for local communities and local zoning precedence over Act 250.

Chairman Sirotkin identified this bill is a top priority for his Committee because "housing is at the top of everyone's list and there are more and more ideas on how to get there."

Education

There is an unprecedented $90 million surplus in the education fund for fiscal year 2022 (which ends in June). This surplus is generally due to higher than projected returns from non-property tax revenue (Sales & Use tax and Meals & Rooms tax). The tax department is projecting that if all this surplus was used to buy-down the property tax rate for 2023 it would result statewide average savings of 21.5 cents per $100 of assessed value.

The Governor is recommending using this surplus to great a rebate for taxpayers instead of simply rolling the surplus forward in the education fund. There are two reasons for this: first, the amount of surplus is much larger than normal. Second, applying half of the one-time money to the education fund often puts pressure on the following year. Craig Bolio (Commissioner, Department of Taxes) is asking the Legislature to partner with his department to accomplish this. The second half of the surplus would be used for program enhancements identified by the Agency of Education.

One other impact from Covid-19 is that a hot real estate market lead to an increase in grand list values which impacts the common level of appraisal (CLA). The CLA is a mechanism used compensate for differences is when towns have last done an appraisal (for example one town might have done an appraisal this year while a neighboring town last re-appraised might have been 8 years ago, depressing their grand list value). As the CLA ratio drops (due to properties selling above their grand list value) it will drive tax rates up because the grand list is assumed to be out of date. As one might imagine, a number of properties have sold for well above their grand list values over the past two years. This has lead to a historic drop in CLA values.

Despite the lower CLA's most Vermonter's will not see a negative impact on their property tax bills, this is because the CLA adjustments are largely uniform statewide (meaning that there were generally not winners and losers) and the property tax surplus from 2022 will help to offset most towns who might see an increase.

On Thursday and Friday, the House Ways & Means Committee reviewed the Pupil Weighting Task Force findings with Dan French (Secretary, Agency of Education) and professor Tammy Kolbe. Instead of simply adjusting the weights within the current funding formula, the Task Force recommended a totally new approach called the Cost Equity Payment model. This model would use the the weighting factors to calculate direct payments to school districts so they have the money in hand instead of impacting the tax rate calculation directly. Secretary French found this approach intriguing but wants to see further study. It's not clear how the cost equity payments (CEPs) would function from a cost containment front. Particularly the impact on the excess spending threshold could be difficult to understand. He supported most of the other recommendations except the one to split out english language learners as categorical aid instead of a weighting factor. He worried this might complicated for civil rights issues.

Professor Kolbe agreed with much of French's assessment. There are some trade offs with the CEP approach and it may be difficult to get the grant amounts right. She also believes that moving to CEPs and categorical aid will increase education spending statewide instead of redistributing it (the weighting factors themselves might have had the same effect). Two other concerns are that determining the grant amounts may become a political issue for the legislature, and it might also induce competition for resources that will reduce the base amount of funding available for education (i.e. the all the spending on these categorical grants and CEPs may deplete the Education Fund).

Good Government

The Senate Government Operations Committee took a first look at S.171 on Thursday. The bill would adoption of a statewide code of ethics. The Committee spent time going over the definition of conflict of interest and who it would be applied to. The state code of ethics would not preclude more stringent standards, it is simply a floor. The code would not apply to the legislature unless both House and Senate adopt it by rule. Public servants can request advisory opinions which are not public (to avoid some issues we had a few years ago).

There was a discussion about the definition of "person" in the bill, given the citizens united decision. The Committee noted that the question seems to be whether or not we want the code to apply to individual persons or organizations as well, and the pros and cons of that.

Other things this bill includes:

1. Prohibiting previous public servants for advocating for policies that they had direct jurisdiction over while they were serving for a certain period of time (cooling-off period).
2. Mandatory ethics training for public servants and should be re-taken every 3 years.
3. A definition change of what counts as a gift to create uniformity with existing regulations.
4. Prohibiting any person seeking to do business with a state agency from making gifts to officials.
5. The code would apply to all people elected or appointed by the state, the legislature, and state employees.

The code would apply to all people elected or appointed by the state, the legislature, and state employees. However, there was some interest from the Committee in expanding to municipal employees as well.

Things to watch for next week:

Student weighting factors will be tackled by several committees next week, including House Education, Senate Education, and Senate Finance

Senate Economic Development is hosting a "Housing Roundtable" on Wednesday with a number of stakeholders

Both the House Commerce Committee and the Senate Economic Development Committee are looking at the controversial worker relocation program

The House General Committee is taking up two bills (H.28 and H.270) on Wednesday related to wages, hours, and basic income.

Senate Government Operations will be taking up the statewide code of ethics bill (S.171) on Wednesday, CFV will be there to testify!