2022 Weekly Legislative Report #12

H.740 appropriates $8 billion, an amount reflective of the federal money that has already arrived and will continue to flow to the state. It is much larger than any previous state budget, except for last year’s $7.9 billion budget, which also benefited from an immense infusion of federal recovery money. Breaking down the total, the bill allocates $3 billion in federal funds, $2 billion in General Fund, $1.9 billion in Education Fund, $345 million in Transportation Fund and Transportation Infrastructure Bond, $428 million in American Rescue Plan Act (ARPA) dollars, and the balance in a variety of special fund dollars. In an ordinary year, federal funds make up about one third of the state budget.

Technology Modernization and Retirement Special Funds. With an initial appropriation of $16.8 million, the bill would create a Technology Modernization Special Fund. The fund would be administered by the Agency of Digital Services to purchase, implement, and upgrade technology platforms, systems, and cybersecurity services used by state agencies and departments, upgrades that would improve efficiency in each affected department. In FY23, those expenditures would include $11.8 million to upgrade some statewide financial accounting system and integrate with Department of Labor and Agency of Transportation financial systems; $1.8 million towards a property management information system at the Department of Buildings and General Services; $960,000 for Fire Safety Modernization to upgrade technology; and $2.2 million for a case management system in the Attorney General’s office. 

An additional $50 million in ARPA dollars would be appropriated to the Agency of Digital Services to continue work on technology modernization at the Department of Motor Vehicles and the Department of Labor’s Unemployment Insurance.

A second special fund would be established to receive funds transferred from the three retirement systems that would fund the operation of the Vermont Pension Investment Commission.

Importantly for municipalities, the bill also reserves $8.5 in General Fund dollars to be used for match for federal Infrastructure Investment and Jobs Act funds that may become available to Vermont.

Dispatch. Over the last few weeks, there was considerable discussion in the House about how a transition to a fully regional dispatch system might occur and who has a stake in its success. The dispatch language here is a result of that conversation. The Commissioner of Public Safety would be directed to convene a working group to agree on a proposal to transition to a new dispatch model. That group would include one representative of the state police, two representatives of local legislative bodies appointed by VLCT, two police chiefs (one who uses a state dispatch center and one who uses a local or regional dispatch center), one emergency medical responder, one firefighter, one sheriff, and one representative of the E-911 Board. Part of the working group’s responsibility would be to document how much is spent on dispatch services for each town versus how much would be spent under the new model, and to identify a timeline for transitioning to the new model. A report would be due to the legislature by next January. Legislative approval of the report’s recommendations would release the $11 million held in reserve in H.740 to implement the recommendations of the Dispatch Working Group. None of the $11 million would be allowed to revert to the General Fund. Effectively, the $11 million is being reserved for implementation of a new regional system even if it does not happen in FY23.

Education. The table below indicates the appropriations from the Education Fund to the obligations established in the Education Fund, as we noted in our article in Weekly Legislative Report No. 11 on the education yield bill, H.737. The $1.9 billion total appropriation accounts for education property taxes being assessed at reduced rates. This year, the Education Fund has a surplus of approximately $90.7 million, even as education spending increased 5.4 percent from FY22 and yields per equalized pupil (based on the existing system of pupil equalization) also increased. At the same time, education grand list value grew by 7.5 percent on the revenue side. Half of the Education Fund surplus would be applied to reducing education property tax rates in FY23. The appropriations bill and the yield bill do not yet address implementation of the pupil weighting legislation (S.287), which is on the Senate floor for third reading today. During debate on H.737, several questions were raised about how the Ways and Means Committee expected to pay to implement the new pupil weighting system.

Municipal Planning Grants and Regional Commissions. Property transfer tax revenues are up by orders of magnitude this year. In FY23, $4.574 million is appropriated from the property transfer tax to regional commissions, an increase of $1.6 million over the FY22 appropriation. The bill would appropriate $872,120 for Municipal Planning Grants, an increase of $414,000 over the previous year and is the first increase in years. The affordable housing bill, S.226, if passed, would appropriate an additional $650,000 to the Municipal Planning Grants specifically to modernize municipal bylaws.

Property transfer tax appropriations to the Vermont Center for Geographic Information total $436,060. Regional planning commissions receive funding from a number of different sources, including the Agency of Transportation’s Transportation Planning Initiative, Vermont Emergency Management, and other agencies – all to address specific programs. Additionally, should the Municipal Energy Resilience Grant Program (H.518) pass, $2.4 million will be provided to regional commissions to help with energy assessments, community involvement and implementation of energy resilience project recommendations.

ARPA and One-Time. As of March 22, federal allocations to Vermont from the Families First Coronavirus Response Act, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, Consolidated Appropriations Act, and ARPA totaled $5.1 billion, of which $595 million is earmarked for education. 

Last year, the legislature appropriated $650,000 to start the ARPA Coordination and Assistance Program at VLCT. Under the direction of its director, Katie Buckley, the program logged significant and early successes: Every eligible non-entitlement unit (NEU) in Vermont save one accepted their ARPA awards. And Vermont is the only state in the nation with such a successful record. This program – in coordination with legislatively directed funding provided to the state’s regional planning commissions – ensured Vermont municipalities would draw down more than $200 million in funding that might have otherwise been left on the table. This year, VLCT asked for $350,000 to extend the program from 2024 to the new December 31, 2026, federal deadline for expending ARPA funds. VLCT also proposed using $250,000 to expand the scope of the program to helping municipalities navigate the Infrastructure Investment and Jobs Act (IIJA) when details become available, the Consolidated Appropriations Act of 2022, and the Build Back Better Bill, should that legislation ever pass in Congress. The committee declined to fund any portion of that request.

H.740 would require the Commissioner of Finance and Management to report on the status of all appropriations from the Coronavirus State and Local Fiscal Recovery Fund (SLFRF) provided through ARPA. The report, due by September 15, would include updates on project eligibility, obligated funds, expenditures, and compliance or reporting issues. By next January, the commissioner would recommend any reallocation of ARPA SLFRF monies. The issue is particularly timely as the news from Congress is that many representatives and senators – from both sides of the aisle – are interested in recapturing these funds.

Other allocations in the bill include $1,050,000 to the Natural Resources Board to expedite ARPA project permits, $3 million to the Vermont Outdoor Recreation Economic Collaborative Community Grant Program, and $6 million for remediation and redevelopment of brownfield sites. 

The Housing and Conservation Board would receive $50 million for affordable, mixed-income rental and ownership housing, housing improvements, and to address homelessness and housing needs for farmworkers, refugees, and those in recovery. The board would also receive $21,128,985 from the property transfer tax, an increase of $10 million in their base annual funding from that source. Those amounts would be in addition to other funding that would accrue to the board as well as to housing in general.  

The Department of Housing and Community Development would be charged with developing and implementing the new Vermont Rental Housing Investment Program in S.210, through which funding will be awarded to statewide or regional nonprofit housing organizations or to private landlords to rehabilitate eligible rental housing units. S.210 would appropriate $20 million from ARPA to that program. That bill is in the House General Housing and Military Affairs Committee. Should S.226, the comprehensive housing bill, pass, additional appropriations would be made to address manufactured housing and mobile homes ($5 million); Vermont Housing Finance Agency (VHFA) grants for large employer housing, commercial property conversions, and multi-agency coordination plans for neighborhood development ($5 million); and subsidies administered by VHFA for new construction or acquisition and rehabilitation of owner-occupied homes for income-eligible buyers. Thus, an additional $15 million would be dedicated to “missing middle” housing development. S.226 was voted out of the Senate Economic Development Housing and General Affairs Committee this week and is currently on the Senate floor.

According to the Joint Fiscal Office, more than $176 million of combined state General Fund and pandemic relief funds were allocated to the Housing and Conservation Board in 2020 and 2021 to address housing.

The bill would also set aside $ 7.2 million as match for IIJA project categories so that once it is clear what is included in that federal legislation, no federal dollars would be left on the table.

H.740 is complicated, and following both new contributions from various funds and shifts from one fund to another doesn’t simplify the task of figuring out what goes where. Our table shows appropriations that are of interest to local governments, but it doesn’t show capital bill expenditures. Those are in a separate bill, H.739, and affect the amount borrowed by the state (and local governments). As well, several other bills contain appropriations that are not included in H.740. Those bills currently total an additional $4.6 million.