The Vermont House on Thursday approved a nearly $7 billion budget bill that invests a windfall of federal Covid-19 relief dollars to make major investments in infrastructure, economic development and the state’s pandemic response.
Buoyed by the American Rescue Plan Act — the federal pandemic relief bill that will send $2.7 billion to Vermont — House legislators crafted a budget proposal to fund initiatives that many policymakers have long wanted, but couldn’t afford.
The House’s spending package, H.439, would harness $150 million of the federal dollars for broadband buildout, $100 million on clean water funding projects over the next five years, and $100 million to upgrade outdated state IT infrastructure.
The budget sets aside $250 million of the federal funds for “investments in the health and wellbeing of families and small businesses to create an equitable, resilient Vermont,” though legislators have yet to determine what those investments would be.
In all, the budget spends $650 million of the new federal dollars— about half of the money lawmakers and the governor will have wide latitude to spend to respond to the pandemic.
Altogether, the House’s budget spends $6.99 billion and appeared to pass in a unanimous voice vote late Thursday evening.
This year state spending reached $7.32 billion, as lawmakers and the governor raced to spend $1.25 billion in Coronavirus Relief Fund dollars during the 2020 legislative session. Before the pandemic — when federal Covid-19 relief money wasn’t in play— Vermont’s state budgets typically hovered just over $6 billion.
In addition to the federal dollars, the fiscal year 2022 budget also benefited from a $210 million surplus in the current fiscal year’s budget that Gov. Phil Scott identified in January.
The House reserved the bulk of these one-time dollars to address the state’s pension crisis. This week lawmakers unveiled a plan to tackle Vermont’s growing pension and retiree health care liabilities, which involves spending up to an additional $150 million to pay down debt next year.
That’s on top of the $316 million the state will owe in pension and health care liabilities next year.
Lawmakers have prioritized buying down debt next year, to keep Vermont’s bond rating from falling.
“We believe that it is important to show all who are watching our actions, including the analysts who set bond ratings, that we are seriously attending to this issue,” said Rep. Mary Hooper, D-Montpelier, the chair of the House Appropriations Committee.
Rep. Emma Mulvaney-Stanak, P-Burlington, questioned whether an additional $150 million would be enough to tackle the pension problem.
Hooper said that $150 million was “an extraordinary amount of general fund dollars to be able to find to apply to a problem.”
“Normally when you’re in the appropriations committee, we are wrestling over how do you spend $10,000, $100,000, and to have this amount of money is extraordinary,” she said.
Mulvaney-Stanak said “there’s more work to be done” to avoid increasing costs for public employees in the pension system. The plan unveiled this week by Democratic House leaders to address the pension shortfall would involve cutting benefits and asking employees to contribute more.
“I understand $150 million is a sizable amount of money to free up from the budget, or part of the solution. There’s a lot more we need to discuss, and the unfunded liabilities of former legislatures are on our shoulders to try to unpack and figure out more solutions so the cost shift does not go to these hardworking Vermonters,” Mulvaney-Stanak said.
Between the House’s proposed budget, and the Covid relief bill the Senate approved last week, legislators propose investing $50 million of one-time state dollars into affordable housing projects in fiscal years 2021 and 2022. This money would be directed to the Vermont Housing and Conservation Board.
Rep. Tom Stevens, D-Waterbury, who chairs the House Committee on General, Housing and Military Affairs, praised the budget’s investments in housing.
“For all of the money that’s come to the state over the last year, very little of the recent money has gone in for building new housing,” Stevens said. “But the increase in funding to VHCB for this year will increase the amount of housing that they’re going to be able to build over the next year.”
In addition, the budget sets aside $50 million for transitioning Vermont’s homeless population out of hotels and motels.
The budget also appropriates $300,000 for the Department of Mental Health to ensure that the state’s warm line, or mental health crisis hotline, can operate 24/7 next year.
Hooper noted that calls to the warm line have jumped during the pandemic. While it received 7,000 calls in 2019, that number jumped to 10,000 in 2021. In the first three months of 2021, it has already received 8,000 calls.
The spending bill also contains more than $80 million to help stabilize Vermont’s higher education system.
This includes about $70 million for Vermont’s ailing state colleges, and $7.2 million for the University of Vermont.
Legislators have taken up the governor’s proposals to revamp IT infrastructure, investments in outdoor recreation infrastructure projects, and restoration of brownfields — sites that have been contaminated by chemicals.
The Scott administration and lawmakers also share an interest in broadband buildout, more funding for the state college system and additional investments in affordable housing,
Unsurprisingly the governor’s proposals to legalize sports betting and keno, which are unpopular with House Democrats, were rejected.
But the governor has expressed concern that legislators are deciding how to spend the newly approved federal money too quickly, and before the U.S. Treasury issues official guidance on how it can be spent.
He is planning to release his own plan for how the dollars should be used in the coming weeks.
Some echoed Scott’s concerns during the budget discussion on Thursday, and questioned how the state would react if lawmakers’ spending decisions didn’t square with the federal rules.
Rep. Pattie McCoy, R-Poultney, the House minority leader, pointed to the budget’s plan to invest $100 million of the federal funds into clean water projects.
“My concern is what happens if three months from now we figure out that we can’t use the money for this particular project— then what happens?” she asked.
Hooper said the American Rescue Plan explicitly permits spending on water, sewer and broadband projects. The budget sets asides about $40 million for next year’s budget adjustment.
Hooper said legislators have been “conservative in our estimation of where these funds can be used in looking at the plain reading of the act.”
The House budget is expected to pass on a second vote Thursday before heading to the Senate.
