The first year of the 2019-20 legislative biennium came to an unusual close, with the House adjourning its chamber on Friday, May 24, leaving the Senate chamber at the altar, so to speak.
The session’s close was an unpredictable end to an otherwise relatively predictable session.
With increased revenues our state is seeing (derived largely from both the 2018 federal tax cut and the Supreme Court decision to allow states to collect sales tax from businesses that don’t have a physical presence in the state), the $6 billion fiscal year 2020 budget is a balanced one that saw some give and take among members and the various priorities of the two chambers.
In the end, the Legislature adjourned with items of importance under our belt, items of concern still unaddressed, and a long road ahead for our long-term success as a state as we continue to face both our demographic/workforce challenges and our billions in unfunded liabilities.
Some of the issues are outlined here.
Broadband deployment: As we are all well aware, the lack of high-speed broadband access is one of the most critical issues facing Vermont — rural Vermont especially.
While we have known this for many years, the nut has historically been an incredibly difficult one to crack in a rural state like Vermont. As a member of the House Energy and Technology Committee, I understood this difficulty, and continued to be frustrated by the unrealistic promises by state leaders of 100 percent coverage within a certain number of years. I was pleased, therefore, that our committee tried to tackle this in a realistic and responsible way.
The legislation we passed this year is designed to support municipalities and regional entities in their quest to ensure service, by developing a toolbox for them to explore and understand their options, and funding opportunities to get the work done.
This includes funding for a specialist in the Department of Public Service to assist municipalities and entities, broadband grant opportunities for the development of plans, and a $10.8 million broadband loan program that authorizes loans of up to $1.8 million.
Clean water: It is disappointing that Vermont, one of the leaders among states in environmental protection and stewardship, is in the position we are with regard to our lakes and waterways. There is much blame to go around, but suffice to say that to have the EPA give us an ultimatum about cleaning up our waters is embarrassing.
I am pleased to report that this year a comprehensive plan for tackling the challenge seems to have come to fruition, so it was time to consider the funding of such a plan. As I have indicated repeatedly, my philosophy on this is simple: The funding source has to be broad-based, fair, and it has to have a “nexus” to water.
Unfortunately, the first source that always comes to the forefront in the mind of many is the rooms and meals tax, which is revenue generated almost exclusively by the tourism and hospitality industry. Whether it is an increase in the rooms and meals tax or a $2 occupancy fee added to every room per night, in my view it is unfair to place the burden of our clean water on our tourism industry. So, for the last couple of years, we had always been able to defeat those proposals.
This year was different.
While there was significant debate and numerous proposals were considered, in the end, the decision was to divert 6 percent of the current revenues raised from the rooms and meals tax to fund clean water. This would not be an increase in the rooms and meals tax rate.
While I continue to dislike putting the burden of our state’s clean water on the backs of our tourism and hospitality industry, I did end up supporting the legislation. In the end, I thought it was critical that we have funding in place to support our clean water efforts.
In my view, though, this legislation is good news/bad news and an opportunity, all rolled into one.
• Good news: There is consensus to ensure we have the funds for our state’s clean water efforts. And, those funds are not additional taxes on Vermont families and businesses.
• Bad news: It is clearly evident that the burden of funding clean water is going to be on our tourism and hospitality industry. The leaders in Montpelier believe that is the “nexus” to clean water.
• Opportunity: This is our chance as a tourism industry to educate the leaders in Montpelier about the need to institute a dedicated fund for marketing Vermont as a tourist destination, and that by doing so — by dedicating a percentage of the revenues generated from tourism — those funds grow and allow us to invest more in marketing. The result is that we realize significant increases in total revenues from the rooms and meals tax, and we will be able to support clean water efforts, and many of the other programs and services for Vermonters in need. This reality has been proven time and again. Simply look to our neighbors in Maine.
Child care: Vermont will invest $7.4 million in new funding for child care subsidies, child care center reimbursements, and efforts to ensure the needs of the child care workforce shortage are met. As a co-sponsor of the child care bill for which these funds are being used, I am very pleased with these important investments.
Higher education: On the other end of the spectrum, we added $3 million in funding for Vermont State Colleges ($2.5 million in base funding and $500,000 in one-time funds). Given our extremely poor support for higher education in Vermont, the base funding increase here is especially important.
Act 46: While a valiant effort was made to provide the opportunity to extend the July 1, 2019, deadline for the forced merger of the Stowe and Elmore-Morristown school districts, I was disappointed that the delay never came to fruition. Unfortunately, even with overwhelming majorities in both the House and the Senate voting for the delay, the legislation was slow-walked to its death, to the delight of the Vermont Agency of Education, the Vermont School Boards Association and the Vermont Superintendents Association. Passage of this bill was a Sisyphean task, made even more so by the opposition of those three behemoths.
Education funding and property taxes: The fiscal year 2020 budget includes $14 million to buy down the property tax increase that is necessary due to the increase in school spending throughout the state. Spending had been predicted to increase 3.2 pecent, but school budgets came in higher than that, so the spending increased by 4 percent.
To keep the property tax increase at just one cent per $100 of property value, $14 million of the revenue surplus is being used to fill the whole.
Increased spending is a direct result of our funding system. Until we comprehensively reform the education funding system, we will not see a financially sustainable pre-K-12 education system. No amount of forced mergers of school districts like Stowe and Elmore-Morristown is going to save money, unless and until you reconnect voters to the budgets voted upon and money spent.
Like our education funding system in general, this tax rate buy-down is unsustainable, and, while it is appreciated to keep taxes low, it could mean a spike in property taxes next year.
Tax changes: As is the case every year, numerous proposals to increase taxes on Vermont families and businesses emerged to fund pet projects. In the end, though, there was a tax package that actually included some very positive changes:
• An increase in the estate tax exclusion from $2.75 million to $4.25 million in January 2020, and $5 million in January 2021.
• An expansion of the downtown tax credit program from $2.4 million to $2.6 million.
• Reinstituting a deduction for medical expenses within the personal income tax that will allow taxpayers to deduct any medical expenses beyond Vermont’s standard deduction and personal exemptions.
• Expanding the cap on the affordable housing tax credit and the first-time homebuyer tax credit to $125,000 each.
• Changing the definitions of “operator” and “rent” to include online travel agencies, to ensure they remit to the state the entire tax collected from the client.
• Changes in the land gains tax so it would apply to a much smaller number of transfers — only land subdivided by the transferor within six years prior to the sale or exchange would be subject to it, and it exempts land transferred in a downtown, village center, or new town center.
Unfortunately, the tax bill also capped the capital gains exemption at $350,000. This reduction will have a considerable impact on some of our state’s small businesses and their families.
Tourism funding: While funding for promoting Vermont as a tourist destination is maintained in this year’s budget, the increase many of us hope for each year was not to be.
Rest assured, however, this issue will be at the forefront next year. Our first annual Tourism Day at the Statehouse this year was an unqualified success. We started to educate legislators about the importance of the industry, and of additional investment in it, and this effort will continue over this summer and fall. Our goal next year is to continue this education and, ultimately, institute a dedicated fund for tourism and marketing.
Unpredictable end: Undoubtedly, the surprise of the session came on the final day of the House session when it became clear that the two highest priorities of the Democratic legislative supermajorities — an increase in the minimum wage to $15 an hour and a mandatory paid family leave program — were not going to get across the finish line.
While the leaders had five months to come together on the two priorities, they failed to do so, and, in the end, the Legislature adjourned without either.
I am pleased that neither proposal passed this year, as both would have been detrimental to our state’s small businesses and their employees. Rest assured, though, these two issues will return in earnest next year.
It continues to be a tremendous honor to represent the people and community of Stowe, and I thank you for your continued confidence in my work. As always, if anything is of interest to you, or if you have any questions or concerns, please contact me. I can be reached at 253-9314 or firstname.lastname@example.org. Please also be in touch if you are interested in receiving my more in-depth email newsletters.
Heidi Scheuermann, a Republican, represents Stowe in the Vermont House of Representatives. Email letters to email@example.com.