The Vermont House budget proposal would harness $650 million of federal Covid-19 aid to fund broadband expansion, clean water projects, state computer system upgrades and a variety of other initiatives.
The budget, approved unanimously Monday evening by the House Committee on Appropriations, proposes spending about half the dollars Vermont expects to receive from the American Rescue Plan, which President Joe Biden signed into law this month.
In total, the American Rescue Plan will send $2.7 billion to Vermont, including $1.3 billion in direct aid to the state government. The Legislature and Gov. Phil Scott will have wide latitude to use that money to respond to the Covid-19 crisis and make major investments in state infrastructure.
The state budget emerging from the House totals just under $7 billion. It would use $150 million of federal Covid relief to fund broadband expansion outlined in H.360 — legislation aimed at accelerating internet buildout throughout the state. That legislation is expected to pass out of the lower chamber this week.
The House budget proposal also needs approval from the full chamber before it is sent over to the Senate. A vote on the bill is expected in the coming days.
The budget bill would direct $100 million to the state’s Clean Water Fund. Legislators say that move could increase state spending on clean water initiatives by about $50 million over the next five years, and free up state dollars at the same time.
Using the federal money to pay for clean water projects would allow the state to redirect $10 million in rooms and meals tax revenue — which usually goes to the Clean Water Fund — to the state’s general fund during the five upcoming fiscal years.
Rep. Mary Hooper, D-Montpelier, chair of the appropriations committee, said using federal money for clean water initiatives will help the state make major investments.
She said that long-term projects — such as upgrading sewage treatment plants and removing phosphorus from waterways — require large, stable funding sources.
“What is good about this is people can look at the fund and with a good deal of assurance say, ‘That money is there; we know it’s going to be available for us; it’s worth the investment and time and effort to do this,’” Hooper said.
The budget would use $100 million from the American Rescue Plan to help the state upgrade some of its outdated computer infrastructure.
In his January budget proposal, Scott pitched spending $53 million from a one-time surplus on IT upgrades, and establishing a dedicated technology fund for such projects.
The governor’s plan included modernizing two computer systems that are more than 40 years old — the Department of Motor Vehicles IT system, and Vermont Department of Labor mainframe, which the state uses to process unemployment insurance. The labor department mainframe crashed after facing an influx of claims.
The House budget for the upcoming fiscal year, which starts July 1, would include even more money — $62 million — for IT projects, and set aside the $38 million in an “IT reserve” to pay for upgrades in future years.
The spending bill directs $50 million of federal money to workforce development initiatives, including part of an $84 million plan announced by House Speaker Jill Krowinski last week to stabilize the state’s higher education system.
In addition, the package would dedicate $250 million in federal money to initiatives that would help Vermont “grow into the future” as it emerges from the pandemic, Hooper said. Details are still being worked out, but Hooper said it could include “broader investments” in Vermont families, small businesses and the local economy.
Lawmakers are setting aside much of the $210 million surplus that the governor identified in his budget proposal to address the state’s pension crisis.
Legislators are crafting a plan to reform the state pension system in response to an analysis that state Treasurer Beth Pearce issued in January, which projects the system’s unfunded liability is growing by about $600 million.
The House budget would earmark $150 million in surplus money for pension-related expenses. Lawmakers don’t believe federal money can be used to deal with pension problems.
Scott has concerns that legislators are deciding too quickly how to spend the new round of federal covid relief. Last week, he said the U.S. Treasury has yet to issue guidance on how the money can be spent, and state officials have until December 2024 to use the money, according to the legislation.
“We need to just take a deep breath, and we don’t need a free feeding frenzy here,” Scott told reporters at a press conference on Friday. “What we need to do is to make sure that we’re doing this in a strategic way that will help us in the future,
“Let’s slow down just a little bit and make sure that we’re doing this in the right way, give us the biggest bang for the buck, the best return on investment possible for the future,” the governor said.
Hooper said lawmakers propose investing the federal money in longstanding priorities, such as broadband expansion and workforce development.
“I think we’re being terribly responsible with this money, as well as using it to invest in Vermont in a way that we have been acknowledging needs to be done,” Hooper said. “We are getting it out in areas that have been thoughtfully looked at. These are not new, different spending ideas; they are ones that I think there’s very common agreement across sectors, across parties, across communities about what the needs are.”
She said the House’s proposals are “strikingly in concert” with the Scott administration’s spending priorities, pointing to broadband and IT systems.
Adam Greshin, commissioner of the Vermont Department of Finance and Management, said Scott will unveil a “comprehensive plan” in the coming weeks, including his own proposals for spending the majority of the federal funding.
“It will be a comprehensive plan across a wide variety of initiatives, and we don’t think it will look too different from what the Legislature is planning, but it will have the governor’s signature on it,” said Greshin, who declined to be more specific.
He said he expects “substantial overlap” with the Legislature’s plans, “but I’m sure there will be differences; there always are.”
