Budgets, COVID-19 Relief And End Of Session: Senate, House Leaders Offer Legislative Update

May 7, 2020

The legislative session will likely be extended into the summer, and there are still many things still waiting for the Vermont House and Senate to finish. On that list are the state budget, coronavirus relief bills and priorities from the pre-COVID-19 era. This hour, we talk with the Senate and House leaders about their plans moving forward.

Our guests are:

Broadcast live on Thursday, May 7, 2020 at noon; rebroadcast at 7 p.m.

The following has been edited and paraphrased for brevity and clarity.

There's a gaping hole in Vermont's general fund of nearly $195 million– and it could grow. Governor Phil Scott has proposed borrowing money from the state's reserve funds. Lawmakers are still thinking about their plan.

They also have to come up with a plan to plug a $400 million gap in next year's budget.

Plus, there are all the time-sensitive needs surrounding the COVID-19 pandemic that legislators are trying to address as they conduct official state business from home by video conference.

Jane Lindholm: Gov. Scott has proposed to use about $138 million of state reserve funds, which he says he’d be able to pay back in the next fiscal year. That’s mostly because there’s an assumption that a lot of the deficit that is in the budget right now will come back to the state when Vermonters finish filing their income taxes, after this extension period.

 In Gov. Scott’s proposal, some funds would come from Medicaid funding and alcohol revenue, which are also affected by COVID-19. There isn’t as much money being spent on healthcare, so some of that Medicaid funding could be used to plug the gap, and then people are spending more on alcohol.

Senate President Pro Tem Tim Ashe, what are you thinking about that proposal and others you would like to look at?

Senate President Pro Tem Tim Ashe: It’s a daunting challenge. Vermont has been named as one of the states that is best positioned to weather this fiscal storm.

I think much of what the governor has proposed makes sense. We have extended income tax filing deadlines, sales and use tax, purchase and use, rooms and meals taxes have all been given three-month extensions. So in some ways, using our reserves, while normally a very dangerous thing to do, in this case it’s really borrowing from our reserves to be repaid when the money comes in a couple months into the new fiscal year.

With regards to the Medicaid money, the federal government did provide a boost in funding to states in one of the earlier relief acts, so that money is a natural source to help plug the gap. Alcohol sales are up, but it’s a very small piece of the puzzle. It’s maybe $4 million of that grand total.

We’ll also be looking to see if there are programs where we can either postpone some spending until next year so that we can finish the year with a little less pressure.

But I think working with the governor on this will not be difficult.

"I think working with the governor on this will not be difficult." - Senate President Pro Tem Tim Ashe

Speaker of the House Mitzi Johnson: I agree. There isn’t a way to implement changes to make up that magnitude of a shortfall with just one month left in the fiscal year. I think we are all on the same page about the tools we need.

The much bigger problem is how to address FY2021, which begins in July. That conversation will be heavily impacted by what the federal government does. Thanks to our Congressional delegation, Vermont has $1.25 billion of coronavirus relief fund, but that’s a small state minimum.

As a proportion of our budget, or per capita, that’s a much higher amount as compared with other states. But there are such tight parameters around how to use that money that at this point we cannot use that to try to close our budget gap in the state. If that changes, that shifts the conversation quite a bit.

A $400 million gap is scary. That’s not something that will be made up when the majority of Vermonters have paid their income tax.

What are you thinking now about the next fiscal budget? How are you readjusting to think about where you can find that money knowing that there are likely more Vermonters who will need the social support network Vermont has in place?

Tim Ashe: $400 plus million in reduced revenue expectations is just a massive number. And this is just a few months after we were sitting in pretty good condition, with stable revenue growth and upgrades.

If Congress does not make progress allowing states to use some of this relief money to fund existing budget pressures for the upcoming year, it is states all over the country.

Our highest priority is getting Congress to work with the Trump Administration to give us flexibility because otherwise, you could imagine the choices are fairly limited: it’s raise taxes at a time when people’s incomes are way down, or it’s cut programs when people need them the most.

We will know a lot more in the next month and a half about the allowed uses for those hundreds of millions of dollars in federal funding.

If those monies aren’t available, we have to look at other tools to get us through the year.

Some of those may be borrowing for infrastructure improvements to help spur economic activity.

How do you think about that philosophically? If the state is not deficit spending, but we’re essentially asking the federal government to give money to the states, which would increase the national deficit, how do you approach this idea that we are spending money we don’t have?

Tim Ashe: What I think states need is for the federal government to provide money until our economy comes back to where it was just as recently as three months ago. It’s not about taking federal money to use as ongoing budget support year after year, it’s helping us get back to normal.

The federal government has the resources to step in and help states at just these kinds of moments.

For 100 years, it was well known that the way to help states and communities through hard times was to bring in the federal resources and make public investments. So that’s what the federal government is there for.

We’ve been talking a lot as a country about comparisons between now and the Great Depression, especially around unemployment levels and ways we are seeing people struggle, but also in terms of ways that the government may be able to come in and provide some assistance.

The comparison breaks down in some ways breaks down. During the Great Depression, the federal government wanted to get people back to work with big projects like the WPA. If in this pandemic, we can’t be close to one another, that’s going to make things difficult for big projects that might spur economic growth. How does that complicate things?

Mitzi Johnson: Of course that complicates things, but in Vermont, I think communities around the state have really stepped up to pay attention to Stay Home, Stay Safe orders and make sure we could flatten the curve tremendously.

Our major work projects are very different from what they were under FDR. When we think about our greatest needs in the state that those sort of work projects could entail, I think of some of the outdoor recreation things that were used at that time as well, but infrastructure like telecommunications and housing, particularly for more vulnerable populations.

"Vermont has $1.25 billion of coronavirus relief fund... but there are such tight parameters around how to use that money, that at this point, we cannot use that to try to close our budget gap." - Speaker of the House Mitzi Johnson

It’s also a different type of construction now from those WPA-type projects, where people worked shoulder to shoulder. There’s a lot more work with individual people in large equipment.

I think if we can get money committed and line up how we are to do projects, even if they don’t start immediately, it starts the process of building our way out of this to a stronger, healthier place than when we went in. There’s also an opportunity to build our workforce, which we can do now, with tools like remote learning.

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Should Vermonters anticipate that there will have to be cuts in the next fiscal year or do you anticipate that the federal government will come through and fill those holes in our budget?

Ashe: Some of that will depend on when people are able to go back to work. We are expecting that many of the people who are now unemployed will have jobs to go back to when the economy starts to reopen.

I would hope they will, but it would be naïve to expect there won’t be reductions. My hope is that they do not affect people’s day to day needs being met or dramatically alter the nature of the state.

It’s tough times that shine a light on what we value most. We will face difficult choices, and there will need to be reductions, but hopefully it will be kept to a minimum and around the edges.

With gas prices at historic lows, would you consider a temporary increase in the gas tax?

Johnson: The $400 million shortfall is in the general fund. Gas tax funds go into the transportation budget. For transparency’s sake, I would not be in favor of slapping on a $0.20 gas tax to then fund things that have nothing to do with transportation.

We are not trying to make all of the decisions in the next month for the entire fiscal year. Before June 30, we will pass a one quarter year budget—for the first time in my 18 years. It will keep government open and basic services available, but only deal with the first three months. Then in late august we will return to address the remaining three-quarters of the fiscal year.

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There is quite a lot of pressure in opening up the use of CARES funding to support states. I was on a call just a few days ago with Speakers from all around the country, and no matter their political stripes, they were all in favor of having a bit more flexibility in that federal funding.

The extreme projected shortfalls we are talking about are one-third of the federal CARES Act money sitting in our state bank account right now. If that changes, it will change the conversation dramatically.

"The extreme projected shortfalls we are talking about are one-third of the federal CARES Act money sitting in our state bank account right now." - Speaker of the House Mitzi Johnson

Is the Legislature looking at any widespread conservation corps projects? What sorts of public works projects could we take on to revitalize our economy?

Ashe: There will be many kids who choose not to go to college next year because they worry they may be signing up for an on-campus experience only to be sent home. Do we come up with some kind of civilian conservation corps opportunity to train people in what might be an off-year for higher education enrollment? Do we do a large housing construction program to get people back to work and give them a lot of skills? Do we systematize support for our local food economy? I think those initiatives have the potential to support jobs well into the future.

Do you think it was too early for the University of Vermont to say students will return to campus in the Fall? What does that mean for the school system in Vermont overall?

Ashe: I think UVM, the state colleges, the K-12 system, they all have to be thinking about opening up for business as usual in the fall with new health protections.

But, they have to have contingency plans in place in case we have an additional outbreak. For the purpose of letting people organize their lives, it’s good to be moving forward with the expectation of being back open for business, but fall back plans need to be in place and we will benefit from the experience we’re having now.