Determination First, Details to Follow
Vermont is one of the few states with no statutory or constitutional balanced budget requirement. With the state facing its largest budget gap in years, one might expect that flexibility to tempt Gov. Peter Shumlin and legislative leaders to forestall some of the painful choices that lie ahead.
Originally forecast at $94 million, the gap has grown to $113 million following a revenue downgrade in January.
In the face of those daunting numbers, it was extraordinary on Thursday to see administrative staff and House leaders join together in releasing an eye-popping list of potential budget cuts that places some of the most sacred cows on the chopping block. The document is more a statement of will than a budget blueprint since the laundry list of cuts, taken together, far exceed the amount that will ultimately be needed. It includes substantial reductions in health care assistance, elimination of entire state divisions and dramatic reductions in others, closure of a state prison, and even the bold suggestion to reduce the size of the House from 150 to 120 members.
The largest area of proposed cuts is in the category of state employees, with nearly $11 million in reductions. The Vermont state employees union historically has had enormous influence with Democrats in Montpelier, so the fact that the governor and House Speaker Shap Smith have linked arms on the employee budget savings target illustrates a sea shift in Statehouse union politics.
There continues to be surprisingly little talk about raising taxes to fill the budget gap, which is indicative of the conservative mood swing that has occurred in the last few months. The tax aversion also is a recognition of the state’s systemic budget problem that has been largely caused by spending growth that has consistently exceeded revenues by two percent.
Although the governor’s budget proposed a 0.7 percent payroll tax to reduce the Medicaid cost shift, that proposal is moribund in the legislature despite an intense campaign by the administration to garner support.
The likely death of thepayroll tax increase opens up an additional $16 million hole in theGeneral Fund budget, since part of the increase would have been used to pay for higher Medicaid enrollment. Lawmakers will be looking for another revenue source to fill that gap. A proposed sugar sweetened beverage tax has gained some traction in recent weeks but still faces long odds. It is anyone’s guess what other taxes may be considered.
The institutional budget cooperation in Montpelier this week presented a stark and refreshing contrast to the continuing dysfunction in Washington, D.C., as the Department of Homeland Security faced a potential shutdown on Friday. Gov. Shumlin, House Speaker Smith, and new Appropriations Chair Rep. Mitzi Johnson, D-S. Hero, deserve credit for putting political gamesmanship aside and addressing the state’s budget challenge head-on.
Committee Approves State False Claims Act
The House Judiciary Committee gave its unanimous approval on Friday afternoon to H.120, a bill that establishes a state false claims act modeled after federal law. The bill authorizes substantial penalties against entities that submit false claims for payment to state agencies, and it creates significant incentives for individuals (so-called “relators”) to file claims on behalf of the state in exchange for monetary awards.
Representing many of the state’s health care providers, DRM, along with others, was able to obtain numerous changes to the bill. These included the elimination of penalties where an entity voluntary discloses a false claim; the elimination of a provision specifying that joint and several liability would be imposed when multiple defendants are sued; and numerous other amendments to make the process more manageable.
R ent-to-Own Legislation Substantially Modified
Following a widely publicized and contentious hearing process, the Senate Economic Development, Housing and General Affairs Committee substantially amended a bill that, as introduced, would likely have forced rent-to-own businesses out of the state. The amendments to S.73 were largely patterned after legislation adopted in other states that has not proven to be detrimental.
The committee heard more testimony from nearly a dozen customers this week who ventured to Montpelier in minus-twenty-degree weather to testify about their positive experiences with rent-to-own stores. The witnesses acknowledged knowing that they paid significantly more than the cash price at other retail outlets, but said that rent-to-own was their only avenue to purchase high-quality merchandise. The testimony had a noticeable impact on several senators.
The amended bill will be voted on when legislators return from the Town Meeting week break.
Senate Judiciary Considers Limit on Building Defect Suits
A bill that would create a ten-year statute of limitations on suits brought based on injuries from defective building design and construction was considered on Friday by the Senate Judiciary Committee. The bill, S.17, presented the typical stand-off between parties seeking to limit tort claims – in this case architects and contractors – and plaintiffs’ lawyers.
Plaintiffs’ attorney Chris Maley argued that the bill would unfairly limit claims by individuals who are injured from defective building construction but who don’t discover the flawed construction until after the ten-year period. Architects and builders argued that current law exposes them to potential liability forever, and suits brought decades after a building has been constructed are virtually impossible to defend.
With only four legislative days before the crossover deadline, it seems unlikely the bill will make it out of committee this year.
Renewable Energy Bill Advancing in House
A bill that would create a new Renewable Portfolio Standard for Vermont utilities and eliminate a troubled Sustainably Priced Energy Enterprise Development program has advanced to third reading in the House and will likely pass after the Town Meeting Day break. The bill, H.40, was the topic of a DRM Leadership Forum with Department of Public Service Deputy Commissioner Darren Springer on Wednesday.
Before passing the bill out to the floor, the tax-writing House Ways and Means Committee attached an amendment that would freeze for three years the rate of the energy efficiency charge that is added to electricity bills. The money raised by the fee funds the energy efficiency utility, Efficiency Vermont, which is run by the privately held Vermont Energy Investment Corporation. The program, which is regulated by the Public Service Board, currently raises about $52.2 million annually for energy efficiency projects
Cloud Tax Repeal Moves On
The Senate has passed a bill that will formally declare prewritten software accessed remotely over the Internet to be a service and not a tangible good and not taxable under current Vermont law. The bill, S.97, passed through third reading in the Senate on Friday and will move on to the House.
In 2014 lawmakers declined to extend a moratorium on collection of the tax, levied on an activity that is commonly known as Software as a Service. But recent court rulings in Michigan and a failed attempt by the Vermont Department of Taxes at writing rules to collect the tax led Vermont Commissioner of Taxes Mary Peterson to conclude that there is nothing to tax and to request a change in the law. Legislators want to send a clear message to the outside world that Vermont no longer taxes transactions in "the cloud."
Water Committee Wants Gas and Rooms and Meals Tax Money But Others Balk
The House Fish, Wildlife and Water Resources Committee this week passed a water quality bill that, if enacted, would crack down on agricultural runoff into impaired waters of the state, restructure storm water management laws and raise more than $17 million in new taxes and fees to pay for it. The bill, H.35, called for a half-percent increase in the nine percent rooms and meals tax, a half percent increase in the ten percent alcohol tax and a two cent per gallon increase in the gasoline tax. State and federal gasoline taxes currently total 50.54 cents per gallon.
The funding proposals were not well received by other committees in the House. Ways and Means Committee Chair Rep. Janet Ancel, D-Calais, told an official from Department of Environmental Conservation to let them know how much money is needed for the cleanup program and the committee would find the money. The House Agriculture and Forest Products Committee stripped all of the taxes out of its version of the bill and sent it off with only about $3 million in related fees still intact.
The Transportation Committee held several hearings on the bill and plans to look hard at the taxes being raised and the spending being proposed next week. The committee considers the gasoline tax to be a resource for the maintenance and repair of roads and bridges and has jealously guarded its revenue sources in the past.
Speakers Support Enterprise Zone Concept for Industrial Parks
The Senate Economic Development, Housing and General Affairs Committee intends to revive a plan that failed to pass last session to create Enterprise Zones in industrial parks entitled to expedited permitting and other advantages. The provision would be added to a draft economic development bill which is under construction in the committee.
Colchester Town Manager Dawn Francis made a strong case for establishment of the program in which Act 250 permitting could be expedited, agricultural soil mitigation could be waived and traffic restrictions could be mitigated. She said industrial parks should receive the same favorable treatment as growth centers. Enterprise Zones could also receive priority funding from state programs that support infrastructure development, such as storm water and waste water disposal.
In his testimony on behalf of the state’s regional development corporations, Rutland EDC Executive Director Jamie Stewart supported Enterprise Zones, the proposed changes to the Vermont Strong Scholars and Vermont Economic Growth Incentive programs, the marketing funds proposed for general promotion of the state and expedited permitting.
Stewart said the act of establishing Enterprise Zones would, of itself, promote economic development. He said with the use of the VEGI program, Enterprise Zones, media marketing and other proposals in the bill, the state would be well positioned to compete with New York as a destination for new development.
Committees in both the House and Senate are working on similar drafts, but the Senate is expected to act first when lawmakers return from their break.
Panel Close to Finalizing Health Care Reform Bill
The House Health Care Committee neared completion this week of a health care reform bill that includes many of the governor’s reform initiatives. The committee is working with the assumption that appropriators will approve a $20 million appropriation from the state’s General Fund budget. The committee is expected to propose a two cent per ounce excise tax on sugar sweetened beverages to fund the proposal. That tax would raise approximately $34 million.
The bill:
Emergency Involuntary Procedures Moving Forward
The House Human Services Committee continued discussions this week on H.241, a bill related to emergency involuntary procedures. Hospitals successfully lobbied to have the rule apply to only inpatient psychiatric units and not emergency or other hospital departments.
The bill limits the rule to adults in psychiatric units in care and custody of the Commissioner of Mental Health. It allows psychiatrists, advanced practice registered nurses, and physicians assistants to prescribe emergency involuntary medication and allows psychiatrists and APRNs to call in phone orders for emergency involuntary medication. (PAs will need to personally observe these patients) It also requires PAs who prescribe emergency involuntary medications to do so under the supervision of a psychiatrist.
Representatives from Disability Rights of Vermont and the Mental Health Law Project argued that protecting the safety of patients and staff is a priority. They said the proposed legislation does not provide everybody in the department’s custody with the same level of protection that they would have received if the Vermont State Hospital still existed.
The committee will vote on the bill upon their return from the Town Meeting break.
Panel Continues Discussion on Observation Status in Hospitals
On Tuesday, the Senate Health and Welfare Committee heard from the Vermont Association of Hospitals and Health Systems, the office of health care ombudsman, and the long term care advocate on S.5, a bill that would require hospitals to notify patients in observation status that they will be covered under their outpatient, not inpatient, insurance benefits. Medicare’s policy is to not reimburse hospitals for patients admitted to the hospital who should have been deemed an observation patient.
All agreed that individuals need to be informed that they are in observation status when in the hospital. They also supported a standard form that hospitals will provide to patients. The form will include a statement that the patient is not admitted to the hospital as an inpatient and that observation status may affect the patient’s Medicare, Medicaid, or private insurance coverage for other services.
Hospitals provide observation care for patients who are not well enough to go home but are not sick enough to be admitted. This care is considered an outpatient service, even though patients may stay several days. Because observation care is provided on an outpatient basis, patients are responsible for co-payments for services and any routine drugs the hospital provides.
VITL Fights for Autonomy
Vermont Information Technology Leaders President John Evans advocated for continued autonomy for his organization before the House Health Care Committee on Wednesday. The administration has proposed that oversight of VITL be moved to the Green Mountain Care Board. Evans said to be successful the organization needs to maintain an entrepreneurial approach to technology innovation, and he doesn’t believe this can be done with the increased bureaucracy and other “governmental” constraints that would exist under the GMCB umbrella.
Evans told the committee that to be successful VITL needs to act as an independent high-tech company both in terms of management and governance. He does not believe the state should dictate VITL’s board structure, but VITL should continue with a public-private partnership with board seats filled by the governor’s office and legislature as long as the state continues to provide funding. He said if the GMCB is to provide oversight to VITL it should be limited to the funding provided by the state.
GMCB Chair Al Gobeille told the committee that he would support the administration’s proposal to have VITL fall under the board as long as the state provides the board with appropriate resources and that the oversight includes review and approval of the entire budget, VITL’s strategic plan, and their core activities. He does not support Evans’ recommendation that oversight be limited to state funding.
Telecom Bill Passes Out of Two Committees
H.117, a bill that creates a new Division of Connectivity within the Department of Public Service, was given unanimous approval by the House Commerce and Economic Development Committee on Wednesday and then swiftly passed on a 10-0-1 vote out of the Ways and Means Committee.
The Ways & Means Committee approved an amendment, proposed by Rep. Sam Young, D-Glover, that would require the personnel and administrative costs associated with the new connectivity initiative to be covered by the utility gross receipts tax in Fiscal Year 2017. Those costs will be covered in the coming fiscal year by the Connectivity Fund, which itself is funded by the Universal Service Charge. Young’s amendment would allow the department to propose an increase in the gross receipts tax if existing revenues are inadequate to fund the new connectivity administrative costs.
The bill creates a telecommunications and connectivity board that will serve in an advisory capacity to the commissioner in developing telecommunications policy, and recommend distribution of funds to the high-cost program, a program aimed at keeping basic telecommunications service affordable in all parts of this state, and the connectivity initiative, which serves locations needing improved access to broadband internet service.
The bill will be reviewed by the House Appropriations Committee after the Town Meeting break.
Senate Health Committee Considers Health Care Bill
The Senate Health and Welfare Committee this week began reviewing a committee bill that would set standards for pharmacy benefit managers, limit maximum allowable costs for prescription drug reimbursement and require hospitals to provide notice to individuals placed in observation status of potential financial implications. The bill would require the Green Mountain Care Board to create an online database to allow consumers to compare the cost and quality of health care services, evaluate the quality of certain threshold evaluations and recommend strategies to reduce administrative burdens on health care providers.
GMCB Chair Al Gobeille reminded the committee that the goal of health care reform is better access and quality and reduced health care spending. He said that creating a website to allow consumers to compare costs and quality of health care can be increasingly expensive and result in lower than expected consumer participation. He said a comprehensive website would be best managed through insurers.
On Thursday, the Senate Health and Welfare Committee heard from anti-trust attorney David Balto on the lack of regulation of pharmacy benefit managers. Balto has been hired by independent pharmacists to explain why the proposed legislation is necessary to protect consumers. Balto said Vermont does not currently adequately regulate the conduct of PBMs and that this legislation is vital. He argued that PBMs engage in fraudulent and deceptive practices that are harmful to consumers. He said the market is lacking the essential elements of competition, including transparency, choice, and standards regarding conflicts of interest.
The Senate Finance Committee has agreed to work closely with the Health and Welfare Committee to advance the bill promptly prior to crossover.
Bill Would Require Coordination for Substance Abuse Care
The Senate Health and Welfare Committee on Friday took a first look at S.42, a bill that would create a comprehensive system of care for the administration of substance abuse, prevention, treatment, and recovery services. Deputy Commissioner of the Alcohol and Drug Abuse Program for the Department of Health Barbara Cimaglio expressed support for the bill and asked to return to the committee after Town Meeting break with recommendations on prevention and recovery strategies.
The bill would establish an alcohol and drug abuse treatment council to integrate substance abuse services across the new system of the care, require substance abuse services to be available throughout the state, and require the Department of Mental Health to create a plan to balance delivery of episodic and chronic treatment services between the Department of Health, the Department of Mental Health, and the Agency of Human Services.
House Committee Unanimously Passes Education Bill
On a unanimous vote on Thursday, the House Education Committee passed H.361, a bill that would provide incentives for consolidation of school districts and address school spending by limiting the increase in per-pupil spending to two percent over the next several years. School districts would be required to seek consolidation with neighboring districts with a goal of establishing districts of at least 1100 students by 2019. Districts which get their plans in place by Nov. 30, 2017 will receive additional financial incentives in the way of grants. Districts that fail to accomplish consolidation can petition the Secretary of Education for approval to not consolidate.
The bill sets real limits on the growth in per-pupil spending. School budgets that increase beyond two percent above the prior year will see their budgets automatically fail and revert to the previous year’s budget. The two percent limit would sunset in 2018.
The committee was also charged with setting education tax rates for 2016. The statewide education property tax rates for Fiscal Year 2016 will be reduced from $1.10 to $1.00 for homestead residents and $1.59 to $1.535 for nonresidential taxpayers. The overall program is expected to save $25 million to $50 million statewide.
The bill would also encourage higher staff-to-student ratios and transition public school employees to Vermont Health Connect by 2018, which may save an additional $40 million annually.
The House Ways and Means Committee will hear testimony on the bill after Town Meeting break.
