[T]he jobs bill, S.138, was a central drama in the Senate last week as senators and the Shumlin administration engaged in a push-me-pull-you game of brinksmanship. The weeklong negotiations culminated in the passage of an economic development bill on Friday that Sen. Kevin Mullin, R-Rutland, describes as a “meaningful step toward job creation.”
A key provision in the bill relaxes rules for companies that receive cash incentives.
On Tuesday, when S.138 was up for a second reading, the bill was a long way from that “meaningful step.” Three committees had stripped the legislation of more than a dozen sections, and the bill’s ultimate fate was in doubt.
As senators scrapped over the details, members of the Shumlin administration began a full-court press to get changes to the state’s cash incentives program in place.
At issue were changes to the Vermont Employment Growth Incentive that would allow qualifying businesses to hire workers at a significantly lower rate. Under current rules, companies must pay 160 percent of minimum wage or $14.64. Under the new rules they can pay 140 percent of minimum wage or $12.81. The minimum wage is set to increase from $9.15 per hour to $10.50 per hour by 2018, and proponents say the VEGI wage will quickly bump back up to a higher rate.
The lower wage can only be used in regional labor market areas of the state that have a higher than average unemployment rate. That means companies in the Burlington area, for example, will not be eligible for the lower wage threshold.
The Shumlin administration originally wanted the Senate Finance Committee to back a provision that would have allowed VEGI companies to pay $13 per hour, the livable wage set by the Joint Fiscal Office, to workers in all parts of the state.
Sen. Tim Ashe, D/P-Burlington, chair of the committee, was ambivalent about the lower wage rate on Thursday because he was concerned that workers who made $13 an hour would qualify for food stamps and other benefits.
“These changes that the [Shumlin] administration is proposing [to VEGI] would have the effect of providing cash benefits to companies that create jobs that will have people on government assistance,” Ashe said.
But after several days of rising tension in the committee, and a full court press by members of the Shumlin administration, Ashe and officials from the Agency of Commerce and Community Development reached a compromise that the senator could support.
The compromise included the elimination of a “value add” provision that would have further loosened rules for incentives to manufacturing and other companies. The provision would have lowered the job creation standard for manufacturers by no longer requiring a 20 percent job growth rate above the industry average. The Shumlin administration supported the lower threshold for green companies; Mullin wanted the standard to apply to all manufacturers.
By Friday afternoon, as John Campbell, the Senate President Pro Tempore, went ahead with the debate of S.138 on the floor of the Senate without the seven members of Senate Finance, Ashe and members of the committee voted to kill the “value add” language and opted to support the lower wage rate.
Pressure mounted in the committee when Campbell’s assistant asked Ashe whether committee members were needed to debate the sales tax holiday.
“Are you kidding?” Ashe said. “I’m there to tell them it’s the dumbest idea in the world.” Mullin called the situation “disrespectful.”
Ashe requested a lunch recess until 1 p.m.
Before the message got upstairs, Sen. Dick Sears, D-Bennington, asked his colleagues on the Senate floor to send the sales tax amendment to Senate Appropriations. Lt. Gov. Phil Scott asked Sears if he wanted to move the whole bill to Senate Appropriations. Sears replied, “Sure, why not, Mr. President?”
The Senate then recessed at Campbell’s request.
Sen. Michael Sirotkin, D-Chittenden, was the sole senator to vote against the amendment in committee, and on the floor, where the amendment passed 29-1. “I’m not going to support lowering the wage threshold, and the reason is I came here on income inequality,” Sirotkin said. He voted “yes” on the bill, which passed unanimously in a roll call vote.
Mullin, who sponsored the amendment, told Sirotkin that lowering the threshold helps more companies qualify for VEGI; Mullin said it would mean jobs for unemployed workers and raises for workers living on minimum wage.
Ashe endorsed Mullin’s amendment on the Senate floor, saying it “takes a program that’s working as is, provides a little bit of flexibility on a case-by-case basis, without fundamentally changing the program.”
The change would be retroactive to Jan. 1, 2015.
VTDigger requested a list of the five companies that have placed initial applications with the state this calendar year.
Pat Moulton, secretary of the Agency of Commerce and Community Development, and Fred Kenney, executive director of the Economic Progress Council, declined to give VTDigger the list but confirmed that “a handful” of companies are already in contact with the state, and that some are in the “value-added foods” industry. The list of VEGI applicants on the agency’s website is current through December.
In public testimony before Senate Finance, Revision Ballistics, a military contractor with plants in Newport and Essex, said that fewer of its employees qualify for VEGI funding because of the minimum wage increase that went into effect in January (the rate went from $8.73 an hour to $9.15 per hour). The company commended Newport workers and said it would like to “re-shore” one of its factories back to Vermont from overseas.
Fresh Greens, a company debating whether to set up in Albany, New York, or Brattleboro, testified this month that the company would bring between 35 and 40 jobs. Fresh Greens said Vermont’s 5 percent per year minimum wage increases through 2018 “negates the value of the incentive originally intended by the program and does not provide any inducement to locate a company in Vermont.”
Nearly a dozen pro-business amendments
There were seven amendments on the Senate calendar on Thursday afternoon.
Three of those, plus the new floor amendment with Mullin’s VEGI changes, passed. One was withdrawn before the Senate convened, and two were withdrawn on the floor to be taken up with the miscellaneous tax bill. The amendment to create a one-day sales tax holiday failed 21-9 in a roll call vote.
One amendment that passed will allow Williston-based military contractor General Dynamics to legally accept a contract with the Department of Defense to manufacture gun silencers in Vermont.
Sen. John Campbell, D-Windsor, sponsored the bill with Sens. Joe Benning, R-Caledonia, and Norm McAllister, R-Franklin. The amendment passed unanimously in a voice vote.
“All we’re trying to do is make sure that these people who work for these companies will not be prosecuted under (current Vermont law),” Campbell said. “This would not allow someone to become the new Bill Gates of gun silencers in their garage.”
Another passed unanimously to repeal last year’s “cloud tax.” The new bill, S.97, passed the Senate unanimously in February but has not moved out of House Ways and Means.
Sen. Richard Westman, R-Lamoille, said the Tax Department has not been able to collect the cloud tax, which taxes software accessed through an online cloud as a good rather than a service, so repealing it does not lose revenue.
“We need to encourage these businesses to access the cloud, and Vermont should be in the lead in bringing those businesses to the state,” Westman said.
Sen. Mark MacDonald, D-Orange, said Senate Finance would continue to analyze the financial issue between taxing software accessed through the cloud as a good versus a service.
Westman’s second amendment, to establish a special events permit for fortified wine sellers, passed overwhelmingly.
Sen. Peg Flory, R-Rutland, withdrew her amendment to expand the research and development tax credit, but vowed to bring it back to the floor if Senate Finance did not review it.
Sen. Becca Balint, D-Windham, withdrew her amendment to have the state use tamper-proof “blockchain” technology — the same technology that backs up Bitcoin — from the floor before the Senate convened.
Sen. Philip Baruth, D-Chittenden, withdrew his amendment to reinstate an affordable housing tax credit in an understanding that Senate Finance would address it during testimony on the miscellaneous tax bill.