When asked why state revenues had come in tens of millions of dollars above expectations in September, Gov. Phil Scott pointed to “the billion dollars that’s been injected into the economy.”
Scott was referring to the $1.25 billion that President Trump and Congress had approved for Vermont in March — part of the aid package that the federal government sent all 50 states to help cover the costs of responding to the pandemic.
“A lot of it I think was due, from my standpoint, to the injection of so much federal money into our economy, which tells me we’re going to need another shot of it to get through this,” Scott said.
Scott and other state leaders hope Congress will soon approve another round of Covid-19 stimulus. But federal gridlock has prevented any action.
And, according to reports from Washington, another stimulus package isn’t likely before President-elect Joe Biden is inaugurated on Jan. 20.
Some state leaders hope that with Biden in the White House it will be easier to get the next round of Covid-19 relief through Congress.
‘Need another aid package’
“I think we’re in better shape with Biden than we might be with another person in that seat,” said state Sen. Becca Balint, D-Windham, who will be the new Senate president pro tem in 2021.
“But I’d be lying if I didn’t say that we are worried about it, definitely. We’re going to need another aid package to help us continue to weather the pandemic,” she said.
Others worry that the U.S. Senate will still be controlled by Republicans. Unless Democrats win two U.S. Senate runoff elections in Georgia in January, Republicans will still hold the majority and Sen. Mitch McConnell, R-Ky., will remain the majority leader.
Eric Davis, professor emeritus of political science at Middlebury College, said uncertainty over Covid-19 relief may be the biggest hurdle Vermont policymakers face in the coming year.
“A Biden presidency and a McConnell Senate is not going to give state leaders what they had hoped they would get in terms of another stimulus bill,” Davis said.
“It’s a tough negotiation; it’s probably not going to come as soon as the state leaders would like. So I think that’s the biggest challenge for Montpelier next year,” he said.
The state government is facing a budget gap of between $150 million and $180 million in the next year because of the economic strain caused by the pandemic.
State budget gap
Adam Greshin, Vermont’s finance commissioner, said additional federal money is needed to continue to expand the state’s Covid-19 testing efforts. Last weekend, the Legislature approved another $3.5 million for testing, but Greshin said more is needed.
“I think already on a per-capita basis Vermont has the best testing program in the country, and we will acknowledge that we don’t believe it’s sufficient. So we’re trying to put more assets” in that budget line, Greshin said.
Greshin also pointed to the state’s struggling hospitality industry, which could use more federal stimulus dollars. Last week the Legislature approved $75 million in additional economic recovery grants for the sector.
“$75 million is a goodly amount of money, is a substantial amount of money for hospitality, but we know that we’re not meeting the full need,” Greshin said.
While the state budget faces a large hole in 2021, so far the federal government hasn’t allowed states to use Covid-19 relief funds to replace the revenue they are losing as a result of the pandemic-induced economic downturn.
State officials across the U.S. have urged Congress to give them the flexibility to use the money to prop up state governments, but Washington lawmakers have not allowed states to do so.
The Scott administration is preparing to propose a balanced budget to the Legislature in January, under the assumption that no additional federal money reaches the state.
Even if more money does come from Washington, Greshin said it is unclear whether it will be made available for state operations.
“In many ways, the guidelines for the usage of the stimulus are as important as the amount,” Greshin said.
Despite the pandemic, Vermont was able to pass a budget for the current fiscal year, which runs through next June, without making drastic reductions.
That’s in large part because state tax revenues came in well above forecasted expectations in July.
But that isn’t expected to happen in 2021, and the Legislature and the governor have warned that they will likely have to make tough decisions about spending.
Will Congress step up?
Sen. Jane Kitchel, D-Caledonia, chair of the Senate Appropriations Committee, said she hopes that another round of federal aid will help extend unemployment benefits for people whose payments expire soon.
Some Vermonters who became unemployed before the pandemic began, and then were unable to return to work, are approaching a full year of filing for unemployment benefits, at which point they run out.
The Scott administration has said the state’s unemployment system is unequipped to extend benefits any further, and federal help is needed to do so.
Kitchel said she hopes that as the pandemic worsens, Congress will feel compelled to send more money to the states.
“My only thinking is, as this pandemic gets worse and grips all states, that Congress will step forward and move on a package that would perhaps have a little more flexibility for states, would provide that extension of that [unemployment insurance] safety net, and help us get through until we get the vaccine,” Kitchel said.
She said if there was “any circumstance that would propel Congress into working together and assisting the nation, one would hope” it would be the pandemic.
“I want to be optimistic. Remember, Winston Churchill said, ‘Americans will do what’s right after they’ve tried everything else,’” Kitchel said.
“Maybe that will happen here,” she said.
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