Lawmakers clashed with Gov. Phil Scott on government restructuring, business development and labor priorities this year.
Scott repeatedly threatened to veto any budget that included new taxes or fees. At the same time, he asked the Legislature for new spending on business development, tax credits and a $35 million bond to build housing.
At various points in the session, lawmakers responded by cutting or scaling back his requested investments in an effort to keep from raising taxes or fees. But they also debated multiple times whether to put a new overnight fee on hotel and motel stays to pay for the housing bond.
Scott also saw lawmakers reject or modify two out of three executive orders from January that he said were designed to promote workforce development and help government run more efficiently.
In the annual economic development bill, lawmakers approved a public retirement program to help employees of small businesses save. On the consumer protection front, lawmakers considered numerous new measures but turned several of them into studies so they could pass legislation next year.
The House Commerce and Economic Development Committee found a compromise on changes to independent contractor laws but then abandoned the bill in dramatic fashion. Meanwhile, progressive policies such as paid family leave and an increase in the minimum wage will wait until 2018.
Scott’s housing priorities
The governor sought to borrow $35 million to fund affordable housing. The revenue source for the bond was part of his original and complex budget plan that fell down early in the session, in what House Speaker Mitzi Johnson, D-South Hero, called a “house of cards.”
In an effort to balance the budget, the House Appropriations Committee stripped the bond and used its revenue source for something else. A few weeks later, in the upper chamber, the Senate Finance Committee approved a $2-a-night hotel and motel occupancy fee to fund the housing bond, despite Scott’s veto threat.
In an effort to avoid a veto, the Senate eventually dropped both the occupancy fee and the housing bond from its original budget. The issue was largely taken off the table until, in an eleventh-hour maneuver, lawmakers and Scott made a deal to fund the bond through money originally earmarked for Lake Champlain cleanup.
A proposal Scott supported to expand the use of tax increment financing districts faced similar political issues. The financing mechanism helps communities pay for infrastructure improvements meant to spur private development.
Scott wanted to expand the use of the tax districts around the state so developers would invest in struggling downtown areas. While the Senate spearheaded a bill to bring about that expansion, the House Ways and Means Committee saw problems.
The Legislature eventually agreed, as part of S.135, to allow six new tax districts to spur development. It also allowed municipalities to create their own tax incentive programs.
The Legislature put the $35 million housing bond, which was once part of S.100, into the budget bill, H.518, which Scott has promised to veto. While the tax credits are within S.135, the bill says they will not be enacted until Scott signs a full-year budget.
Government restructuring proposals
Scott had mixed success with his three executive orders he said in January would make government more efficient.
Lawmakers shot down Scott’s plan to put the Department of Labor into the Agency of Commerce and Community Development, creating a new Agency of Economic Opportunity.
Scott said the merger would help promote workforce development, but lawmakers killed the idea over concerns that the Department of Labor would back away from its primary role of protecting workers, therefore weakening their labor protections.
Lawmakers agreed to create Scott’s new Agency of Digital Services. The new Cabinet-level agency includes staff from the former Department of Information and Innovation. Additionally, the top-level information technology people in other agencies will stay in their current positions and locations but answer to the Agency of Digital Services.
Lawmakers in the House rejected Scott’s proposal to immediately merge the Department of Liquor Control with the Vermont Lottery Commission. Members of the House General, Housing and Military Affairs Committee said they could not approve the merger because they wanted to make changes to it.
The governor had proposed a variety of changes to not just merge but modernize the two departments, including privatizing some of the warehousing and liquor sales. The House committee opposed privatizing liquor sales.
The Senate, which agreed with the Liquor-Lottery merger, attached language to another bill, H.238, agreeing to the combo. That put pressure on the House to form a committee of conference late in the session and come up with a way to move the merger forward.
The Legislature agreed to a version of H.238 that puts the state on an aggressive path to merging Liquor and Lottery. The Legislature would still need to approve a bill next year to finalize the merger.
Independent contractor bill
The House Commerce and Economic Development Committee, which struggled in 2016 to revise the state’s labor laws on who is an independent contractor, came closer to a compromise this year.
The chair got permission from the House speaker to bypass procedural deadlines to allow his committee to keep working. The committee ended up with a bill that would have made the test for who is an independent contractor consistent with federal law.
Currently, workers in Vermont are held to three different standards on whether they are employees or independent contractors: a Vermont-level test for whether the person qualifies for unemployment insurance benefits; a Vermont-level test to determine whether the person qualifies for workers’ compensation benefits; and a federal test.
The draft bill would have used the federal test in all three instances. While the bill had support from Vermont Businesses for Social Responsibility, the Women Business Owners Network, and Main Street Alliance, it did not have support from traditional business interests at the chambers of commerce.
When the committee chair, Rep. Bill Botzow, D-Pownal, announced he would not support the bill, Rep. Paul Poirier, I-Barre, stormed out of the room, telling Botzow it would be “a cold day in hell” before they worked together again on an issue.
It’s not clear if House Commerce will try again to rewrite Vermont’s independent contractor laws.
Retirement, paid family leave, minimum wage
S.135, which contains the tax increment financing expansion, also put Vermont on track to offer a public retirement plan for employees of small businesses by 2019. Lawmakers said the program might be ready by next year.
The program, called the Green Mountain Secure Retirement Plan, would be designed to make it easier for people to save their own money in 401(k)-style plans. The program would be fully funded through fees on those who enroll.
S.135 also contains language studying how Vermont can increase the minimum wage to $15 an hour without causing low-wage workers to lose benefits like child care subsidies and heating assistance.
The wage is currently $10 an hour and scheduled to increase to $10.50 on Jan. 1. Democratic senators say they are still committed to raising the wage when they return in January.
The House also passed the paid family leave bill, H.136, which would use a payroll tax on workers to let them take paid time off to take care of a new baby or a family member. The current bill does not cover short-term disability leave.
The bill was significantly scaled back from an original version that would have taxed workers and employers a total of 0.93 percent. The bill is on track for Senate consideration next year.
Consumer protection measures
In the end, the Legislature did not pass laws regulating the home improvement industry or data brokers, and lawmakers did not enact a state-level version of a federal internet privacy protection.
As part of S.136, the omnibus consumer protection bill, they did put new regulations on the fantasy sports industry and changed laws on home escrow accounts to make it easier for lower-income people to keep up with paying their property taxes.
The Senate had originally passed regulations on the home improvement industry in S.136 meant to protect people from getting ripped off in home repair deals. Lawmakers in the House wanted to wait until the secretary of state’s office studied the entire home improvement industry and how it is regulated in other states.
Another consumer protection bill, S.72, directs a working group to study how to regulate data brokers, which are firms that collect, analyze and sell data to third parties, including other data brokers. The attorney general’s office originally sought to make Vermont the first state to regulate data brokers.
The Senate also considered restoring an internet privacy rule that Congress and President Donald Trump reversed earlier this year. In part because of time constraints, the Legislature decided to attach a study of the issue to S.72.
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