Rep. Curt Taylor's Session Journal

Week 19: May 8th to May 12

Annnnnnd Done! (sorta)

Last Friday the gavel came down on the 2023 legislative session at around 11:30 PM. The Governor had just finished his speech with a see-you-in-June message, meaning he plans to veto the budget we had just passed. We will be back on June 20th for a short veto session; maybe just a day.

The Governor had previously vetoed one bill: S.5 The Affordable Clean Heating Standard. The Senate voted 20 to 10 on Tuesday to override. The House did the same on Thursday with a vote of 107 to 42. I voted in favor of the override. My reasons for supporting S.5 have not changed.

End-of-Session Shenanigans

There are at least five must-pass bills: The Budget, The Capital Bill, the Yield bill, the Workers' Compensation Bill, and a Miscellaneous tax bill. All of those require decisions on finances. The Budget (H.494) is needed by July 1st when the state fiscal year begins. The Capital Bill describes how about $60 million in bond revenues should be spent. The Yield Bill sets the numbers needed to calculate all Vermont property taxes. The Workers' Comp. bill sets the premium percentage for the next year. And the Miscellaneous tax bill establishes the annual linkup to federal taxes. Because these bills must be passed before we adjourn, they are sometimes used as "vehicles." Pieces of other bills are added to them. Or the must-pass portion of the bill is pulled out and forced into another bill. Things can change a lot, and quickly.

The Budget - The House and Senate kicked H.494 back and forth briefly, then set up a Committee of Conference (CoC) to work out the differences. The CoC concluded negotiations Wednesday evening. That brought the bill to both the House and Senate for up-or-down votes (no amendments allowed). More on this later. 

The Capital Bill - H.493 was approved by both the House and Senate on Thursday and was sent to the Governor.

The Yield Bill - H.492 sets the property dollar equivalent yield to be $15,443, the income dollar equivalent yield to be $17,537; and the nonhomestead property tax rate to be $1.391 per $100.00 of equalized education property value. What does that mean? This report from the Joint Fiscal Office explains the impact of the bill. Across Vermont the average increase in property tax rates (homestead and non-homestead) is 4.06%. Which is not bad when there was an 8% increase in the total of approved Vermont school budgets. Grand list growth was 9.7%.

The tax bill- H.471 passed the Senate on Thursday with a small amendment. The House accepted the change on Friday and sent the bill on to the Governor.

Workers' Compensation - H.217 contains language that sets the rate of contribution for the year's premiums. It passed both House and Senate on Friday.

The Budget Battle

Friday's session conclusion was not fun. The State budget, referred to as The Big Bill, is a 308-page document describing where $8.4 billion will be spent. Few legislators read the whole document, but many pick through sections, and love or hate different parts. This budget's big controversy was the State's ending of the system of housing homeless in hotels. 

There are 150 members of the Vermont House of Representatives: roughly 40 Republicans, 103 Democrats, and half a dozen Progressives. If the Governor vetoes a piece of legislation, it takes a two-thirds vote of both House and Senate to override that veto. When Democrats and Progressives agree, as they did with S.5 the Affordable Heat Standard, the veto can be fairly easily overridden by the strong majority. But if the Democrats and Progressives do not agree, things can get dicey. That's what happened with the budget. 

The Progressives and some Democrats did not like the fact that the administration and the General Assembly  have not put forth a solid plan on how to handle the fact that the program to house the homeless in hotels will end in June. Several thousand people including six-hundred children will have no place to live. At least that is how the Progressives portray it. They swore they would vote against the budget unless something was done. And that's what they did. The final vote on the budget was 90 to 53 in favor. Enough to easily pass the bill, but not enough to override a possible veto.

Vetoing a budget is a big deal. It's happened before. In 2017 Governor Scott vetoed the budget (H.518) along with fifteen other pieces of legislation including that year's Yield Bill (H.509). With little more than a week left in the fiscal year the Legislature had to scramble. Most of the existing budget was copied into a new bill (H.542) with enough changes to make another veto unlikely. The portion of the Yield Bill needed to set property taxes was also put in the Budget bill. H.542 left the General Assembly for the Governor's desk in time for his approval on June 28th. A financial crisis was averted.

This time it's a little trickier. If the House Progressives back off and vote for the override on June 20th, we will be done. But if the veto is not overridden, things get complicated. We will have a week to hammer out a new budget. It could be the same as the one that was vetoed. In which case we would be daring the Governor to veto it again and start the new fiscal year without a budget. Or adjustments can be made to satisfy either the Governor or the Progressives. Yes, it will be interesting, but it will be something only a few will enjoy, and I'm not one of them.

The Child Care Battle

The Budget Battle was/is between the Democrats, the Progressives and the Governor. The Child Care battle was between the House and the Senate.  At the beginning of the session there were two bills to deal with Vermont's shortage of child care facilities: a House bill (H.208) and a Senate bill (S.56). They were "companion bills," meaning they were two approaches to the same problem. After some preliminary discussion there was agreement between the leadership of the two bodies that the Senate version (S.56) would go forward while the House version would wait.

There are two sides to such a piece of legislation: the policy and the funding. The House and Senate eventually agreed on the Policy which included expansion of eligibility to State supported day care, an increase in the reimbursement rates that the State would pay day care facilities, and a continuation of free pre-kindergarten for all Vermonters. The funding was the problem.

Both the House and Senate agreed to the continued funding of Universal Pre-Kindergartens through the Education Fund. The House had worked out changes to Vermont's income tax in order to fund Early Care and Education (ECE - no longer called Day Care). They proposed an increase in the income tax along with a increase in credits that lower and middle income Vermonters can receive through the Earned Income Tax Credit. The Senate wanted to find the needed funds by increasing the payroll tax and leaving the income tax alone. The taxpayers who pay an income tax are different from those that pay a payroll tax, though there is much overlap. The payroll tax would hit all W-2 employees and employers. But many people earn income and pay income taxes on funds received from investments, retirement, and passive income. The Senate also wanted to end Vermont's continuation of the Child Tax Credit (CTC). The funds saved by not providing the CTC would be used for ECE. But the CTC has been a very successful program that the House was reluctant to end.

During the last week of the session, House and Senate leaders negotiated. The House agreed to the payroll tax and and the Senate agreed to drop getting rid of the CTC. The funding portion of S.56 was moved to H.217. The policy portion of S.56 passed both House and Senate on Friday. 

How much and when is the payroll tax increase?

H.217 contains a payroll tax increase of .44% of the employee's pay. That's 44 cents for every $100 of pay. The bill specifies that the employer pay 75% of that .44%. The employee pays 25%. So of that 44 cents, the employer is paying 33 cents and the employee is paying 11 cents, with both of those being per $100 of the employees pay. If you earn $60,000 a year, that's $5,000 a month, or $1,250 each week (assuming 4-weeks in each month). $1,250 divided by $100 is 12.5, so the total payroll tax increase is 12.5 X $0.44 = $5.50 a week, roughly. The employer will pay 75% of that $5.50 or $4.125 and the employee will pay 25% of $5.50 or $1.375 a week. The addition to the payroll tax will begin in July of 2024. The Joint Fiscal Office produced this fiscal note on the bill.

The yearly costs for high quality Early Care and Education is estimated to be $125 million a year to begin, with inflationary increases after that.

Why I voted for a Legislative pay raise.

S.39 relating to compensation and benefits for members of the Vermont General Assembly came to the House for a vote last week. The "optics" were not good. They never are when it comes to elected officials determining their own compensation. This was a particularly difficult vote.

Did I?

Were we voting for our own pay increase? Yes and No. The bill delays implementation of the $1000 a week salary until 2025, after another election. so technically, we voted for a raise for future legislators, not ourselves. But . . . just the same, legislators are setting legislator salaries so, in a way, we're raising our own salaries.

What is the status quo?

What are we paid now? For each week of the 2023 session we received $811.68 in salary. This session will go nineteen weeks. So that's an annual salary of $811.68 X nineteen or $15,421.92 which is $1,000 more than the federal poverty level for a single person. The average Vermont wage is $89,820 or $1,727 a week. The median wage, with the same number of people earning more as there are earning less, is $67,674, or $1,301 a week.

By State law we also receive taxable allowances for meals ($69 per day), lodging ($134 per night), and milage ($0.655 per mile). Those amounts are determined by the federal government. Depending on how expensively you dine, where you spend nights, and how far you drive, your expenses can vary considerably. Legislators do not get paid for days when they are not in session, although special arrangements apply to those members on task forces and committees that meet occasionally in the summer.

The meal allowance is $69 each day of our four-day week regardless of how much you actually spend. If you stay in a hotel, you get the $134 regardless of the actual room cost. If you rent an apartment, or share a house, you get the $134 for each day the legislature is in session. Living frugally can bring in a little extra.

A dental insurance plan is available to Legislators who want to pay for it, but otherwise we receive no medical benefits.

What does the bill do?

Historically, the legislature has tried to match the average or mean Vermont wage. In 2005, legislation set the weekly wage at that average. An annual  cost of living adjustment (COLA) was also set in motion. In 2019 a small change was made to boost the COLA a little. But the cost of living increases have not kept up with actual increases. S.39 takes three years to bring General Assembly salaries closer to that average salary of all Vermonters. In 2025 the weekly salary will move to $1,000 per week plus the COLA. In 2026 the weekly salary goes to $1,100 plus any COLA. That should bring us pretty close to the median average Vermont wage of $1,301, still a ways from the average ($1,727). After 2026 there should be no need for increasing the base. The COLA adjustment will go on.

Currently the bill does not offer medical insurance. That was found to be difficult. As a result there will be a study to figure out how it might be  offered.

Why the increase?

The basic reason for the increase is to make it  possible for more people to serve in the legislature. As it is, the people most capable of running are retired and on Medicare, are in a very flexible occupation, or have spouses with income and medical insurance. The average age of House members is 55; 64 for the Senate. 

What will it cost?

The Joint Fiscal Office produced a Fiscal Note on the financial impact of S.39. When S.39 came over to the House from the Senate is contained a provision for health insurance at a cost to the State of $1.6 million. That has been removed from the bill. The Senate version also had a provision for off-season salary for one day a week of constituent work. The House made that one day of pay something that must be requested each week, rather than assumed. The total cost of the increase is estimated to be about $2 million in 2025, then about $4 million when fully implemented in 2027.

Conclusion

This session we passed bills to raise the payroll tax, increase some fees, and give future legislators a pay hike. That does not look good to those paying the taxes that support the government. In fact, there is never a good time to raise legislative salaries. But I have seen good people leave their positions as House members because they just could not afford to live on that low a salary. More lucrative jobs are easily available. I have also tried to recruit potential candidates only to be told: "I can't live on that salary," or "How can I support a family with those wages?" I would welcome more candidates, and the resulting greater competition. I voted in favor of the raise in hopes of bringing more people into the political arena.

The Governor's Veto of S.5 - Affordable Heating Standard

Because S.5 originated in the Senate, the Senate was the first to attempt an override. That vote was held Tuesday. The Senate voted 20 to 10. Just enough to meet the two-thirds threshold and override the veto. The House then took it up on Thursday and voted to override by a margin of 107 to 42. The Clean Heat Standard will become law. For the moment that doesn't mean much to most Vermonters. After July 1st $825,000 will be made available to the Public Utilities Commission (PUC) to hire and attorney and two analysts and to hire consultants. In addition, $900,000 will be made available to the Department of Public Service to hire one attorney, one analyst, and consultants.

The PUC will begin developing rules, designing the credit system and conducting community outreach. S.5 establishes the 15-member Clean Heat Standard Technical Advisory Group (TAG) to assist the PUC. The PUC will also establish the 10-member Clean Heat Standard Equity Advisory Group to assist in assuring that clean heat measures are advanced equitably to all Vermonters. There will be at least six public hearings or workshops open to the public. In February of 2024 the PUC will propose to the General Assembly how the financing of the Clean Heat Standard will work. Then, also in February, the PUC shall submit a progress report. By September of 2024 the DPS will produce what is called a Potential Study investigating energy needs, technologies, costs, workforce, and demand. By January of 2025 the PUC must submit the rules to implement the Clean Heat Standard to the General Assembly for approval. 

What's next for Clean Heat?

The Fy2024 budget includes a total of $1.725 million to hire five full time individuals (three for the PUC and two for the DPS). Those funds will also be used for consultants in designing, researching, public outreach, and reporting on the development of the clean heat standard system. The Joint Fiscal Office released a Fiscal Note referencing this report stating that by 2050 Vermont should see $6.4 billion in benefits. That may be a little deceptive as it assumes more than just the Clean Heat Standard for mitigation. The Fiscal Note ends with this statement: "The General Assembly will have an important oversight role in monitoring implementation and reviewing and responding to the frequent reports and recommendations from the Commission."

By January 31st of 2024 everyone that sells heating fuel into or in Vermont must register with the PUC. That's really the only action that the general public has to take until after January of 2025 when the PUC submits rules to the General Assembly. At that point we may know what exactly is required by whom and when. The final rules cannot be implemented without the passage of a specific bill stating that they are in effect. That bill, like any other bill, must go through the legislative process and be approved by the Governor.

But what happened to . . . . ?

As the session develops different issues raise and fall in importance. One day everyone is talking about the Bottle Bill, next it's Paid Family and Medical Leave. When the session ends, there is always the question, "But whatever happened to  ." and some bill is named. Well, eighty-six bills passed both the House and Senate and were sent to the Governor. Here's a summary of some. If there's another bill with a fate you want to know, send me an email and ask. Some of these bills may yet be vetoed by the Governor, passed next session, or quietly forgotten.

Why are we raising fees?

This session saw increases in Transportation and Secretary of State related fees. The Governor has consistently insisted that he can provide the same level of services and programs without raising taxes and fees. The approach used by previous governors has been to submit a fee bill to the legislature each year. That bill looked at a third of the fees and gave recommendations as to which might be raised or lowered. This governor has not submitted fee bills, so fees have not been raised.

With the Department of Transportation and the Secretary of State's Office of Professional Regulation (OPR), the fees are deposited in a special fund to be used by each. Because fees have not been raised, those funds are in the red. The Governor's solution is to transfer money from the General Fund to these other funds. 

This year some of the Department of Motor Vehicle (DMV) fees and some OPR fees were raised as much as 20%. Why so much? Because it has been so long. Inflation accounts for most of that increase.

The table is a sampling of the fee changes.  Without raising the fees, the extra amount of the actual costs is paid for by the General Fund, which is income taxes.

What's Next?

On June 20th we will regroup under the Golden Dome for a veto session. Exactly what that means is still up in the air.

Beyond that? Summer !