The Scott administration and the Legislature are busy building the state budget, helped by an injection of federal COVID-19 relief funds that has staved off the pandemic's more-bitter economic consequences.
But while that $210 million boost is new, most of Vermont's economic problems are not.
The stakes are high for many Vermont households. How lawmakers and the administration decide to invest this new funding could change how individual Vermonters recover economically - or whether they continue to struggle as many did prior to COVID-19.
Public Assets Institute (PAI), a fiscal policy think tank, shared data in its “State of Working Vermont 2020” report which showed that many Vermonters had not even recovered from the 2008 Great Recession before the coronavirus hit.
Of all in income earned in Vermont in 2019, wages dropped 7 percent for households in the bottom-20-percent-income bracket. Almost half of the income earned in Vermont, however, went to households in the top 20 percent.
COVID-19 has also made existing inequities in Vermont communities worse for people of color, women, and people with disabilities. According to the report, Vermonters of color were more likely to live below the poverty line than white Vermonters.
According to PAI Deputy Director Stephanie Yu, last year, employers noted that people receiving unemployment and the extra $600 federal COVID-19 benefit chose to stay on unemployment than return to work.
“So the problem with people earning more on unemployment than working isn't that the unemployment benefits are too high,” Yu said. “It's that wages are too low.”
By the numbers
In his January budget address, Gov. Phil Scott acknowledged that economic expansion has been very uneven across Vermont's 14 counties. He also reiterated the challenges of a shrinking workforce and the need to attract more people to the state.
Scott presented a $6.83 billion budget that proposes to use the one-time federal funds to shore up state programs. The Republican governor also cautioned against spending revenues or raising taxes, a familiar refrain from previous budget addresses.
“We must focus on the challenges created by the pandemic, as well as the problems we faced before - many of which have challenged us, and grown, for decades,” Scott said.
He continued, “We must support our communities, children, businesses, and health-care system; care for our neighbors; and lead a recovery that reaches every county and brings equal economic opportunity to every Vermonter.”
Scott's budget includes:
• $1.89 billion to education students, from pre-kindergarden through grade 12
• $680 million for transportation projects and infrastructure
• $3 million for the Working Lands program
• $10 million toward outdoor recreation in all 14 counties
• $1 million to start a marketing fund, a one-time appropriation
• $25 million in one-time funding for clean-up and development of brownfield sites
• $20 million to expand broadband
• $20 million for weatherization
• $20 million for housing through the Vermont Housing and Conservation Board
“If we're cautious, we can solve problems and fund projects that have been stalled for years, improving communities, services, outcomes, and state government itself,” Scott said. “And we can lay the foundation for an economic resurgence around the state, without having to ask more from taxpayers to do so.”
“However, if we don't learn from past mistakes, and [we] choose to use one-time money to create ongoing obligations that we can't afford in the future, we'll be forced to increase the burden on working Vermonters, slowing our recovery and missing an incredible opportunity,” he added.
Numbers are not final
Many lawmakers, however, feel that Scott's budget is not final.
Senate President Pro Tem Becca Balint told VtDigger that Scott's budget is only a starting point and that the Legislature will make other choices, especially as additional federal COVID-19 funding is approved.
Balint told The Commons that “there is a lot of common ground between the governor's budget and the Senate's priorities. We support investments in broadband, child care, workforce development, housing, and COVID recovery initiatives.
“I've been saying we're singing from the same hymnal, but may not yet be on the same page,” she said.
“We may have differences of opinion about the amount of investment in our priorities, and there are other issues we want to address that were not highlighted in the governor's proposals,” Balant added, naming funding the Vermont State Colleges System in the short- and long term, and addressing the solvency of the state's pension systems.
Balint said the Legislature “really needs the governor to partner with us to address both these really important issues.”
“We'd also like to see the governor give more attention to our mental health system, as we need to be clear-eyed and sober in our assessment of the number of Vermonters in crisis right now who need support to survive the COIVD crisis and beyond,” she said.
Local lawmakers react
Windham County's other senator, Jeanette White of Putney, told The Commons in an email that she appreciated some of Scott's proposed budget but felt disappointed by other parts.
White felt happy that Scott proposed the state use one-time federal funds “to put us in a stronger position in the future,” but said that he left out any mention of the state's “fragile EMS system and [made] little mention of local governments.”
“Another pretty glaring hole was no mention of our mental health and substance abuse issue,” White wrote. “We constantly underfund them, and we are now paying big time.”
She said that on this issue, the state needs “to provide more resources and focus on creating a better system.”
“[Scott] also talked about no new taxes or fees,” White added. “Some of our agencies are being starved with no fee increases for years.”
“We will know more once we actually see the entire budget,” she said.
Rep. Carolyn Partridge, D-Windham, said that the $3 million which Scott has proposed for the Working Lands Fund caught her attention.
“There has been a huge increase in demand for local products, including meat,” wrote Partridge, who chairs the House Agricultural Committee.
She added that Vermont's farmers have tried to increase the supply of local food.
“But the bottleneck is processing, especially the meat-cutting part of it,” she said. “Hopefully, a good chunk of the money will be used strategically around the state to improve capacity.”
A more robust local food system would mean the state as a whole would be better prepared to weather climate change or another pandemic, she said.
“We are talking about a regional food system and shortening the supply chain so we don't have to rely on food coming from thousands of miles away,” Partridge added.
Rep. Mike Mrowicki, D-Putney, wrote in an email that “the governor's proposed budget looks like a good start.”
But, he said, “As the details are revealed, [that] is when the real work starts.”
All committees in his chamber “will now do a deep dive” to help the Appropriations Committee craft a budget for the House to vote on, Mrowicki said.
He likes how Scott, in his proposed budget, included expenditures designed to meet people's basic needs like food and shelter, while also addressing infrastructure such as broadband.
He is also “glad to see there are funds also dedicated to addressing systemic racism and climate concerns.”
But the budget needs to go further, he said.
“We need a lot more, and [we] are waiting to hear Congress to tell us, 'We're from the government and we're here to help,' because broadband in Vermont is a $300 million problem,” he wrote. “We'll need that federal help to help this [issue] move [ahead] sooner rather than later.”
Rep. Mollie Burke, P/D-Brattleboro, found the governor's allocation for electric vehicles “hopeful,” with proposed funding for electric vehicles and other transportation projects.
Burke has served for years on the House Committee on Transportation with an eye to mitigating the effects of climate change. Scott realizes the state needs to cut climate emissions, she said, since transportation and home heating are Vermont's biggest emitters of carbon dioxide into the atmosphere.
Burke is co-sponsoring H.94, a bill aimed at cutting carbon emissions. The legislation includes incentives for lower-income households to purchase electric vehicles, which are part of the administration's strategy.
“We're not completely on the opposite page,” she said.
Burke also liked seeing additional funds allocated to the state's downtown transportation fund. This fund provides matching grants to municipalities with designated downtowns for capital improvements that support multiple modes of transportation.
Other measures that could reduce Vermont's carbon emissions in Scott's budget include funds for housing bonds, weatherization, and energy efficiency, she said.
“There were some forward-thinking things there,” she said. “But the devil is in the details.”
Burke said she does not favor the governor's proposal to bundle funding for pre-kindergarten into the K-12 school system.
The governor's pledge to not raise taxes also gives Burke pause. She said she is willing to ask wealthier households, especially those who benefited from the Trump tax cuts, to pay more.
“People think it's so bad to raise taxes, but when you can afford to pay, you help everyone,” she said.
“Where do you think your roads come from?” she said. “People act like it's their God-given right to use roads without paying for them.”
Burke added that she does like to accentuate the positive, and she gave Scott credit for his condemnation of the Jan. 6 insurrection at the U.S. Capitol, an act that left five people dead and a nation shaken.
“He has been well-outspoken on the issue,” she said.
Managing through recovery
Members of the Scott administration outlined the need to work with concrete numbers rather than hoped-for federal funding when building the next state budget during “Funding Vermont through the Crisis,” a webinar presented by the Vermont Chamber of Commerce.
In his budget address, Scott customarily focuses on discussing the general fund, state staff said. Vermont, however, operates three major funds: the general fund, the transportation fund, and the education fund.
All three funds for the current fiscal year total more than $7 billion.
Susanne Young, secretary of administration, said that the federal COVID-19 relief funds that Vermont received last year came with multiple restrictions, which made it difficult to quickly distribute the money, she said.
The administration and Legislature “did the right thing,” however, and dispersed the money by the federal government's Dec. 31, 2020 deadline.
Last August, the state's federal forecast was “grim,” she said, adding that the 2020 federal aid is the reason Vermont is doing OK in the second half of the fiscal year.
For the 2022 fiscal year, Scott and his administration are budgeting based on what funds they know will be available rather than using estimates that include potential but unconfirmed additional federal relief aid.
“The major takeaway here is that with $7 billion, you think you can do everything,” Adam Greshin, commissioner of finance and management, said. In fact, “you find more and more as you start parceling out what you need to do, the amount that you have available for any particular use becomes smaller and smaller.”
Questions from the Chamber audience pointed to a business community that still felt uncertain - even fearful. Would the state add more taxes? Would business owners receive less in federal relief funds?
Craig Bolio, commissioner of taxes, added that raising taxes, especially on higher-income households, could lead the state in tricky directions. On the one hand, taxes are not the only reason people stay or leave a community, he said.
But states use taxes to influence behavior (one example is sin taxes). So why would people assume that higher taxes on wealthier households wouldn't impact their behavior?
“I think when we're looking at increasing taxes, even on a group that folks may think has a higher ability to pay, you need to be very worried about interstate competitiveness,” Bolio said. “And I think, again, the governor is just very worried about affordability across the board and would rather that we increase the number of taxpayers to increase the tax base.”
People-centered budgeting
The staff of the Public Assets Institute stressed the need for people-centered fiscal policy to address the potholes in Vermont's economy - regardless of whether they existed before, or because of, the pandemic.
“This pandemic has made it very clear that good government is critical to managing public crises so that people are taken care of,” Yu said. “The job is not simply to pass a balanced budget and make sure all the numbers add up. It's to meet people's needs.”
Under Vermont statute, the budget is supposed to be built to meet people's needs.
“The State budget should be designed to address the needs of the people of Vermont in a way that advances human dignity and equity and in a manner that supports the population-level outcomes,” state law affirms.
And one problem this pandemic has exacerbated, is that vulnerable Vermonters - those of color, with low incomes, with disabilities - continue to suffer a disproportionately higher level of insecurity when it comes to health, employment, and finances, Yu said.
PAI says the solution can come in the form of short and long-term investing in three areas and creation of responsive policy.
The first area is better data collection.
“We need better data about race, about Vermonters with disabilities, so we can fully see what's happening so that policy can be responsive to those disparities,” she said.
The state also needed to support the work of Racial Equity Director Xusana Davis while using an equity lens to examine all government programs.
“A lot of this comes with acknowledging just how significant this transformation has to be. It's a whole new way of looking at what we've been doing for a long time,” Yu said.
Next is ensuring income security for low-income families. Multiple tools exist, such as the earned income tax credit. But even these tools need work to reduce the peaks and valleys associated with benefits cliffs, she added.
Yu noted, however, that many of the state's tools also excluded some Vermonters. For example, despite the state's efforts to ensure that people would receive adequate unemployment benefits during a pandemic, these benefits were tied to work.
“For people who were not able to work, going into this pandemic, they've been largely l eft out of a lot of this aid,” she said. “So we need to make sure that the income supports that we provide are getting to everyone.”
Finally, the state needed to invest in emergency infrastructure that allows for the distribution of resources quickly and can handle a large influx of need.
For example, when thousands of Vermonters lost their jobs last spring, the sudden surge in unemployment claims swamped the state department of labor's claims system, she said. Right now, the vaccine rollout has its own hiccups, she added.
“But we also need to invest in those systems that people need all the time, not just in crisis: child care, housing, broadband, other IT infrastructure,” Yu said. “[Another] area that we think of as infrastructure investment is schools.”
Investing in education means channelling money into the physical infrastructure, such as buildings, but it also means allocating resources to kids - for example, moving to an income-based education tax and adjusting how the state weights the cost of educating students with higher needs.
“So the federal aid has been, and will continue to be, really critical in how Vermonters weather this pandemic, but the way that [PAI is] thinking about it is that it buys us time to figure out how to meet Vermonters' needs on an ongoing basis,” Yu said. “And with that breathing room that the aid provides, we can establish more equitable systems that allows us to really achieve that [people-centered] purpose of the state budget.”
And while Scott's budget address might have focused on where to funnel money, COVID-19 has raised the stakes for human lives. Vermont communities as a whole have big choices to make.
Burke echoed the concerns many have had about recovering from the pandemic.
COVID-19 “unmasked” many of the struggles Vermonters face, including hunger and homelessness, Burke said, and returning to pre-pandemic Vermont won't be enough of a recovery.
Burke pointed to the housing of the state's homeless residents in motels during the pandemic.
“COVID helped solve homelessness,” she said. “But now Vermont is at a point where we need to decide: Will we put people back on the streets, or will we house them?”