2023 Weekly Legislative Report #5

Governor Scott presented his budget to the legislature last Friday, and we linked to his speech in last week’s newsletter. This week we have had a bit of time to consider his priorities, on which committees of jurisdiction are just beginning to focus. The governor stated “because of the extraordinary moment we are in, this is undoubtedly the most significant budget I have presented in my time as Governor.” The proposed budget would spend $8.4 billion: $2.3 billion in General Fund, $2.1 billion in Education Fund, and $335 million in Transportation Fund. The Capital Budget is expected to total $122 million over the next two years.  

He emphasized, as he has every year that COVID-related federal dollars have been available, that his proposed budget uses surplus funds for one-time initiatives that do not create ongoing costs. His budget summary states that key initiatives are to: 

• Support Fiscal Year 2024 total General Fund uses of $2.32 billion.  
• Set aside over $150 million to meet future, anticipated state match obligations due to enhanced federal funding streams.  
• Triple the state’s financial commitment to childcare, allowing thousands more children access to high quality, local childcare providers.  
• Provide additional funding to help stabilize our health care provider network and supports a major increase in Medicaid reimbursement rates for dental providers.  
• Invest an additional $45 million in housing development and rehabilitation, and another $30 million in emergency housing.  
• Make major investments in workforce training and expansion through education, internships, and outreach.  
• Fully fund all state retirement and debt service obligations and maintains statutory reserve requirements. 

In his budget speech, the governor focused on Vermont’s need to build its workforce and to assure that that growth accrues to all geographic areas of the state. The Rural Infrastructure Assistance Program in the Budget Adjustment Act is key to helping communities access federal dollars to spend on infrastructure (see "Rural Infrastructure Assistance Proposed in Budget Adjustment” in this report). The budget also includes $10 million to create the Regional Investment and Growth Fund, which would prioritize improving industrial readiness, capital investment, and job creation in rural communities, and $4 million for refugee resettlement assistance, which will help people access language assistance and community support as they settle – and hopefully stay – in Vermont. 

The budget commits funding to clean heat and electric vehicle charging stations, to health care, to education, and to tax relief for working families and seniors. The budget summary highlights the substantial dollars already committed to emergency housing, including hotel stays for people experiencing homelessness, and the General Assistance and Adverse Weather Conditions Program. It also calls for stepping up efforts to provide permanent homes for families and others. Local officials hope that this commitment means a long-term plan is being developed that will transition people out of temporary hotel stays, which are shelter but in many cases do not offer much support for the wide range of recipients’ other needs. Experience during the pandemic has been that local law enforcement and emergency medical services have had to fill gaps in support services.  

The budget would also dedicate: 

• $79 million reserved to meet Infrastructure Investment and Jobs Act (IIJA) state match requirements in our transportation sector  
• $27 million to ANR to meet Clean Water and Drinking Water State Revolving Fund IIJA state match requirements  
• $10 million to ANR for municipal pollution control facilities state match requirements 
• $4.5 million to ANR to meet state match requirements for repairs to the Waterbury dam 
• $30 million to the Public Service Department in budget adjustment to meet state match requirements for the NTIA (broadband) grant application or other broadband initiatives 
• $9 million to the Environmental Contingency Fund and $1 million to the Department of Environmental Conservation for PFAS testing and remediation 

Many of the projects contemplated by those programs — such as for water quality, pollution control, and water supply infrastructure — would be implemented at the local level. You can find programs for which towns are eligible using VLCT’s new Federal Funding Guidebook and contacting the VLCT Federal Funding Assistance program.

The budget also would fund $35,650,000 to the Department of Housing and Community Development: 

$150,000 for a Land Value Tax Feasibility Study, in partnership with the Vermont Department of Taxes, to explore the potential economic and community development benefits of aligning local property tax policy to spur revitalization and economic development 

$20,000,000 to fund the Middle-Income Rental Housing Revolving Loan Program to create and preserve multi-family rental housing that serves middle-income households  

$15,000,000 for the Vermont Housing Improvement Program changes.  

While the governor’s budget offers opportunities for municipalities, there are also serious concerns to be raised. Actually assuring that transportation aid gets to local governments is a significant problem, which your advocacy staff will work on this year (see “Governor’s Transportation Budget Proposal” in this report). Many issues surround the Education Fund, including new uses of Education Fund dollars, increasing needs in the pre-K – 12 system, implementing the new pupil weights system, and evaluating the potential for moving to an income-based education tax for homestead properties. In the meantime, “Governor Scott’s FY24 Proposed Appropriations” table in this report highlights items in the budget that are of interest to local governments. 

Resources for this article: 

• Governor Scott’s FY24 Budget Summary 
• Governor Scott’s FY 24 Budget Address

Millions of Dollars

1. Includes a reversion of $8,734,480 from FY23 Town Highway Structures to the Transportation Fund. 
2. Includes $101,089 FY23 reversion to the Transportation Fund. 
3. Includes $4,818,108 FY23 reversion to the Transportation Fund. 
4. This amount does not include local match dollars. 
5. Includes $533,098 FY23 reversion to the Transportation Fund. 
6. Includes $18,247 FY23 reversion to the Transportation Fund. 
7. One-time items funded with ARPA in FY22 and paid with a mix of funds in FY23. 
8. IDEAL (Inclusion, Diversity, Equity, Action, Leadership) Program to support municipalities in promoting the named municipalities. 

Note: Citations in parentheses refer to the section in the budget bill where those items are found:   

CRF = Coronavirus Relief Fund 
GF = General Fund 
EF = Education Fund                                               
FF= Federal Funds 
LOT = 30% local option tax share remitted to state   
PILOT = Payment in lieu of taxes 
TF = Transportation Fund                                        
TIB = Transportation Infrastructure Bond 
ARPA = American Rescue Plan Act                          
USF= Universal Service Fund 
PTT = Property Transfer Tax 

Also note, for some items funded with ARPA dollars in FY23, we do not have proposed amounts yet this year. This may be VLCT Advocacy staff not yet having found them. 

A vital source of funding to Vermont local governments is the Transportation Fund. While the requirements to comply with the Municipal Roads General Permit, general stormwater management that affects roads, and the regular construction and maintenance needs are increasing significantly each year, revenues from the Transportation Fund that help pay for those obligations do not keep pace. After years of anemic funding for town highway programs, in FY22 and FY23 municipalities began to see increased state funding of municipal transportation programs for local roads, bridges, and associated infrastructure.  

This week, the Agency of Transportation (VTrans) presented to the House and Senate Transportation Committees the Governor’s recommended transportation budget for FY24. If adopted, it would be the biggest budget in the state’s history, totaling $858.3 million. The FY23 budget was $838.1 million. The steady budget increases in the past three years is largely thanks to federal money from the Infrastructure Improvement and Jobs Act (IIJA), the federal funding legislation that passed in 2021, superseding the previous Fixing America’s Surface Transportation (FAST) Act of 2015. Between FY22 and FY26, the IIJA will bring $570 million to Vermont. 

At the same time, state revenues remain anemic due to their heavy reliance on the underperforming and outdated gas tax. Of the total $858.3 million state budget, town programs are proposed to receive $91.7 million – a mere 11 percent of the entire state transportation budget. To put this into perspective, there are 15,761 total road miles statewide, of which approximately 13,000 miles are Class 1–4 municipal roads, yet municipalities receive only a very small slice of the state funding pie. The governor’s proposed FY24 transportation budget is technically a $8.26 million increase from FY23. However, VLCT Advocacy staff identified large sums of unspent funding in municipal programs during VTrans’s budget presentation, which are slated to revert to the Transportation Fund. VLCT is currently working with VTrans to better understand why so much money was left on the table by municipalities despite the significant need for it. 

The following table breaks down the shares of municipal funding: 

 As municipalities first saw in FY23, there was a huge (97 percent) increase in funding to the Town Highway Bridge Program, which was wholly due to the IIJA. The IIJA included a new program in which $225 million would be directed to Vermont for bridges over five years. The IIJA requires that at least 15 percent of that funding must go to local bridges, funded at 100 percent. In FY24, the increase in bridge program funding is again thanks to the IIJA. General Town Highway Aid and the Class 2 and Highway Structures programs are funded at Vermont’s statutory mandated levels.  

FY24 Transportation Funding Uses (858.3 ($ Millions) 

"Other" includes Finance & Administration, Program Development Admin., Rest Area, Policy & Planning, Transportation Buildings, and Transportation Board,

Concern with Unspent Class 2 and Structures Money 

Although not directly related to the Governor’s FY24 proposed budget, this week VTrans presented the FY22 carryforward and reversions of state and federal funds. Of the $83.5 million appropriated to municipal programs in FY22 (two years’ worth because it included the FY21 amount, which had been held back during the pandemic), just under $70 million actually went to municipalities. VLCT Advocacy staff identified significant sums of money allocated to two programs in FY22 but not spent: $8.73 million in the Town Highway Structures program and $4.82 million in the Town Highway Class 2 Roadway program. Of the $13.55 million left unspent, only $1.81 million is proposed to be carried forward for those programs. The remaining $11.73 million goes back into the state Transportation Fund to be reallocated to different state programs and to help match federally eligible state projects. VLCT was shocked to see this reallocation in the agency’s budget presentation.  

VLCT Advocacy staff is trying to work with VTrans staff to fully understand why so much money was unspent in those two programs. Historically, and according to most recent data from VTrans, both programs are oversubscribed, with less than half the applicants receiving funding in any given year. Demand far exceeds available funds: therefore, it is perplexing to see so much money left on the table. It is even more shocking and disturbing to see money that the legislature meant to go to support local road and bridge projects revert back to the Transportation Fund. It is not uncommon to have some money left in programs because some projects simply cannot meet the deadlines specified by program requirements. However, such large sums have never before been left over and unallocated. If there are problems at the local level with capacity and getting money out the door, VTrans needs to help towns and cities, not take away money that’s earmarked specifically for municipalities and local transportation projects. Although it is not the practice at VTrans, the carryforward money in local highway programs should be 100 percent of the unspent funds, with all remaining funds designated to the intended town highway programs. Next week, VLCT Advocacy staff will meet with VTrans to discuss this issue, and in early February VLCT is set to testify in the House Transportation Committee on this and other municipal transportation issues.  

VLCT is becoming increasingly concerned as the state continues not to address obvious long-term Transportation Fund funding issues. If the state is using $11.73 million that was designated for town highway programs to instead help pay for other state projects and meet federal match requirements, it is clear that there is simply not enough money to fund our state’s transportation system. VLCT not only is opposed to this approach, but also believes that the larger issues within the state’s transportation budget must be resolved. The overreliance on federal money and the fact that Transportation Fund revenue sources continue to underperform are a reality that is simply not addressed in the governor’s budget. Although a slight increase in funding to town programs is welcome, municipalities will now have to be extra vigilant that that money remains in town programs and is not reallocated at VTrans to balance the state’s transportation budget. 

Resources for this article: 

• VTrans FY24 Budget, presented to the House Transportation Committee on Jan. 24, 2023 
• VTrans FY24 Budget for Municipal Assistance Programs, presented to the House Transportation Committee on Jan. 25, 2023 
• VTrans Revenue and Budget Pressures FY25 – FY27, presented to the House Transportation Committee on Jan 25, 2023 

The House Appropriations Committee continued considering Governor Scott’s recommendations for the Budget Adjustment Act this week. The administration has proposed total appropriation changes of $339 million, which is far more moving around of numbers than occurs in an ordinary budget adjustment bill.  

One proposal that has generated a lot of discussion is to create a $3 million Rural Infrastructure Assistance Program in the Agency of Administration to provide rural communities that do not have the professional capacity necessary to access ARPA funded programs with assistance to help them do so. On Wednesday, the House Commerce and Economic Development Committee heard from VLCT Advocacy staff, VLCT Executive Director Ted Brady, and regional commissions about the need to offer additional assistance to those smaller rural communities.  

The Rural Infrastructure Assistance Program would be designed to help communities apply for and secure and manage ARPA-funded grants in the short term. The time for implementing projects is short because ARPA dollars must be obligated by December 31, 2024 and spent by December 31, 2026. Thus, including the new program in the Budget Adjustment Act will be crucial for helping small rural local governments as time to implement projects is short.  

The chair and vice chair of the House Committee on Commerce and Economic Development lent their support to the Rural Infrastructure Assistance Program in the House Appropriations Committee on Thursday. The committee supports the $3 million dollar appropriation to the new program and told Appropriations Committee members that they are continuing to work with stakeholders, including VLCT, to assure that the program language is complete and acceptable to all members. One of the more contentious discussions is about what criteria should be included in a Vermont Underserved Community Index, which would be used to determine which municipalities have the highest need for assistance. 

Their letter expressing support for this and other programs is linked below. We expect that the House Appropriations Committee will vote out the Budget Adjustment bill early next week, and the total cost will not be available until they do so. 

A separate bill, H.124, would provide additional funding and support to rural communities to ensure equitable access to economic development resources and build the necessary professional capacity in the longer term. 

Resources for this article: 

• Budget Adjustment Proposal
• Letter to House Appropriations from House Commerce and Economic Development
• House Appropriations Committee Worksheet

The Senate Economic Development, Housing and General Affairs Committee has taken testimony all week, hearing powerful stories about the difficulty that virtually everyone who is looking for a home has had in finding that essential but elusive shelter. The challenge is so great that many people coming to Vermont for jobs have had to turn down those jobs because they could not find housing. And while the problem is nationwide, testimony is that the problem is more acute here than in other states. 

The committee has been working on a draft bill that incorporates many of the elements in H.68, Representative Bongartz’s bill, as well as enhanced funding for housing programs, and minor amendments to Act 250. 

Friday morning, VLCT Advocacy staff testified on the committee’s draft bill and urged the committee to hear from the Mayors’ Coalition regarding the particular circumstances challenging Vermont’s cities. The committee expects to hear from Mayor Lott of Winooski next week. Clearly, smaller municipalities located farther from the Chittenden County economic engine have very different housing needs from the more urban areas. Legislation should be flexible enough to address the various kinds of challenges that face different towns. (VLCT’s testimony and the Mayors’ Coalition’s Legislative Goals for 2023 are linked below.) 

In addition to zoning changes that would facilitate housing development, most importantly amending the law that any ten persons may appeal a municipal zoning permit, the VLCT membership adopted the following provisions relating to Act 250. 

1. Allowing municipalities with duly adopted local zoning and subdivision regulations to accept responsibility to administer Act 250 solely within their own jurisdictions.  
2. Eliminating Act 250 jurisdiction over projects in designated downtowns, growth centers, new town centers, designated village centers, neighborhood development areas, and other areas designated in municipal plans.  

A separate bill, H.111, co-signed by 50 House members, would both address Act 250 impediments to housing development in a more substantive manner than the other bills we have seen and focus on facilitating smaller housing developments in more rural communities which likely will not host large developments. 

The Senate Economic Development, Housing and General Affairs Committee will continue work on developing a bill in the next few weeks. Watch this newsletter for further versions of the bill, and contact your senators soon to discuss the nature of the housing crisis in your community. 

Resources for this article: 

• VLCT’s testimony to the Senate Economic Development, Housing and General Affairs Committee, on Jan. 27, 2023 
• Vermont Mayors Coalition 2023 Legislative Session Goals 
• The text of H. 111 as introduced
• The text of H. 68 as introduced  

The Weekly Legislative Report is authored by

Karen Horn, VLCT Public Policy & Advocacy Director
Gwynn Zakov, VLCT Municipal Policy Advocate

Editing and proofreading provided by

Ione L. Minot, Content Specialist 

The next Advocacy Chat is Monday, January 30th at 11 AM.