Vermont is awash in money right now as policymakers decide how to spend the state’s $1.25 billion share of CARES Act money. Vermont is second only to Wyoming in the size of its per capita payout.
Vermont received just over $2,000 per person from the $2 trillion coronavirus relief bill, which was signed in March. Only Wyoming, which has a slightly smaller population of 578,000, received more money per capita, at $2,160. For any state with a population of 7 million or above, the per capita payout was only about $388, said Tom Kavet, the economist for the Vermont Legislature.
It’s not yet clear exactly what that will mean for Vermont, where only about $300 million of the $1.25 billion has been spent, Kavet said. Even $300 million is a staggering sum in a state of 625,000 residents and an annual budget of $6 billion, he said.
“If there was a legislative program or initiative that was $30 million in the past, we would analyze that to death,” he said. “Now hundreds of millions of dollars are being spent with a couple of days of analysis.”
The state has until the end of the year to spend the money.
Vermont is receiving the larger share in part because Congress set a minimum as it apportioned the money, something Kavet attributed in part to the work of the state’s congressional delegation. But he added Congress took into account the fact that small states also lack economies of scale, so they need more.
Unprecedented spending
After Gov. Phil Scott declared a state of emergency on March 13 and started issuing orders that closed businesses to prevent the spread of the virus, lawmakers and administration officials moved quickly to create programs aimed at keeping companies from going under.
Much of the $300 million that has been spent so far has gone to support the state’s businesses through a wide array of grant programs. The state is also providing rental and mortgage assistance programs and distributing money in other ways, such as a gift card aimed at promoting local businesses and through broadband expansion grants to help people work and study remotely.
Meanwhile, much more than the $1.25 billion is flowing into the state from other federal sources, such as $1.2 billion from the federal Paycheck Protection Program for businesses, more than $625 million in supplemental unemployment assistance, and about half a billion dollars in the $1,200 payments that went out to most adults.
Kavet thinks all that cash is one reason Vermont retailers are reporting record sales of recreational equipment, cars, and electronics. Building contractors are busy in a hot home improvements market, and real estate agents are reporting high interest from homebuyers.
“There is this phenomenal amount of money,” Kavet said.
Lawmakers worked long hours this summer to create a spending plan for the remaining money. That budget includes more grants for hospitality businesses, which have been hit the hardest by the continuing limits on visitors to the state.
While individuals won’t see cash grants, they will experience the money through things like additional supplemental unemployment assistance, and meals assistance for those with food insecurity, said Rep. Mike Marcotte, R-Coventry and chairman of the House Committee on Commerce and Economic Development.
“It won’t be seen in a dollar amount for most people,” Marcotte said. “It will be seen in services they can receive that won’t go by the wayside because we don’t have the funds to do it.”
A New York nonprofit called the Peter G. Peterson Foundation analyzed the distribution of federal funding so far in all the states and said Vermont has received $4.4 billion from a large array of sources, including the CARES Act, or about $7,130 per capita. That per capita distribution is also among the highest in the country.
The economic disruption of the pandemic has worsened existing problems of inequality, something that the CEO of the Peterson Foundation noted in a letter about the impact of the virus. The nation was poorly prepared for the outbreak in many respects, wrote Michael Peterson.
“This outbreak has not only exposed flaws in our pandemic preparedness, but also weaknesses in our health care infrastructure, challenges to our government’s ability to respond effectively, and newly revealed but very familiar inequalities within our economy,” he said. “And, of course, our unsustainable fiscal policy is another major concern that will hurt our capacity to respond to unexpected emergencies in the future. As we steward the nation for the next generation, we all share an important responsibility to make sure America is better prepared.”
Kavet said that while many governments and businesses have pandemic preparedness plans that cover the health and safety aspects of an infectious disease, “there was no comparable economic playbook.” Consequently, the federal government was left using existing mechanisms, such as the unemployment insurance system, and to sending cash grants to businesses through the Paycheck Protection Program.
To qualify for PPP, businesses only had to express uncertainty about their future, and last spring, many accountants urged their clients to apply. While welfare programs require clients to prove their need, “these businesses are getting money with a very low bar,” Kavet said.
“There were many businesses that felt some risk but probably weren’t going to actually need to lay off anybody,” Kavet said. “Their sales could go up and they would still qualify. So that money is pure profit to the owners of the businesses. It drops right to the bottom line.”