Business & Economy

Legislative Wrap-up: Economic development

Unemployment insurance and benefits

Lawmakers helped state businesses this session by mitigating some impacts of Tropical Storm Irene and by tweaking laws regarding the state’s unemployment insurance trust fund, which pays benefits to the unemployed.

The remnants of Hurricane Irene shuttered many businesses for several weeks in 2011, forcing some employees to be laid off. Since an employer pays more to the trust fund if it lays off workers, businesses ended up with higher payments to the trust fund.

Under legislation that sailed through the House and Senate, businesses will be exempt from higher unemployment insurance contributions, if those increases stem from layoffs directly caused by Irene.

But the shield exemption only covers eight weeks, which means businesses closed for more than eight weeks will still pay more, simply because of the storm. Some businesses viewed that as an unfair penalty.

In future, the natural disaster provision, which shields a business’ unemployment insurance rating if natural disasters cause job losses, will cover only four weeks.

Lawmakers argued that the state couldn’t afford to shield businesses for more than eight weeks, noting that the trust fund is still fragile and not yet solvent. Labor Commissioner Annie Noonan said workers were laid off for an average of seven weeks post-Irene, so the shield still covers many Vermont businesses.

H.169 provides retroactive tax relief to affected businesses, who must prove that employees were laid off as a direct result of a disaster, and wouldn’t have been fired otherwise.

Businesses seeking relief must apply to the Department of Labor within 20 days of notification. The labor department will spend $60,000 in administrative and implementation costs, and will send mail notifying state businesses.

Meanwhile, the issue of unemployment insurance for newspaper carriers won’t be dealt with until July 2014. In the meantime, the Legislative Council will issue a report on the topic, due in January.

Just as businesses complained about higher unemployment insurance payments, legislators countered that workers didn’t receive enough in benefits from the state’s trust fund.

Several House lawmakers argued that, thanks to a stronger than expected economic recovery and the state’s timeliness in repaying a federal unemployment insurance loan, unemployed workers should share in that good news by receiving more benefits.

The argument failed to gain much traction, after the state’s business community questioned the wisdom of the move at this time, backed by some lawmakers on the House Commerce and Economic Development committee. A Progressive push to increase benefits for the unemployed, at a total cost of $700,000, failed on the House floor, 19-118.

Equal pay and paid sick leave

The Legislature reformed regulations on businesses, attempting to address the pay gap between men and women. New legislation protects employees who ask how much their colleagues earn and those who request flexible work schedules.

The legislation also requires that the state only contract with businesses who meet the equal pay act’s provisions and can certify that they’re up to that standard.

The most contentious element in the bill, which many state businesses questioned, involved just how seriously a business must consider a request for a flexible work schedule.

Since a business faces civil penalties and investigations from the attorney general, state’s attorneys or the state’s Human Rights Commission for failure to comply, businesses sought to water down any mandates, fearing harsh penalties for small mistakes, or over-stringent requirements.

The legislation now mandates that an employer must consider in good faith a request for a flexible work schedule at least twice a year. A business can’t punish an employee for this request, but is free to say that its business interests make flexible work time unfeasible.

Employers and employees will still maintain their strict rights under law to create, end or modify flexible work schedules.

The reform to the state’s law came as the state’s last update to equal pay provisions, passed in 2002, faced its first test in the courts, in a 2011 case attracting attention from many legal observers. Preliminary judgments on that case are still pending.

Legislation also puts in place a study, due in January, of the benefits and drawbacks of implementing paid family leave. Paid family leave is time spent out of work caring for a newborn or other family members.

One statistic cited often this session is that women make 84 cents on the dollar compared to men here, slightly better than the national average of 78 cents per dollar.

Debate over mandatory paid sick leave eventually stalled.

Tax Increment Financing Districts

Reforms to the complex and disputed financing tools known as TIFs, or tax increment financing districts, were pushed by both chambers, a coalition of mayors and the Shumlin administration this session.

Backed by eight city mayors, Gov. Peter Shumlin called for the $6 million allegedly owed to the state by Burlington, Winooski and Milton to be forgiven, prompting action from the state Senate to do just that.

But House lawmakers and Speaker Shap Smith tweaked legislation so that those towns would pay back $460,000 to various funds, in recognition of the auditor’s work on this topic. State Auditor Doug Hoffer also called for reform to TIFs in a December 2012 Capstone report, requesting clarification of ambiguous laws and a way to resolve disputes with towns in the future.

Eventually, it seems all parties secured parts of what they initially wanted. Hoffer resisted a call for a full amnesty, asking for a partial forgiveness based on laws applied retroactively to TIFs, which he got.

Towns paid much less than they supposedly owed, and also received the clearer statutes they had requested. Towns said unclear statutes, and resulting legal interpretative disputes, led to their disagreements with the auditor.

Under the legislation, the Vermont Economic Progress Council (VEPC) and the tax department will maintain increased oversight of TIF districts, which must now report more frequently. VEPC can also adopt rules to clarify TIF district regulations.

In future, if there are disputes, the secretary of the Agency of Commerce and Community Development will decide who owes what, after a recommendation from VEPC. If a town doesn’t pay the state, then the state treasurer or the attorney general can deal with it.

However, the legislation also provides that VEPC won’t approve new TIF districts. This has sparked questions among administration officials, lawmakers and towns as to what new tool will finance economic development in towns, and especially downtown development.

Cloud computing tax

Controversy at the Statehouse over taxing businesses who use cloud computing services ended for now as lawmakers approved extending a sales tax on cloud computing by ending a tax break that lasted one year.

A conference committee on the technical tax bill decided that the state couldn’t afford the $900,000 annually needed to cover extending the tax break, or moratorium, for three more years. The full Senate backed an extension of the moratorium, while the House voted to end it.

The Shumlin administration originally asked for charges made for rights to use “prewritten computer software,” if the software is owned by a third party, to be exempt from the state’s 6 percent sales tax.

This comes after a study committee voted 4-3 to keep cloud computing tax-free, with some businesses and officials arguing that the tax break would spur the growth of Vermont’s software and technology industry.

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Nat Rudarakanchana

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