A balanced budget in tough times

 Developing a balanced budget is always intense as there is a massive amount of work to do.  Information is gathered from dozens and dozens commissioners, secretaries and directors, agency fiscal and program staff, advocates, citizens, legislative legal and fiscal staff, legislative committees and more.  Each member of the Appropriations Committee is responsible for digging deep into assigned areas of responsibility which involves not only listening to those who come to our committee, but going out to our agencies to meet with yet more staff, see the programs and clients they serve, and to get a feel for the ambience for which they are requesting funding. In many ways members become advocates for their budget areas as they are tasked with recommending and defending before our fellow committee members acceptance or changes from the administrations proposal.

 This year the committee labored for the third year to divide yet another smaller pot of money amongst ever growing needs while working to overcome a $176 Million shortfall.  The Governor presented a budget that achieved that target.  The final legislative budget, however, exceeded that target by an additional $1.3 million in reduced spending, while assuring that the stabilization fund is whole, and at the same time “parking” between $15 and $17 Million in reserve funds in anticipation of next year’s likely budget shortfalls and possible federal funding reductions.  This is real “rainy day money” and it will be used for the FY 13 budget. 

 Throughout deliberations, the Appropriations Committee kept two lists.  One was a wish list of cuts to restore.  The other was a list of dollars identified as additional savings, found revenues, and some just because of the magic worked by our extraordinary JFO staff.  In the end the Legislature was able to restore several million dollars of the cuts proposed by the Administration.  The Senate adjusted some of those restorations, and ultimately an agreement was reached with the Administration to accept all the changes.  All of this was accomplished within the bottom line balanced budget.

 We achieved about half the budget reductions by changes in spending and program adjustment, many of which focused on achieving better outcomes for less money.  The other half was met carry forward funds and increased revenues.

 The final unduplicated appropriation for all funds is $4.69 billion, which represents a 3.6% reduction from last year.  The General Fund (GF) appropriation is $1.24 billion, a 7.3% increase over last year.  Some of that seemingly large percentage growth this year is due to the need to use General fund money to replace ARRA money, such as $38.6 million for the Education Fund.  However comparing GF plus ARRA spending from 2011 to this budget, spending has decreased by 5.7%.

Raising funds to support state government

Each year, the Committee on Ways and Means is charged with raising a certain amount of revenue in order to help balance the budget. In recent years, the task has been to do so without raising broad-based taxes, and this year is no exception. The vehicle for raising that money is the miscellaneous tax bill which raises $24.3 million this year.

 The committee has a variety of tools available to it. These include fees charged for government services, permits, and certain privileges such as discharging certain pollutants once they have been treated. In addition, there are fees for licensing banks, insurance companies and corporations. There are also narrowly targeted taxes on specific products and on classes of providers that most Vermonters are only vaguely aware of.

 This year, much of the focus has been on a group of taxes called provider taxes. These are taxes on medical providers, enabled under US Code, that allow Vermont to draw down federal Medicaid dollars that are used to enhance reimbursements to Medicaid providers. Ways and Means took considerable testimony from a host of potentially affected parties with the intention of drawing down as much federal money as possible while minimizing the impact on the medical community and the public.

Investing in our technology infrastructure

Whether it allows students to use state-of-the-art learning tools, seniors to make purchases from the comfort of their own home, or companies to communicate halfway across the world, the legislature  recognizes  broadband coverage as a vital need for all Vermont residents, businesses, and schools.  In 2010, Vermont received $174 million in federal grants and loans to fund major broadband initiatives.

 The 2011 Telecom Bill streamlines the permitting process for developing communication technology infrastructure like cell towers and fiber optic lines, which ensures that this stimulus money is utilized effectively over the next two years. The bill also allows for wireless Internet and cellular providers to apply for permits for multiple towers at once rather than permitting them individually.  This helps get more Vermonters connected faster. The Telecom Bill also includes a reorganization of the Vermont Telecommunications Authority Board, allowing the oversight body to better coordinate state efforts to bring broadband to the last mile and bring cell phone service to targeted highway corridors. The state has committed $10 million in capital construction funds to further the goal of providing accessible, affordable cell phone and broadband Internet service to all Vermonters by the end of 2013.    

Keeping our roads safe from drunk drivers

The challenge presented to the legislature to prevent harm to Vermonters and their families and friends by chronic DUI offenders was taken on in H.264. It is helpful to understand that we are challenged by a small population, but a hardcore population. While fifty percent of first offenders don’t offend again, larger percentages of second time offenders, and even larger percentages of third and subsequent offenders re-offend and they are the focus of this legislation.

 An escalating scale of penalties has been set in place for these offenders. A third DUI conviction carries with it a term of imprisonment up to five years of which least 96 consecutive hours of imprisonment must be served. For the conviction of a third or subsequent DUI offense with death or serious bodily injury resulting, a term of at least five years will be imposed and probation, parole, furlough, or any other type of early release will not be allowed.

 Additionally, this legislation holds accountable anyone who allows someone who is under the influence of drugs or alcohol to drive his/her car. Anyone who violates this will be subject to a fine of not more than $1,000 or imprisoned for not more than six months or both. Should death or bodily injury be a result, a fine of not more than $5,000 or imprisonment of not more than two years would be imposed.

 Having said all this, it is important to understand that efforts to avoid arriving at the point of second, third, and more convictions are made at each juncture. The CRASH program and alcohol and substance abuse treatment programs are provided. New preventative programs are always under consideration, such as the ignition interlock. But, in some very few cases, these initiatives are ineffective and incarceration is called for.   

The Capital Bill

The Capital Bill allocates the funds that the state raises through issuing bonds to productive investments that benefit Vermonters. This year we have actually allocated two year’s worth of funds now, with a total allocation of $154 million. This will get large projects funded and underway; create jobs in construction quickly; and take advantage of low interest rates. We have been conservative in our borrowing and we have a very good bond rating.

 The investments in the Capital Bill will support Vermont’s economic development and provide services to people of Vermont. It has been estimated that approximately 1,000 construction jobs will be created. In addition, the injection of millions of dollars in spending for materials and supplies will help to support the economic recovery in our state, increasing personal income and gross state product.

 Across the next two fiscal years the Capital Bill will dedicate some $70 million to the improvements and repairs of existing state buildings and facilities all over Vermont. We will also invest about $28 million in the construction of a new state health laboratory, supporting all of the programs of the Department of Health that help to keep us safe and well.  The Vermont Telecommunications Authority will receive $10 million to support the ongoing initiatives to extend high-speed Internet and cell phone service to more Vermonters. The Vermont Housing and Conservation Board has been allocated $4 million to invest in affordable housing.

 The Capital Bill also supports investments in infrastructure by Vermont municipalities. Over $10 million in state funds is dedicated to assisting towns to improve drinking water and pollution control systems. The allocation to the special grants programs that can support community investments in educational, cultural, recreational, and historic facilities was increased to total $2.7 million across the two years. The outstanding state share of past school construction projects is cut in half with a total allocation of $14.8 million, and every town’s project received a portion of the amount owed. 

Vermont’s Transportation Program

Vermont’s $554 million infrastructure budget makes a strong investment in a safe, efficient and fully integrated transportation system.  Transportation investments work to expand economic opportunities and improve quality of life. They create many local jobs and improve our roads and bridges for residents and visitors. Town programs, Class 2 paving ($7.2 million) and Town Structures ($5.8 million) continue to be strongly funded in this budget, regardless of the evaporating stimulus funds. These record-high funding levels were established as policy and will become the permanent base level amounts going forward.  An exciting new municipal sidewalk program struggled to be created, and in the end needed more time for review of funding sources, but it will be a good starting point for next year’s discussions. 

 Vital investments are made to alternate modes of transit.  As Vermont realizes the impacts of gas prices our public transit systems take on new demands.  We must prepare ourselves, while maintaining commitments to improvements of our roads and bridges.  Investments in public transit ($25.4 million), pedestrian/bike facilities ($9.0 million), Park & Ride ($3.0 million), rail infrastructure ($50 million, mostly federal grant) and our commitment to Amtrak all make Vermont’s transit systems stronger.    

 Vermont’s road conditions rank close to the bottom in the nation and Mother Nature is not helping this year. A harsh winter and current spring flood levels pose a real challenge to everyone and has proven to be very costly. Regardless, our state roads and bridges managed last year, to make significant progress with the assistance of the federal stimulus funds. Results moved our national rating from 46% to 42% on the national picture and provided for over 1200 jobs in the process.  State paving will make excellent use of the 2012 passed allocated $77 million for our roads. State and town bridge programs will see a 2012 investment of $105 million.  Our infrastructure condition requires us to make the correct investments. 

Honoring Our Veterans

Whether they are returning from a recent deployment or served bravely in a past conflict, we are always seeking opportunities to thank and honor veterans for their courage and sacrifice. The legislature has prioritized employment and other crucial supports for veterans and returning soldiers this session.

 We continue to hear regularly from Adjutant General Michael Dubie on the status of our returning Guard soldiers to ensure we are doing our utmost to support their successful reintegration. While it is already in law that a member of the Guard cannot lose his or her job due to deployment activities, many soldiers are returning from recent deployments without a job waiting. The legislature advanced a bill to the governor that will allow employers to get a $2,000 tax credit if they hire a Guard member for eighteen months or longer who has returned from a recent deployment. We also passed a provision that extends to deployed soldiers a motor vehicle tax benefit so they can take advantage of it upon their return, and extended special license plate status eligibility to members of the US Armed Forces.

 The legislature also remains deeply concerned about the care afforded to disabled veterans and interested in any initiatives we can undertake to enhance it. While we have proudly partnered with towns and municipalities to provide a match for property tax exemptions for disabled veterans, we improved the provision such that income-sensitized disabled veterans will now see a benefit from the exemption. We also passed a bill that requires various stakeholders and service providers in the state to convene a task force to recommend ways to improve long-term veterans' care and report back to the legislature early next year.

 Finally, we encourage veterans and their families to take advantage of the resources provided by the Vermont National Guard Family Support and the Vermont Office of Veterans Affairs. For more information, call the 24/7 toll free National Guard hotline at (888) 607-8773 or visit www.veterans.vermont.gov. Again, thank you to our veterans, their families, and their employers for your service and sacrifice.

Children of Military Families

H.38,  Educational Continuity for Military Families, recognizes that the children of mobile military families often have a disrupted educational experience and sets up a process that enables Vermont to participate in an interstate compact without creating a conflict with existing state laws. Vermont typically does everything that the compact requires and currently meets the needs of military children coming into the state. Membership in the compact will permit Vermont to play a role in enforcing those same procedures when a Vermont student moves to another member state.

 It provides for waivers, exit exams, and the transfer of credits to and from Vermont schools and a student’s prior school in order to enable on-time graduation from either school.

 Vermont will join the interstate compact on military children with a member or members to be appointed by the state board of education. Vermont reserves the option to withdraw from the compact and limits our financial liability to $100 per year for participation in the compact. 

Disabled Veteran's Education Tax Credit

Pre-dating Act 60 and the enactment of income sensitivity the State of Vermont granted disabled Veterans a $10,000 reduction on the grand list of their home for the purpose of property taxes. This credit was continued when income sensitivity became law in 1997, regardless of the fact that it no longer helped disabled veterans with household income of less than$90,000. This was made further complicated when the state permitted towns to expand the credit to $40,000. This created a situation where towns who granted this additional tax credit were required to make the state education fund whole and many of the disabled veterans in their communities did not get any additional help with their taxes because they were better off utilizing the provisions of income sensitivity.

Reducing the Opportunity for Identity Theft and Fraud

Did you know that Vermont is one of the last states that allows any person anywhere in the world to request and receive a certified birth or death certificate with no questions asked or tracking? With such a certificate you could apply for a passport, driver license or other identification documents. 

 With the passage of H. 454 we have limited opportunities for identity fraud by improving security of the documents in the following ways:  limiting access to these certificates based on relationship of requestor; using security paper with anti-fraud devices; tracking and proof of identification.  It also allows for better efficiencies and compliance with national expectations of technology and security that will improve acceptance of Vermont's birth and death records in other states.

Improving our schools

The miscellaneous education bill improves educational opportunities for young people throughout the state. We strengthened secondary education programs that allow students to enroll in college courses and receive high school. Known as dual enrollment, this legislation requires that schools implement a system to increase the continuum between high school and college, making it more likely that students enroll in a post-secondary school program.

 We have all heard the sad and sometimes tragic stories around cyber-bullying. Email, social networking, and cell phones give students the opportunity to bully fellow students around the clock. Often, these incidents disrupt student learning and classroom management.  S.100 expands the definition of harassment and bullying by including an act conducted by electronic means. It permits school districts to take disciplinary action on bullying that does not take place during the school day on school property if it is shown to pose a clear and substantial interference with another student’s access to education programs.   

 S.100 also recognizes that knowing how to use and manipulate technology is essential to one’s educational and life success. The senate and house recognize the discrepancies in student access throughout the state. S.100 requires the department of education to provide a comprehensive report to the senate and house committees on education regarding the current use of technology and internet service in public schools designed to increase educational opportunities for students.

 Energy conservation is a priority for us all. When schools make energy conservation a priority, financial savings follow. This legislation allows schools to incur debt to finance the cost of school-building energy improvements not to exceed $350,000 per building in any three-year period and payable over a maximum term coextensive with the useful life of the financed improvements, but not to exceed ten years.

 For a project to be eligible it must meet two requirements. First, the voters must approve the school board’s request to incur debt. Second, the project must be approved by a professional who certifies the energy plan and demonstrates that it will result in a cost savings for the district.

Our green energy future

Many Vermont towns have eagerly awaited H. 155, or "PACE." This is a law that enables voters of a municipality to establish a special “Property Assessed Clean Energy” district, in which residents can make energy-saving improvements to their properties with funds borrowed through the town. Participating property owners then repay those loans over a period of up to twenty years through a regular payment as with their property tax bill, which allows them to spread out their payments and reap net annual savings at the same time. When the property is sold, the payments, like the annual energy savings, stay with the property until paid off. H. 155 provides strong safeguards to this program, including a system of loan loss reserve funds, underwriting criteria, project guidelines, and vital technical assistance for participating towns through Efficiency Vermont. This program is the first meaningful way for homeowners to afford important energy improvements, both electrical and thermal, in a time of sky-rocketing fuel prices. Twelve Vermont towns have already voted to become PACE districts, and we expect many more to sign up, especially with Efficiency Vermont now acting as an important facilitator.

Energy alternatives for our state

We passed a robust energy bill this year, full of benefits for all sectors of the energy economy and for Vermont families.

Net metering: This is the program we started thirteen years ago to allow electric customers to generate their own renewable power and receive credit from their utility for any extra they produce. Net metering helps Vermonters trim their electric bills, it provides clean, locally produced power, and it has contributed to the creation of a number of new companies and hundreds of jobs. In H. 56, we double the allowable capacity of net metering statewide and the allowable size per system. We also require utilities to offer an extra per-kWh credit for solar net meterers, recognizing that they typically produce their excess power at times of peak summer demand, which helps utilities avoid purchases of costly market power. H. 56 doubles the allowable capacity of net metering statewide and the allowable size per system. We changed the way a customer’s excess power is credited, so that it is measured in dollars rather than kWh. We also require utilities to offer extra credits to solar net metering customers, recognizing that they typically generate excess power at times of peak summer demand, which helps utilities avoid purchases of costly market power.

Clean Energy Development Fund: H. 56 finds a way to provide enough money to keep the Small-Scale Renewable Energy Incentive Program solvent. It does so by offering 50% cash grants in lieu of already-obligated business solar tax credits. We expect enough money to be unencumbered by this option to continue to fund the rebate program, which since 2003 has spurred more than 1,000 renewable energy systems statewide and has leveraged $4 in private capital for every $1 invested.

Hydro and biomass plants: Several existing power plants operate under expensive PURPA contracts that will expire shortly. H. 56 has the Public Service Board set long-term contract prices for these plants; these will be lower than currently (saving ratepayers money) but high enough to ensure financial viability. This will keep several existing hydro facilities running and save hundreds of jobs at Ryegate in the Northeast Kingdom.

Propane: H. 56 provides protection from unethical practices in the propane industry, such as assessment of fees for minimal usage or for propane not actually delivered.

Wood heat: The bill asks Efficiency Vermont to make woody biomass heating a priority in its thermal incentive programs, which will help homeowners move away from expensive fossil fuels.

Streetlights: We require utilities to provide an option under which towns may own their own streetlights or have the utility install more efficient lighting.

CURRENT USE 2011

For the last four years we’ve worked to improve and strengthen the Current Use program, making it fairer, more efficient and financially more sustainable.  Current Use is often referred to as “the most important, most successful conservation program in Vermont.”  Current Use is the tax policy that taxes land on its “use value” – on how the land is used – not on its market value.  This has helped preserve Vermont’s working landscape – its agricultural and forestry industries – and kept it viable for the past 30 years. 

 To fund the electronic administration of Current Use, we chose to eliminate the preferential property transfer tax treatment for Current Use lands, and we raised the tax from .5% to 1.25% which is applied to every other sale in Vermont.   This will enable electronic communication between the four areas of government which oversee Current Use:  agriculture, forests, parks & recreation, the tax dept. and our towns.

 We will now require the removal of land from Current Use two years after a landowner has secured a waste water permit or all of his or her municipal permits.

 Late in the 2011 session, the House passed a Current Use bill, H.237, which puts the “teeth” back into the withdrawal penalty, provides an “easy out” and establishes a study of municipal reimbursement rates to towns.  We expect the Senate to take it up early next year. 

 This year we chose to tier the penalty, formally known as the Land Use Change Tax, eliminating the ineffective penalty based on pro-rated value, and replacing it with the original penalty calculated at the fair market value.  We adopted the following penalty schedule:

 0-12 years @ 10%   

12-20 years @ 8%              

20 plus years @ 5%

 In addition, we added a provision for immediate family members to be able to step into the shoes of the previous owner, allowing the land to be continuously enrolled.  A new owner could keep the land in Current Use but would have to re-enroll it, and start the clock afresh.

Farm to Plate

The much-anticipated Farm to Plate Strategic Plan (F2P) was released shortly after the 2012 session started. This plan will span over the next 10 years with the objective to strengthen Vermont’s food system with these primary goals: to increase economic development in Vermont’s food and farm sector; to create jobs in the food and farm economy; and to improve access to local healthy foods.

 A portion of the House Agriculture Committee’s efforts in the previous biennium were spent contributing to this initiative, working with the Sustainable Jobs Fund (SJF), creating legislation to create the Farm to Plate Investment Program to finance the work of the SJF and also the Agriculture Development Advisory Board, which will maintain continuity and focus for accomplishing the objectives of F2P over the span of the project.

 After 18 months and over 1,000 interviews, the study came up with these findings, among others:

·         11,000 or 13% of private sector businesses employ at lest 55,500 or 18% working Vermonters in the food system.

·         In 2007, total economic output for the Vermont’s food system was $2.7 billion.

·         Vermont leads the nation in direct agricultural sales with $36.77 spent per capita.

·         Locally produced food accounts for at least 5% of total food purchases (or $50 million annually) in Vermont

 One of the primary goals of F2P is to double the consumption of locally produced food by Vermonters from 5% to 10%. If accomplished, this would generate an additional $135 to $177 million in economic output annually and will increase total local food system jobs by 1,500 over the 10-year period.

 This comprehensive plan includes studies, findings and recommendations for these elements of the food system: consumer demand, farm inputs, food production and processing, wholesale distribution, retail distribution and nutrient management. 

 In the governor’s inaugural address, he emphasized the importance of Vermont’s Agriculture to our state’s economy and future. As such, the House Agriculture Committee worked closely with the House Commerce Committee to add key elements to the jobs bill that will help advance some of the F2P initiatives. The items in the jobs bill will help make the following happen:

·         Develop curriculum for skilled meat cutter training

·         Increase slaughter house capacity

·         Create a new composition of the Sustainable Jobs Fund to ensure that that the entity is not government-controlled

·         Provide funds toward student loan repayments for up to two large animal veterinarians

·         Provide competitive grants for farmers whose markets require GAP certification

·         Creation of a Local Foods Coordinator position, who will facilitate matchmaking food producers with commercial and institutional markets, develop a database of producers and purchasers, improve the agriculture agency website, and administer a local foods grant program.

 For more information about Farm to plate, go to http://www.vsjf.org/project-details/5/farm-to-plate-initiative.

Investing in Pre-K education

S. 53 removes the limits on the number of prekindergarten (pre-K) children who may be enrolled and funded in quality pre-K education programs through public schools. Both the Joint Fiscal Office and the House Ways and Means Committee forecast that this legislation will have no impact on towns’ tax rates during fiscal year 2012 and a minimal impact in coming years.

 According to the Vermont Business Roundtable (VBR), investing in pre-K is a fundamental part of sound economic policy and should be our state’s number one long-term economic development strategy to achieve economic growth and fiscal sustainability.

 In most of the developed world, a child’s formal education begins at age 2 or 3. Research on brain development indicates that the education of 2- and 3-year-olds is the most important step we can take to insure Vermont’s future prosperity.

 Currently fewer than half of Vermont’s children are enrolled in quality pre-K, and 40– 50% of Vermont children begin school (kindergarten) deemed not ready to learn, according to VBR. In addition to increasing the number of children who will begin their formal education ready to learn, higher pre-K enrollment also bodes well for closing the achievement gap that results primarily from poverty. Research shows that investing in early education reduces rates of incarceration and drug use and increases rates of high school and college graduation.

GOVERNMENT TRANSPARENCY.

Under the Vermont constitution, all government officers are accountable to the citizens of Vermont.  One way that Vermont attempts to achieve this constitutional requirement for accountability is by providing open access to public records.  This bill tries to address the balance between the public’s right to know and the boundaries of personal privacy.

 Its central piece is that it orders judges to grant attorney fees to those who are wrongly denied access to records.  This should send a signal to local and state officials to keep good records and respond in good faith to requests for Information.

 It also establishes a study committee to review the 215 exemptions to the Public Records Act.  Some of the exemptions are difficult to understand or interpret, thereby creating confusion. The intent is to clarify whether a document is public or not. 

Consideration of the Blue Ribbon Tax Commission Proposals

Your House Ways and Means committee seriously considered the proposals of the Blue Ribbon Tax Commission.  There were three main recommendations: 1) Sunset all tax expenditures and loopholes, 2) Expand the base of Vermont income taxes from federal taxable income to federal adjusted gross income (AGI), and 3) Expand sales taxes to nearly all goods and services.

 The tax expenditure bill sets the legislature on a course to consider all tax expenditures on a three-year rotation in the same way we consider fees.  This item passed as part of the miscellaneous tax bill this session, and next year we will consider the first third of these tax expenditures.

 The income tax base expansion to federal AGI is under serious considered by the committee. Several models of how this would work have been constructed by our Joint Fiscal Office.  We considered testimony regarding discontinuing itemized deductions.  We also considered changes to the calculation of household income for education tax payment which would base that calculation on federal AGI as well. Neither of these proposals was ready for passage on the House floor and remain in committee for further testimony and debate next year.

Caring for our sickest neighbors

The legislature continued its work this session to remove the barriers that continue to prevent all Vermonters from receiving appropriate hospice and palliative care.  Over eighty percent of Vermonters regularly respond that given the choice they would prefer to die at home, yet half die in a hospital and a quarter die in a nursing home. Three out of four people enrolled in hospice care die in their own homes.  Hospice care is end-of-life care provided by health care professionals and volunteers who give medical, psychological, social, and spiritual support in a variety of settings.  The goal of hospice care is to help people who are dying to live their remaining days in peace and comfort and to support families during the patient’s life and cope with bereavement.  Hospice care allows patients to have a greater sense of control at the end of their lives. 

 Three years ago Aetna, a health insurance company, conducted a pilot project that provided expanded hospice care to a subset of their subscribers.  Two groups of patients with a terminal illness, i.e. with six months or less to live, received two different amounts of hospice care.  Both groups had trained nurse care managers providing care management services to meet the comprehensive needs of the patients at the end of their lives.  One group met the Medicare life expectancy requirements for hospice, with six months or less to live, and had to give up curative care.  The second group was allowed access to hospice earlier, with a life expectancy of 12 months, and, if needed, continuation of curative therapy while on hospice.  Results:

.         Hospice utilization increased in both groups with high patient and family satisfaction

·         There was a decrease in the use of acute care, intensive care, and ER services, particularly in the Medicare group.

·         In the enhanced hospice group the increase in hospice utilization and decrease in acute care represented a net cost decrease of 22%.

 Overall, the outcomes were better and cost less.  Yes, you read that right, better results and the cost of providing the services was less!  Last January Aetna started providing terminal illness care management to all members eligible for care management services and has expanded the hospice benefit for a large portion of their commercial members.