[B]usiness groups say legislative mandates are hampering their ability to recover from the Great Recession.
The groups, representing a wide array of sectors, say lawmakers have burdened businesses with new regulations, fees and taxes over the past six years that have made it difficult for small companies to thrive in Vermont.
Members of the Vermont Retail and Grocers Association, the Associated General Contractors and the Vermont Chamber of Commerce say they are uncertain about future legislative changes, and they are still absorbing the half-dozen laws on the books that have had an impact on how they do business.
There are too many changes happening too fast, they say, for businesses that are already having a tough time pulling out of the doldrums of the recession.
The business groups said that the cumulative effect of the changes are making it difficult for companies to turn a profit, hire more workers and raise pay. Ultimately, it could even be impacting state tax receipts, which have not met expectations over the past year.
Jim Harrison, executive director of the Vermont Retail and Grocers Association, says we all want to see “a good, strong, vibrant economy, that’s what makes the world go round.”
“Unfortunately, we get caught up in the thought that we can just wave a magic wand and everything is good,” Harrison said. “It’s sort of like if we mandate a good economy, it will happen, and it really doesn’t work that way.”
Heather Shouldice, a lobbyist who represents small business interests in the Statehouse, says the mandates and assessment are having a cumulative effect on the business community “that is prohibiting them from being innovative, creating jobs and growing their businesses.”
In January, Gov. Peter Shumlin proposed a 0.7 percent payroll tax to address the Medicaid cost shift (the first of its kind in the nation). For a company with a $500,000 payroll, the tax would cost $3,500, and the groups say there is no guarantee that the cost of health insurance premiums would go down the equivalent amount.
The cost of doing business
While the payroll tax would have the biggest direct impact on companies, other changes under consideration this year would also be onerous, the groups say. Grocers and restaurants are liable for a larger share of the implementation of the GMO labeling bill than expected. Proposed mandatory paid leave rules would eliminate the flexibility construction companies need to meet to high-pressure deadlines. A development fee could be imposed to help pay for Lake Champlain cleanup. New hotel fees are under consideration. The Legislature is also considering a sugar-sweetened beverage tax that could impact retailers.
That list of taxes, fees and regulatory changes is on top of a laundry list of mandates they are still adjusting to, business groups say. In the past five years, the Legislature has set higher unemployment rates, required all small companies to buy health insurance for employees on the state’s exchange (Vermont was the only state to do so), placed a bag tax on retailers, raised the minimum wage twice and raised the employer assessment to $564 per year per full-time employee.
Not to mention Vermont’s high property tax burden and electricity rates that already make doing business in the state hard enough, they say.
“We get sidetracked into saying, OK, how can we make people’s lives better, and forget that we’re not necessarily helping just by mandating things for employers and then taking away their incentive for job growth,” Harrison said.
The mandates, fees and taxes make it tougher for construction companies and retailers, in particular, to compete with out of state businesses, they say.
Part of the problem has to do with the legislative process, according to Betsy Bishop, president of the Vermont Chamber of Commerce. She says lawmakers are focused on narrow topics in each of the 24 committees in the Statehouse and don’t think about the cumulative impact.
“We often hear from them and they say, ‘well, that’s not our concern because that’s not our jurisdiction,’ we find that because of the process you have a myopic look at whatever the bill is,” Bishop said.
The committee that is looking at the paid sick leave mandate is not necessarily focused on the $2.8 million fee bill, for example, she says. Or they weren’t part of the unemployment changes four years ago.
“What we’re trying to do is remind them of the work that is not only going on in the 24 committees today, but we’re trying to remind them what they did last year and the year before, which businesses are still trying to absorb,” Bishop says. “It’s as if sometimes because we did it last year it’s not an issue this year. But for many of the businesses, you will hear we’re still working on that.”
Different laws affect different businesses differently but each of these laws has a huge impact on employers, she says and the cumulative impact is “getting to a heightened place.”
Harrison says minimum wage increases for example have a cascading effect. Retailers and grocers need to compete for workers and in order to do so they try to stay above minimum wage. When the rate went up 45 cents this year, one country store he frequents pushed the coffee price up 14 cents because “there wasn’t an extra pot of money around.” Adding 14 cents may not seem like much, he says, but what happens next year when it goes up another 14 cents, he says.
“You take that (the minimum wage) and then you couple it with proposals to mandate paid leave, and oh well of course that’s a good benefit,” Harrison says. “If every company could offer it they would because it would make them more competitive in the marketplace, but when you mandate something you take away the flexibility of an employer who would do something else that employees might appreciate more than this benefit that you now have to give to part-time employees.”
John Connor, who runs Connor Contracting, a family construction business with 35 employees, says his sector is very competitive. Jobs in the construction industry are won or lost on a fraction of a percentage point, he says.
“We’re out there every day, doing our best to find work, win work and execute work in safe and careful manner,” Connor says. His commercial contracting company is under a tremendous amount of pressure to attract and retain good employees, and it offers an array of benefits, including 401(k) matches, holiday and vacation pay, profit-sharing, bonuses, clothing, tools, equipment and vehicles to employees.
“When we look at something like mandatory paid leave, that’s of great concern to us,” Connor said. While it is a great benefit to offer, he said three to five mandated days equates to a payroll liability of about $30,000.
“If everyone takes those mandatory sick leave days a year, I don’t know where that money is going to come from,” Connor said. “I’m concerned that money is going to come from changing benefits we currently offer — or not allow us to hire more people. So, it’s either going to stagnate our growth, or it’s going to impact the employees we currently have.”
Cathy Lamberton, director of the Associated General Contractors, says 90 percent of state contracts for the Agency of Transportation and the Department of Building and General Services are awarded through a competitive bid process.
“They take the low bid, which is open to any contractor anywhere,” Lamberton said. “The more you place mandates onto a contractor, the less competitive they become regionally.”
The state is also imposing penalties on transportation contractors who miss deadlines. A paid leave mandate would make it difficult for contractors who are already under the gun because of winter weather constraints to meet deadlines.
House Speaker Shap Smith says the business community’s concerns are “legitimate,” but he defends the changes to state employment laws.
“When I go out on the campaign trail, I hear from a lot of employed Vermonters who are really struggling and asking for some help,” Smith said. “I think that there are two sides to this coin. I understand and am sympathetic to the concerns they raise. We not only hear from them, but also hear from a lot of Vermonters who are seeking some help as well. It’s a matter of trying to balance all that.”
Correction: An earlier versions of this article misstated the amount of the fee bill. The spelling of Cathy Lamberton’s name has also been corrected.
