January 5, 2012

Vermont Statehouse 2012: A legislative preview

On Tuesday, 180 lawmakers will converge on the Statehouse after a seven month hiatus for Round 2 of the 2011-2012 biennium. Judging from interviews with committee chairs, the upcoming session will be fast and furious. Lawmakers have an impressive array of complicated issues to address in four short months, and there is little expectation that the session will drag past the first week in May (this is an election year after all).

Long-term recovery plans post-Irene will figure prominently on the docket. Expect to see lively debate on proposals for the new state psychiatric hospital, the state office complex, a reordering of transportation priorities, and legislation to address property losses, flood insurance issues, municipal borrowing and tax abatements. (The latter is already in motion; lawmakers are expected to forgive about $2 million to $4 million in property taxes to the state Education Fund in the first few weeks of the session.)

There are a number of old business items that must pass through the belly of the snake no matter what. The biggie here is the budget (the 2013 gap between revenues and expenditures is $75 million, plus $25 million worth of budget adjustments for fiscal year 2012); closely followed by the miscellaneous tax bill, the fee bill and the capital bill. The latter will earmark how much money the state will borrow to pay for new state offices and the replacement for the Vermont State Hospital.

As for new business, brace for emotional discussions about reapportionment of House and Senate districts, plans to crack down on an explosion of prescription drug abuse, proposals to limit the federal health care exchanges to large businesses and a so-called “Death with Dignity” bill, which would allow a patient with a terminal illness to take prescription drugs to end his or her life.

Members of the Senate, which have to show their cards first in the game of poker with the reps in the House, have already submitted 140 bills for review. That doesn’t include the legislation that has yet to be proposed by each of the Senate’s 12 committees. (There’s a reason why reporters who cover the Statehouse feel perpetually overwhelmed.)

It’s also Round 2 for first-term Gov. Peter Shumlin, a Democrat. In his first session as governor, Shumlin handily won support for nearly all of his initiatives – including passage of the single-payer health care plan, a fiscally conservative budget, additional health care provider taxes and a small electric rate increase to support a solar tax credit program. He lost out on a hike in the cigarette tax, cuts to Catamount Health, and further reductions in programs for Vermonters with developmental disabilities and mental health. His plan to tax dentists was scuttled, as was a proposal to reduce funding for Choices for Care, a program that keeps elderly Vermonters at home and out of nursing homes.

Some of the unfinished business from 2011 will be addressed in the opening days of the Legislature. The green cleaning products bill, which requires the use of non-chemical cleansers for schools, was the last bill the Senate passed last session, and it will be the first piece of legislation in the House this session. The environmental review public participation bill and the childcare unionization legislation, both of which were passed by the House last year, will move on to the Senate.

Some of the political baggage is also likely to carry over. Last year, Shumlin’s shadow loomed large in the General Assembly. Shap Smith, in his third session as Speaker of the House, continued to maintain party discipline among the Democrats and hewed to an agenda of fiscal centrism that dovetailed with Shumlin’s views. Meanwhile, John Campbell, the Democratic President Pro Tempore of the Senate, struggled to master the big personalities under his purview – and to maintain distance from the former Pro Tem, i.e. Shumlin. This year Campbell appears to be sending a message to the Fifth Floor on the opening day of the session: The Senate is holding a veto override vote on a well testing bill that was nixed by the governor last summer.

Internal dissent will be more difficult for Dems to squelch as members likely begin to chafe at the bonds of intra-party loyalty. With Sen. Randy Brock, a Republican candidate for governor, leading the way for the GOP, expect to see the loyal opposition make inroads on the right as they exploit the mistakes of their major party counterparts and cry foul when Democratic leaders ignore their attempts to shape legislation. Meanwhile, the Progressive Party, which has two senators and five reps, will attempt to pull the debate on taxes, the budget and human services issues to the left.

Here’s a rundown on some of the issues and legislation that will be front and center in the 2012 session:

Budget woes, part 5

It looks like legislative budget-writers will have to wield axes again this session to balance the state’s General Fund budget. Even though revenues are beginning to regain ground lost over the recession, the steady increases aren’t large enough to fill the structural, ongoing gap between tax receipts and the rate of state expenditures, especially in the area of human services programs.

This year’s budget gap is about $75 million, in addition to a $25 million budget adjustment for fiscal year 2012, largely due to the financial impact of Tropical Storm Irene.

The latest shortfall comes on top of four years of budget gaps that together total nearly $1 billion — $753 million from 2009-2011, $150 million in 2012 and $75 million in 2013, according to data from the Joint Fiscal Office. Federal stimulus funds helped to float the state’s human services programs for several years. Now, however, the state is no longer receiving additional monies from Washington to help the poor. Lawmakers instead have braced for congressional cuts to core anti-poverty services, including the Low Income Heating Assistance Program. It is not known at this juncture what other reductions in federal aid the state might see in the coming year, but Jim Reardon, commissioner of the Department of Finance and Management, has expressed concern that the LIHEAP cuts could be the beginning of a problematic pattern. Though Shumlin announced last week that he would shore up LIHEAP this year with about $6.1 million in state funding in order to prevent Vermonters from freezing in their homes. The state, Reardon has said the state does not have the resources to make up the difference for other federal programs should Congress begin to renege on commitments to states.

On Tuesday, the Emergency Board will review revenue projections for the coming year. The following week Gov. Peter Shumlin will present his budget proposal for fiscal year 2013.

Once lawmakers on the House and Senate Appropriations committees have this information in hand, they will begin the laborious process of combing through every major line item to determine how they can bring the budget into balance.

A surcharge on the rich?

Will the Blue Ribbon Tax Structure Commission’s recommendations be resuscitated in the next session? Or will the state’s tax code be left to lie, as it were, as centrist lawmakers wait in hope for tax revenues to recover without the intravenous fluid of reform? Or will the more liberal members of the House and Senate insist on a surcharge on the wealthy?

A dramatic change in the state’s tax base – from a reliance on the much smaller proceeds from taxable income (after itemized deductions for mortgages, donations and the like) to adjusted gross income (before deductions), which is the norm nationally – received a tepid response last year from the Democratic leadership, and if anything that lukewarm feeling for a shift in the way Vermonters, especially wealthy residents, pay taxes, has grown chillier with time.

Though Vermont on paper has the highest marginal income tax rate in the region, the state’s average effective rates are at or below those of other New England states. Taxing residents based on adjusted gross income instead of taxable income would enable Vermont to lower the marginal income tax rates, while keeping the effective rate – the amount residents actually pay – about the same.

Rep. Janet Ancel, D-Calais, chair of the House Ways and Means Committee, said her committee will continue to study the adjusted gross income option, but the major obstacle for legislative approval, in her view, is public relations. Committee members would have to educate the rest of the House members about the intricacies of Vermont’s rather complicated progressive tax system in order to generate the necessary consensus for passage.

Sen. Ann Cummings, D-Washington, is less sanguine about the prospects of any major changes to the income tax, because she says the models developed last year disproportionately impact middle class taxpayers. “In trying to bring Vermont in line with other New England states so it didn’t look like we were higher, we haven’t been able to do that without impacting the middle class,” Cummings said. “We’re going to keep looking at it, but we probably won’t be able to do that this year.”

While Cummings and Ancel agree that changes to the miscellaneous tax bill could be nominal this year, a Progressive rep, Chris Pearson, is developing a proposal that could raise $40 million to $50 million in new revenue.

Pearson’s plan would require Vermont households that report taxable income (that’s income after itemized deductions) of $373,650 or more per year to pay 6.8 percent on taxable income of up to $137,300; 7.8 percent on income between $137,300 and $209,250; 8.8 percent on income between $209,250 and $373,650; and 8.95 percent on income of $373, 650 or more.

View Vermont tax brackets.

Sound complicated? Here’s a simpler way to think of it. Vermont has five tax tiers. All residents – including millionaires — currently pay the lowest tax rates for earnings that fall in the two lowest tiers – regardless of total taxable income. Pearson’s plan eliminates the tax rates (3.55 percent and 6.8 percent) for the bottom two tiers (less than $56,800 and $75,000, respectively) for Vermonters whose taxable income falls in the two highest tax brackets. In other words, wealthy Vermonters would pay the highest three qualifying rates on all their income.

“It’s a way to close some of the loopholes in Vermont tax policy that favors wealthy taxpayers,” Pearson said. “We’ve been cutting programs and budgets for five years and given the economic climate, people rely on state services more and more. We just have to come up with some solutions.”

Whether this proposal, which would increase the effective tax rate for high income Vermonters, has any traction remains to be seen. Shumlin has said he doesn’t want to “tax out” the wealthy.

Finance and Ways and Means will take up a number of issues during the session, including:

* New fees for Agency of Natural Resources and Department of Motor Vehicle permits

* New rules for insurance brokers who are caught in a legal conflict created by the Affordable Care Act. In Vermont, anyone who gives insurance advice must be a licensed agent; the new federal law prohibits insurance companies from paying “navigators” to help consumers understand the new health insurance exchanges.

* Statewide property tax abatement for homeowners who suffered significant property loss as a result of Tropical Storm Irene.

* The Vermont Supreme Court’s recent ruling that Vermonters’ property tax income adjustment information is confidential. The Government Operations Committee will take up legislation to hold harmless towns that operated under the assumption that the information was public. Municipalities are now subject to a $1,000 fine for violating the confidentiality requirement, according to Rep. Donna Sweaney, D-Windsor.

~Anne Galloway

Institutions: What to do with Waterbury

It’s the $65 million (or perhaps as much as $85 million) question: What will the state do with Waterbury, a 700,000 square foot state office complex rendered unusable by tropical storm Irene.

Create a mixed use office complex? Build a floodwater moat? Sell the buildings to a developer? Turn the site into a model of 21st century, eco-rehab and reuse?

That looming issue faces lawmakers this session, who currently await a decision by the Shumlin administration on hiring architects and contractors to develop a plan for historic Waterbury complex, parts of which back to before 1900. That hiring decision is expected the first week of January when legislators return for the session.

What the state eventually decides will have broad impacts for some 1,200 dispersed state workers and the economy of Waterbury. It’s an issue legislators are well aware is fraught with consequences and, as several have noted, is unusually open ended. The House and Senate Institutions panels will be the focal point of those considerations, but any concrete proposals are not likely until late in the session in March, according to the administration.

The state has already spent some $20 million to restore basic infrastructure at Waterbury and is proceeding deliberately in what is a monumental process with a huge price tag that will have impact for decades to come.

Secretary of Administration Jeb Spaulding has said the complex will be vacant for up to two years while a comprehensive re-evaluation of office housing for the entire 7,500 person state work force is undertaken. Besides the option of reinvesting to fix up Waterbury, the state is exploring several sites in Montpelier and one in Barre as well as part of its review. Amid the uncertainty, one thing is certain: A lot of people and communities will be very interested in the outcome.

~Andrew Nemethy

Energy: Pricing for renewables, fracking, big wind

Two energy bills introduced in the Senate and the House would establish a renewable portfolio standard (RPS) in Vermont for the first time.

House Bill 468, introduced by Rep. Tony Klein, D-East Montpelier, and Senate Bill 170, introduced by Sen. Virginia Lyons, D-Chittenden, would both create mandatory standards for utilities to buy set amounts of renewable energy. They would also revise the standard offer component of the state’s Sustainably Priced Energy Enterprise Development (SPEED) Program.

Currently, the state encourages small-scale, in-state renewable energy projects by guaranteeing a set rate for energy from certain projects with a capacity of 2.2 megawatts or less. The current standard offer, however, has a cap of 50 megawatts. Klein’s legislation would lift this cap altogether, and Lyons’ would raise it to 100 megawatts. Lyons’ bill also proposes achieving net-zero carbon emissions from energy consumed in Vermont by 2025.

Both bills also distinguish between existing renewable energy and new renewable energy, with new renewables separated into tiers. They also both ratchet up the amount of renewable energy utilities must buy as time goes on. Where large-scale hydroelectric energy fits in will likely be at the forefront of the debate.

One energy source Vermont may not be exploring in state is natural gas obtained through hydraulic fracturing. Bills introduced in the House by Klein and Rep. Peter Peltz, D-Woodbury, as well as a bill introduced in the Senate by Sen. Peter Galbraith, D-Windham, would prohibit the practice in the state. The legislation is most likely a preemptive measure, given limited prospects for natural gas extraction in Vermont.

Galbraith will serve up a more controversial bill this sessionregarding commercial projects on state lands. The bill drew the most media attention for its proposal to outlaw construction for commercial purpose on lands managed by the Agency of Natural Resources (ANR). While the bill paints a broad brush, its primary target appears to be industrial-scale wind projects on state land. A 2004 ANR policy statement prohibits large-scale renewable energy projects (i.e., wind farms) on state lands. The draft Comprehensive Energy Plan issued by the state recommended that ANR consider rescinding this policy. The final plan backed off slightly to say the agency should consider “revising and clarifying” its policy. Galbraith’s bill would essentially codify the 2004 policy. It would also require that towns that would be “visually or otherwise affected” by wind projects approve projects before the Public Service Board can issue a certificate of public good.

~Alan Panebaker

Small employers defined for health care exchanges

Issues surrounding the state’s health benefit exchange in 2014 will likely direct the conversation in health care committees this upcoming session.

Under the federal Affordable Care Act, states have to implement an exchange by 2014, or the feds will do it for them. The basic concept of the exchange is a marketplace where individuals and small employers shop for and purchase health insurance. Plans in the exchange will have to meet the requirements of an essential health benefits package for the individual and small group markets.

Sens. Vince Illuzzi, R-Essex-Orleans, and Hinda Miller, D-Chittenden, introduced legislation this fall addressing the two hot issues with the exchange: Who is in it and can people buy insurance outside the exchange?

For 2014 and 2015, states have the option to treat “small employers” who would be in the exchange as those with 50 or fewer employees or 100 or fewer employees. The proposed bill would define small employers as those with 50 or fewer employees from 2014 to 2015, as 100 or fewer in 2016 and as an employer of any size in 2017, when the state plans to obtain a waiver from the feds to implement a universal health care system.

The state plans to use the exchange as a springboard that will send the state into its goals of health care reform and universal coverage. Business groups and chambers of commerce have supported the idea of limiting employers in the exchange to 50 employees or fewer on the basis that many larger employers will be able to provide more flexible plans outside of the exchange.

Illuzzi’s legislation would also require health insurance to be available for purchase outside the exchange in the individual and small group markets.

Plans in the exchange, according to the state, would be limited to a few options for each “medal” or quality of plan level. There is a potential for more plan designs outside the exchange. Also, insurance brokers would only be allowed outside the exchange.

The Illuzzi bill also would downgrade the minimum qualifications for plans in the exchange from silver to bronze, as defined by the Affordable Care Act.

The exchange also raises concerns for low-income advocates who worry residents on state-sponsored health plans like the Vermont Health Access Plan and Catamount Health may lose some of the coverage they currently have.

Peter Sterling, executive director of the Vermont Campaign for Health Care Security, sounded the alarm in October that these plans will likely go away since plans in the exchange will be offered through private insurance. For Vermonters who make more than 133 percent of the federal poverty level this would mean higher out-of-pocket costs and premiums, Sterling says. With enrollment for the exchange beginning in the fall of 2013, the Legislature will likely address how to make up for the gap between expanded Medicaid assistance through the Affordable Care Act (up to 133 percent of the federal poverty level) and the services the state already sponsors for residents who make slightly above that.

State lawmakers received a pleasant surprise before the holidays when the Obama administration announced it would not define a single set of “essential health benefits” that employers must provide. Instead the feds will leave it to the states, allowing for more flexibility and variability between states.

According to Sen. Claire Ayer, D-Addison, this was welcome news for Vermont. She said the increased flexibility to determine what insurance companies have to cover would ease worries that the state was going to have to fund mandates that the state offers but the feds have not, like children being on their parents’ insurance policies until they turn 26. Now it will all be part of one essential benefits plan that insurers in the exchange have to offer. It is too early to tell exactly what the news at the federal level means for Vermont, Ayer said, but it is likely a good thing.

Redistricting, more single districts or status quo?

The Legislative Apportionment Board looked at Census data to redraw House and Senate districts, and recommended significantly increasing the number of single-member districts statewide as a way to improve voter representation. The net effect, though, would pit Democrats against one another in many districts. And guess who has the majority in the General Assembly, and who ultimately decides what the map will look like? The Democrats.

Rep. Donna Sweaney, D-Windsor, said her committee, Government Operations, will look at the board’s work, but her committee won’t necessarily accept the map as is. Certain portions of it may work, she said, but “our own ideas are to make as few waves as possible wherever we can.”

“If it works, don’t reinvent the wheel,” Sweaney said. “We know where the problems are and we’ll go from there.”

Every 10 years, in sync with new population figures from the U.S. Census Bureau report, each state across the nation reassesses district lines for state representatives and senators. The district lines are realigned to reflect shifts in population.

In Vermont, Chittenden County has continued to grow, while southern and northeastern sections of the state have seen a decline in population.

Each member of the House is supposed to represent approximately 4,172 Vermonters; each senator is supposed to represent about 20,858 people.

Population figures from the secretary of state’s office show Vermont’s deviation percentage is currently 45 percent. The deviation percentage in the plan approved by the board is 20.30 percent.

Read more about reapportionment here.

~Anne Galloway
Education consolidation bill to get overhaul

Vermont lawmakers who oversee education issues will find a lot of familiar subjects on their desks in the second half of the biennial session.

Among major priorities are likely to be amendments to Act 153, which was passed in 2010 to promote and enable school consolidation; weighing in on state efforts to move away from the controversial provisions and testing in the federal No Child Left Behind Act; passage of a bill that would mandate use of “green cleaning” materials in Vermont secondary schools; and deciding on a reorganization of the Education Department which would make the Commissioner of Education an appointed position by the governor instead of a post chosen by the Vermont Board of Education.

The board of education opposes the bill now in the House Government Operations Committee (H440) that would make the education department a state agency and would allow the governor to appoint its secretary. The bill would also alter the composition of the state board. The board argues that having governors chose the top education official would cause policy swings and inconsistent direction and move accountability from the general public to the governor. The board also noted the governor already appoints the board and has influence in that manner.

Another top issue will be whether to pass a set of 14 recommended changes to Act 153 drafted by a task force over the summer. Wide-ranging Act 153 sets out incentives and funding mechanisms to encourage school consolidation to address Vermont’s declining school enrollment, and it also addresses how school districts are structured. The changes tweak the bill and ease some of its complexities and call for a statewide summit on school mergers. The Vermont Board of Education signed on to the 14 changes at its December meeting.

Also on the legislative education desk is a bill that would mandate use of non-toxic “green” cleaning materials in schools. The Vermont House passed S92 last session but it differs from a Senate version and advocates are now working to get the revised bill passed in the Senate. More than half a dozen states have passed similar green cleaning legislation and many others are considering similar provisions.

Education officials also expect to receive a comprehensive report looking at the state’s education funding law Act 68 – though legislation as a result is unlikely this session. Lawmakers last year authorized education finance consultant Lawrence Picus to do a study of the state’s education property tax system and how well it works. Picus was tasked with providing hard cost and effectiveness data with which to judge Act 68, and whether Vermont’s statewide property tax (and its income sensitivity provision) are serving schools well in the state.

Economic development takes on telecomm, workforce development, VEGI

A hodgepodge of government agencies fall under the purview of economic development – the Department of Labor, the Agency of Commerce and Community Development, the Public Service Department, the consumer affairs division of the Attorney General’s Office and the Department of Banking, Insurance, Securities and Health Care Administration. Hence, the broad swath of issues the two economic development committees – one each in the House and Senate – will take up this year.

Annie Noonan, commissioner of the Department of Labor, has been holding a series of meetings with employers around the state and will report out to lawmakers about workforce development programs and proposed legislation to redefine the term “employee” and “contractor.”

Rep. Bill Botzow, chair of House Commerce and Economic Development, said his committee will examine a soon-to-be-released report from the Post-Irene Property Law Task Force. He plans to discuss a risk management approach to natural disasters as a proactive means of mitigating future problems associated with flooding.

Botzow is also looking to hear a report from the administration about the Vermont Employment Growth Incentive program to determine whether the cash investments the state is making in certain employers is paying off for the state’s economy. “We want to know what works, what’s fair and what’s affordable,” he said.

The committee will also hear from the Vermont Telecommunications Authority’s plans to address areas in the broadband system that lack adequate coverage.

Other items on the list? Cell phone cramming fees, government information security, the CVPS and Green Mountain Power merger and its potential impact on VELCO, the state’s transmission utility and voluntary consolidation plans for Regional Development Corporations and Regional Planning Commissions around the state. In addition, BISHCA is looking to change its name (and presumably its order in the health care realm) to the Office of Financial Regulation.

A review of judiciary reforms

Rep. Bill Lippert, D-Hinesburg, said the judiciary committees in the Senate and House have set in motion a number of initiatives that should be reviewed. He wants to hear about how the Ignition Interlock program for DUI offenders is working. Lippert wants to look into using diversion boards to keep driving with a suspended license citations out of the courts. The DLS system as it stands, he said puts pressure on the criminal justice system and can push low-income people into a downward spiral as fines and penalties pile up on one another.

Lippert also wants to explore an initiative that would provide more information about offenders to judges, criminal defenders and prosecutors to assess an accused offender’s situation, without violating the individual’s constitutional rights. He also said it could be helpful for judges to have information about average sentences imposed for particular crimes in Vermont.

His committee will examine treatment options for Vermonters with opiate addictions who are ending up in the courts and in prison.

“We see it as a serious issue that’s going to require additional attention around treatment,” Lippert said.

More than 400 people are on waiting lists for methadone and other opiate addiction treatments, he said.

Environmental issues

Streambed management will be a dominant theme in House Fish and Wildlife. Many rivers and streams were armored and rechanneled after Irene by towns that were worried about future flooding. Environmentalists have called these streambed alterations a “manmade” disaster for the river ecosystem and fish habitat. Rep. David Deen said his committee will examine the post-Irene response and coordination among the Department of Fish and Wildlife, the Department of Environmental Conservation and VTrans. In addition, new river and stream buffer legislation as part of flood hazard zoning will be on the table, he said.

“We’re going to take a look at permit process review and environmental protections and speeding up and making the process more nimble as opposed to simply dropping environmental protections,” Deen said.

The public participation bill will be back, this time in the Senate. The Conservation Law Foundation is pushing for public comment on pollution violation cases that come before the Agency of Natural Resources. The agency now settles pollution violation cases behind closed doors.

Rep. Tony Klein, D-East Montpelier, will be introducing a solid waste management bill that will include a study to determine whether more aggressive recycling and compost efforts would save landfill space and money.


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