Economic development, broadband, UI relief pass Legislature; Cloud tax, Act 250 reform fail

by the Vermont Chamber of Commerce

The Legislature adjourned Friday after approving spending for tourism marketing, foreign trade, technology-based economic development, workforce development, and BIPOC business support.

Other legislation that made it over the finish line includes additional economic recovery grants, the largest investment in broadband buildout in Vermont history, investments in child care, health care cost savings for businesses, and additional incentives to recruit workers to Vermont. However, the Legislature advanced only $30 million in business relief grants, despite the Agency of Commerce and Community Development identifying over $500 million in existing known unmet need.

Economic development spending

The Legislature passed a $7 billion budget that includes many unprecedented investments across state government, including in economic development. Some notable allocations are:

$20 million to the Agency of Commerce and Community Development (ACCD) to fund additional economic recovery grants
$20 million to Vermont State Colleges for system transformation over the next four years
$11 million to ACCD to be used in the same manner as the Brownfield Remediation Fund
$800,000 to ACCD for technology-based economic development grants
$1.5 million for the Better Places Program
$2 million to the Vermont Department of Tourism and Marketing in additional funds, beyond the agency’s regular budget for marketing and regional stimulus
$650,000 for additional funds for new and remote worker programs
$100,000 for adult CTE scholarships
$300,000 for adult CTE program improvements
$150,000 to ACCD for outreach and technical support for BIPOC-owned businesses
$300,000 to support foreign trade with Canada
$900,000 to ACCD to fund the Entrepreneurs’ Seed Capital Fund

Funds for much of the budget rely heavily on resources provided to Vermont in the American Rescue Plan Act of 2021 (ARPA). This massive injection of federal money allowed legislative leaders and the Governor to advance bold proposals that may have otherwise not occurred.

$15 Million for Utility Customer Relief

Many businesses and residents have accumulated large overdue utility bills over the last year during the pandemic. In response, legislators included $15 million in the budget to provide relief for overdue bills caused by the economic hardship of the pandemic and the Vermont Public Utility Commission’s (PUC) extension of the state’s disconnection moratorium through the end of May.

As written in the budget (page 54) the allocated funds will establish a program to simultaneously minimize financial hardship caused by the COVID-19 public health emergency and mitigate utility rate increases ultimately shared by all utility customers.

$150 Million in Rural Broadband Buildout

The Legislature appropriated federal ARPA funds to finance buildout in Vermont’s unserved and underserved, low-population regions. The $150 million is a massive increase from past investments and prioritizes buildout to locations with speeds under 25 Mbps download and 3 Mbps upload. The funds are primarily directed at Communication Union Districts (CUDs) which are organizations of two or more towns that join together to build communication infrastructure. In many parts of Vermont, CUDs do not yet exist, prompting the Legislature to allow some existing privately-owned internet providers to access the funds.

Unemployment Rate Fix Passes with New Tax Attached

After nine months of deliberating on how to properly adjust unemployment insurance (UI) trust fund replenishment in the wake of historic rates of pandemic-related unemployment, the State House advanced changes to remove 2020, an anomaly year, from consideration when the Department of Labor computes UI tax rate schedules. The Vermont Chamber advocated in favor of this change because it largely addresses concerns about unmerited UI cost increases for employers.

Facing pressure emanating from a handful of representatives and senators who desired an increase in UI payments for claimants, legislators put forth last minute changes that add a $100 million tax on employers to increase UI benefits for claimants over the next several years. The Vermont Chamber strongly opposes this change. The use of the UI trust fund for this purpose is unnecessary, as ARPA funds could have been employed to provide working households with additional financial support.

The result of the legislation is net savings for employers. Yet it adds a new, multiyear tax on employers that are actively working to recover from an economically devastating pandemic.

Additional Economic Recovery Grants Clear State House

Using ARPA funds, $20 million in additional economic recovery grants was advanced as part of the Legislature’s economic development bill that was attached to the State budget bill (page 142). The addition of these funds to previously advanced economic recovery grants adds up to just $30 million in total business relief grants advanced in 2021. In December, the Agency of Commerce and Community Development (ACCD) identified $500 million in known unmet need in the business community as a result of the pandemic. Governor Scott recommended $50 million be provided for additional economic recovery grants, which was also disappointing, considering the demonstrated need. It is almost certain these grants will be oversubscribed. Significant reserves of ARPA funding remain unallocated, and the Vermont Chamber will continue to advocate for direct financial support for businesses over the summer and into the next legislative session.

Economic Development Bill Passes

An economic development bill that includes a variety of Vermont Chamber priorities is awaiting the Governor’s signature. Top Vermont Chamber priorities included in the bill are $1.4 million in tourism marketing funds for out-of-state promotion of Vermont’s tourism sector, $600,000 for a regional consumer stimulus program, and $300,000 to establish a foreign trade office in Quebec. Additional Vermont Chamber priorities included in the bill are technology-based economic development investments, workforce development initiatives, investments in adult post-secondary education, a microbusiness development program, and BIPOC business support.

Short-Term Rental Registry Paused

After being preliminarily approved by the House late last week, S.79, a bill relating to improving rental housing health and safety, which includes establishment of a short-term rental registry, has been held over until the Legislature reconvenes. Unable to garner the votes required to suspend rules and message the bill to the Senate forthwith versus waiting one legislative business day, the bill will remain with the House until the Legislature gavels in again. The legislation was already approved by the Senate for the first time in March, so it is expected the bill will pass when the Senate takes it up again.

Legislature Modernizes Liquor Laws

The Legislature passed the most significant liquor law modernization bill in recent years. H.313 is awaiting Governor Scott’s signature and includes the Vermont Chamber and Vermont Independent Restaurants priority to extend the current pandemic-allowed alcohol to-go provisions until July 2023. While not a cure-all, the off-premises provision as passed will help the industry recoup some lost revenue and provide a service that customers have come to expect. According to a National Restaurant Association survey in 2019, 56% of all adults said they would order drinks with their to-go order from a restaurant, if permitted. Without a doubt, the pandemic has accelerated this trend. By January 2023, a report examining economic and public safety impacts will be submitted to the Legislature.

Significant Child Care Bill Passes

The approved child care bill would plot a policy course to ensure no household spends more than 10 percent of its income on child care by 2025. In a 2020 study of several states, the U.S. Chamber of Commerce determined that shortfalls in child care infrastructure resulted in between $479 million to $3.47 billion in estimated annual losses for those state’s economies. Vermont faces a similar challenge, worsened by our current workforce shortage. The Vermont Chamber continues to believe greater workforce participation could be achieved if more households have access to high-quality, affordable child care that prevents long-term workforce exodus by households in which child care is not economical.

Workforce Recruitment Bill Passes

The Legislature passed a bill to attract new and remote workers to Vermont, providing $650,000 to ACCD to support employers that are unable to fill positions from among candidates who are already located in the State. Relocating employees may be eligible for a grant under the program for qualifying expenses, with grant amounts ranging from $5,000 to $7,500 for relocating employees who become residents. Priority consideration will be given to labor market areas with high average unemployment rates.

Relocating employees are defined as relocating individuals who become full-time residents of Vermont on or after July 1, 2020, are full-time employees at a Vermont location of a for-profit or nonprofit business organization domiciled or authorized to do business in Vermont, and the individual becomes employed in one of the “Occupations with the Most Openings” identified by the Vermont Department of Labor. The employer must show proof of being unable to hire a Vermonter.

Business Community Defeats Cloud Tax Proposal

The Vermont Chamber and other business advocates again avoided the threat of a cloud tax. If such a tax had advanced, consumers and nearly all of Vermont’s businesses that use cloud-based services would see considerable cost increases. This potential additional financial burden becomes particularly daunting for many businesses as they struggle from the economic fallout caused by COVID-19.

As proposed this legislative session, the tax would have cost Vermont’s technology industry at least $14 million annually by Fiscal Year 2025 and would have damaged the state’s current tech-friendly reputation, while also disincentivizing the recruitment of remote workers. By adding a new financial burden for those who may have otherwise capitalized on connectivity opportunities to access or provide cloud-based services, this tax proposal had the potential to negate much of the economic benefit that would otherwise be achieved through State investments in broadband infrastructure.

No Act 250 Reform This Year

Despite executive action and a handful of bills that, if advanced, would make significant adjustments to Act 250, no changes to the land use law advanced in 2021.

Late in the 2021 legislative session, encouraging Act 250 legislation was introduced in identical forms in the House and Senate. The legislation would, among other changes, reform the Natural Resources Board (NRB) and provide certain municipal areas an exemption from Act 250 jurisdiction. In addition to replacing the current five-member Natural Resources Board with a three-member professional full-time board, the two bills would transfer a handful of authorities currently held by District Commissions to the NRB. Exemption from Act 250 jurisdiction for certain Designated Downtowns, Enhanced Village Centers, and Neighborhood Development Areas is a long-standing priority of the Vermont Chamber.

If implemented, this change would help facilitate responsible development in municipal areas, which would contribute to the creation of additional affordable housing in Vermont. Similar provisions were unsuccessfully introduced as part of a housing bill last session.

While a consistent priority of both the Scott Administration and the Legislature, Act 250 reform efforts have failed for the past several years.

Racism and the Economy
The 12 District Banks of the Federal Reserve System are partnering to highlight the implications of racism in the United States and identify solutions. The Reserve Banks will host a series of virtual events to examine the ways in which structural racism manifests in America and advance actions to dismantle structural racism. Learn more and watch previous events in the series. Register to attend the next event on June 2.

Categories: Legislation

1 reply »

  1. “$150 Million in Rural Broadband Buildout” ? Great ! but I live 7 miles from down town Mount Peculiar, and I’ve been trying for 8 years to get cell service ! Priorities ? Broadband, cell service, Broadband, cell service? To be quite honest, from my experience, I don’t hold much hope for either .

Leave a Reply