Lawmakers hold property tax increases to 1% after nearly $120 million infusion of one time surplus funds.

It's been a hard decision because we know there's other cuts coming.

People really are feeling the pressure, anticipating the pressure.

Plus, the Vermont House advances a tax credit package that includes long sought exemptions for military pensions.

And Burlington wrestles with a budget deficit and difficult financial decisions.

All that and more ahead on Vermont this week.

From the Vermont public studio in Winooski.

This is Vermont this Week, made possible in part by the Lintilhac Foundation and Milne Travel.

Here's moderator Mitch Wertlieb.

Thanks for joining us on Vermont this Week.

I'm Mitch Wertlieb.

It's Friday, May 9th, and joining us on the panel this week, Calvin Cutler from WCAX.

Lola Duffort from Vermont Public and Courtney Landon from Seven Days.

Thank you all so much for being here.

We've got a lot to talk about.

And let's start with some good news that comes with a caveat.

I think, lawmakers are holding property tax increases to just about 1% lower to four.

That's some good news.

Where is this money coming from?

How are they able to do this?

Yeah.

Well, as you said, you know, this is good news with a caveat.

So the good news is some tax relief.

The caveat is how they're doing that, which is using 118,000,000 in 1 time money to offset the need for increased property taxes, education, spending did go up this year, right?

Even though schools made some pretty significant cuts, you know, they had some pretty intense cost pressures, health care, which is something that we'll continue talking about.

And so even though education spending went up, property taxes won't really this year.

And that's because the state is going to spend 118,000,000 in 1 time money to offset the need to raise property taxes.

That's good news this year.

But it could be very bad news next year, right?

Why is that?

Because we will have a higher baseline of spending plus run of the mill inflation in a best case scenario.

And we can't count on this one time money.

We can't count on surplus funds.

So that's the whole point of surplus funds there.

You didn't expect them.

And can you break this down for us?

It's 77 million from the general fund, as I understand it.

And then what's the remainder?

And then 41 million from the education fund.

And, you know, this extra money is, a result of the economy kind of going gangbusters these last couple of years.

And as anyone who has been reading or paying attention to the news lately will know, we're expecting that to change.

Right.

And so we're spending 118,000,001 time money to give ourselves a temporary tax break.

But next year, we could be dealing with a profoundly different financial picture.

And so, you know, as you we saw Senator and Cummings kind of express, even though she supported this package, it came out of her committee.

You know, it, she and other lawmakers have qualms about this.

But also feel like given the message they got in November from voters, they had no, no choice but to do this.

I want to focus quickly on, the $41 million of this relief that's coming from the education Fund.

We've been hearing we're going to talk about health care, but we've been hearing a lot about, you know, having to pay teacher, benefits with health care and stuff.

If we're spending this money from the education fund.

Isn't that money that could be spent on things like benefits for teachers?

And that's not being spent well?

So technically, it is being spent on benefits for teachers, right?

Because, health care spending in schools is education spending, right?

It's all coming out of the same pot.

But what we are not dealing with in kind of education reform talks right now is, how to actually actually lower the cost of health care, right?

And so, you know, this is helping offset the need for higher insurance premiums for teachers this year.

But, you know, we don't really know how we're going to deal with that next year.

Yeah.

I mean, health care I don't think it can be understated.

We've talked about it many, many times in a row.

On the past few weeks here, health care costs are continuing to skyrocket across the board for a confluence of reasons.

At its core are demographics using more frequent and more expensive care.

You know, Vermonters are healthy, which is is a good thing.

But just delivering health care services in a rural state, in a rural setting, having 14 full service hospitals, you know, many people you speak with in the legislature, in our health care system.

It is really at a breaking point, and we are there and potentially, you know, some people are really concerned that changes that we might see depending on what comes out of Congress.

You know, with the state Medicaid funding and what's known as the Medicaid provider tax, we can get into that if you want.

But, Vermont could stand to lose hundreds of millions of dollars in Medicaid services, in Medicaid funds, which fund all kinds of of health care services from doctor dinosaur or for for low income children, you know, addiction services, long term care for seniors.

So I think it's it's a very, dire, I think I'll say picture in terms of the health care, component of it.

And I think what a lot of people don't realize is, like, Medicaid cuts will impact you even if you're not on Medicaid, right?

Because these health care providers rely on Medicaid streams of funding.

So setting aside whether or not there is there are going to be Medicaid cuts and everyone is bracing for that, but that still remains an unknown.

Setting that aside, we are we already face as a state, you know, a health care precipice, right?

Right.

Right.

Now, regulators are talking to, you know, our hospitals and saying you have to come up with $200 million in savings next year, or our largest private insurer raises rates by another 20%.

Cross Blue Shield, Blue cross blue Shield, or they go out of business.

Right.

And so setting Medicaid aside, we are already facing, s and like several unthinkable scenarios.

Okay.

But and then you can throw in Medicaid cuts on top of that.

But I've got a great idea a little here's a great way to get more money into the coffers for everybody.

Let's tax second homes.

Never been tried before, right?

Never been even thought about.

Right?

Yeah.

You know, yes.

This is a perennial conversation which lawmakers are having again this year.

Which, you know, technically we do already tech second homes.

We just don't tax them as a separate category, right?

So if you are a second homeowner, you pay, non homestead taxes.

And the problem with that, according to some people, is that because you're in this kind of catchall category, right, there are basically two types of property taxes for the purposes of education.

You've got homestead taxes.

That's what a resident pays on their primary homes.

And then you've got the second category which includes everything else farms, apartment buildings, second homes, deer camps, whatever.

If you're not a primary home, you pay non homestead taxes.

And so, you know, this frustrates people who think that there is more money to be got from the mansions in the hills, because right now lawmakers are always loath to crank the non homestead tax rate up too much.

Because when you do that, you're also taxing deer camps, farms, everything.

So I think about defining what a second home really is.

It complicates the whole issue.

Calvin of Vermont, the Vermont House passed a tax credit package.

This includes something that Governor Phil Scott had wanted for a long time.

Right?

A long time is an understatement.

It's interesting.

You know, the governor put forward, I think probably for the last, I think every budget that he's ever put forward, a full exemption of military pensions for military retirees and every year it's run into opposition, has never really left committee, in part because of a philosophical debate about who do we provide tax benefits to first responders, military, you know, police officers, and others.

And so this time, though, something really remarkable happened in the House of Representatives and in the Ways and Means Committee, where there was a true compromise.

I think that happened in some ways, is a manifestation of the new balance of power that we're seeing and the power that Governor Phil Scott, the influence that he has under the building, but still the Democratic majority setting the agenda, taking, choosing which bills are taking up.

So this is a tax package that, it's about 14 million and some change is what it will cost state coffers.

And basically, it provides a exemption of military pensions, for people making up to 125,000.

There is a tax credit for low income veterans.

There's also a expansion of the earned income tax credit and the child tax credit as well.

So there are policies in this tax package that both Democrats and Republicans like.

So it's a really interesting, lesson here in terms of bipartisanship, but also just sort of the dynamic of this new balance of power.

I mean, it's the military pension.

Bill had more sponsors this year than it ever had.

So it's a really fascinating one.

Would be interesting to see.

Good example of elections have consequences.

Yes, exactly.

The supermajority being gone now for Democrats.

You do wonder if it if it would have passed had things stayed the same.

Courtney Lynn, I want to get to this, really fascinating story you wrote about the troubles with Vermont's largest city, Burlington.

Wrestling with a big budget deficit.

Some difficult decisions have to have to be made.

And there's some news coming up with this as well today.

To, What kind of a deficit are we talking about?

How bad are things in Burlington?

Right.

So they are very keen to avoid the word deficit, when they when they talk about their budget troubles, they like to call it a budget gap because they are looking into the future and saying we will not have enough revenue to cover our expenses versus looking at the current year budget and saying, we're not going to end in the black.

So when they talk about this this year, we're looking at an $8 million hole.

So that's pretty significant.

I don't know that off the top of my head what percentage is of the city budget.

But it's it's significant.

And now the you know, they have they're trying to find ways to make it more stable budget going forward.

And I think they basically have two options.

Raise taxes or cut staff.

And those neither of those are things or there are political winners, certainly.

Also, you know, in your article you were talking about part of the problem was there was a miscalculation.

Not this year, but previous year.

What happened there?

Yeah.

So last year there was a $14.2 million budget gap, but it didn't start out that high.

It originally started out much lower.

And then they realized there had been a clerical error that had forgotten to add in the cost of salaries and benefits, which, if anyone knows anything about budgeting for these, you know, municipal entities in schools, most of your costs are in salaries and benefits, up to 80 to 85% in Burlington.

So that skyrocketed the budget gap for last year up to 14.2 million.

That was Mayor Emma Mulvaney's first go at a budget.

It happened.

She learned about this very soon after she took office.

And last year she did a number of things to close that, managed to avoid layoffs.

That was a huge thing, especially for her.

As someone who was a former union organizer, that was her whole background, before she got into elected office in Burlington.

So some of this, though, was inherited stuff that came from before her.

She became the mayor.

Absolutely.

Yeah.

And those same, same factors are affecting this year's budget gap.

A large one of them is the use of one time money.

To like Lola was talking about.

Yeah.

Artificially deflates, you know, tax increases, other things such as like that.

And in this case, Burlington is trying to figure out how it's going to continue paying for a number of positions that were funded with one time money, mostly Covid relief money.

And in Burlington, that money went toward positions that are, you know, they that they want.

It's the one of them is the Burlington's special assistant to end homelessness.

Now, that's a pretty lofty title.

But that person is busier than ever, as we know, with the exploding numbers of of unhoused folks in the area.

Yeah, I mean, it's it's a fascinating learning lesson.

I'm just thinking back to 2020 when the original CARES act was passed, I believe Speaker Mitzi Johnson, at the time, I had a conversation with her about what, as a state, are we going to do with this huge infusion of federal money?

And, you know, both she and the governor and Tim Ash, who was the pro tem at the time, had said one time, do not invest this into recurring programs, do not create new programs.

Now, of course, that has happened in places in state government.

We're seeing it play out in Burlington.

It's just really it's happened in schools.

Exactly.

Yeah.

So it's just fascinating to see that warning.

Those warning lights from five years ago.

Here we are today.

Yeah I feel like the longer I do this, the more I think that any kind of one time money is more of a curse than a blessing.

Because you end up in these situations, you get used to services, you get used to, spending.

You make promises to staff, you know, plugging holes here, but then others open in other areas.

And, Courtney, before we let this go, there's also news you have today about some some cuts, some layoffs are what's happening in Burlington.

Right.

So in just the last few days since I published this story, the mayor announced this morning that she would be putting forward 25 layoffs, 25 positions.

Now, seven of those positions are vacant.

18 of them are not.

And about half of them are union jobs.

Which is not a great message for anyone to hear, especially her.

Who?

Emma, who considers herself to be a labor mayor.

So we don't know a lot of the specifics of of who is in that list.

We were told today that we wouldn't have the chance to ask questions until Monday, when there's a press conference and a city council meeting.

Okay.

I want to get back to some issues with Burlington as well in just a moment.

But we do have to circle back.

As much as I kind of don't want to to this health care issue.

You know, Calvin, we did talk about this a couple of weeks ago.

Lola was mentioning the problems with Blue Cross Blue Shield.

But again, we're hearing now about facing this, this kind of going off a cliff because, federal Medicaid funding is really much at risk.

What would what would be the the upshot of that here?

Yeah.

I mean, so this is looming over just about every conversation at the state House, and there's a lot we still don't know.

Republicans in Congress are, there's a lot of political implications for Republicans in blue districts or purple district or swing districts.

So we'll let DC have play out whatever happens in DC.

But there is, essentially a loophole in, you know, tax policy that was discovered about 40 years ago in New Hampshire, of all places, which is a tax on providers that states implement.

And, having that tax allow states to draw down more Medicaid funds.

So they're not, of course, growing their state Medicaid budget, but they're pulling in more federal money.

49 states have now used this.

Every state except for Alaska and rural states especially lean very heavily on this.

A Republicans in Congress are thinking about getting rid of this this loophole or this tax, strategy.

You know, saying that this is states, you know, leaning on the federal government, and the largesse of, of cash, for Vermont, that could mean, you know, depending on the worst of it, that could be up to about $270 million that the state could stand to lose.

And in terms of building a state budget, programs that are funded, I mean, I talked a little earlier about Doctor dinosaur and addiction services and long term care for seniors, but that would really dramatically reshape how, state budget writers are approaching state spending and the timeline, especially for some of these budgets as well.

There is a provision, in the budget, it's in conference committee.

Right now, but there's a provision that would allow state lawmakers to potentially come back or the emergency board to come back to put more money into whether it be state programs or, things that are funded by Medicaid.

But we don't have that much to, to fill those holes.

So there could we'll see again what comes out of Congress, though, there's a lot of, political implications that are happening on Capitol Hill.

But, for a state like Vermont, we are very reliant on federal cash and I think that is, really apparent, this week at the state House, a little different.

Or if you've been hearing state House lawmakers talk about this issue, are they afraid to talk about it?

Yeah.

I mean, people are definitely talking openly about it.

You know, it's such a strange place to be in.

Right?

We're going to probably adjourn at the end of May.

We're going to pass the budget.

And everyone is kind of trying to get their work done.

But we also have this understanding that everything that we've done here this year, is kind of is written in pencil, you know, and I mean, yeah, the timing is going to be the beginning of our fiscal year is July 1st.

Right?

So we're going to pass this budget, people are saying that will probably if, you know, the worst comes to pass or something very bad comes to pass.

We'll probably be back in September or October.

So we're going to have to reopen the budget after the start of the fiscal year, and potentially make some extraordinarily painful cuts.

But we don't we don't know.

We don't.

It could be the whole thing could fall apart in DC, right?

I mean, as you point, 49 states take advantage of this, particularly red states.

Right?

So this is really, politically difficult and thorny for a Republican Congress to do.

So, you know, it's everyone's just I mean, we're seeing the same issues come up with things like FEMA, where the federal government is saying states rely too much on FEMA, so we're going to take FEMA away.

But again, there is a ripple effect to all of this, and we're going to have to see how it how it plays out, because I think you're right, Lola, in that if there are enough states that are depending on this kind of Medicaid funding and if it starts to affect everyone, that may not be a political winner for Republicans in Congress.

But we just don't know.

And that's the problem.

And I guess maybe just the last point, just to kind of drive it home, like what this actually means for Vermonters, for consumers.

I mean, we can talk about state Medicaid budgets, but, you know, when you have programs that aren't being funded or people that can't get health insurance because Blue Cross is in dire financial straits or, you know, programs folding clothes, that means people might have to either pay out of pocket and that ruins your personal finances, or you forgo care and you don't get that, condition checked up on.

And then your health gets worse and it really turns into this negative feedback loop for a lot.

That's a spiral.

Yeah, exactly.

So it really will potentially have profound implications for Vermonters.

Again, whether or not Medicaid cuts happen like we are already seeing right there is this.

So, seven days did a really good story about kind of the state of play in the health care conversation, which I recommend that everyone reads.

But there is this one detail, and, you know, there are a million details in these stories that are just shocking.

But the chair of the House Health Care Committee in the state House is already planning to herself go without health insurance next year.

Right?

I think often people think that, like, lawmakers are somehow immune from all this, somehow immune, you know, just like elites in Montpelier.

But like they are already themselves experiencing, many of the worst case scenarios that everyday Vermonters are dealing with at home.

Courtney Land, that I want to circle back to Burlington for a moment, I was so saddened to hear about, nectars.

Long time well known bar downtown Burlington.

Phish got its start there.

Calvin knows that, they are at least temporarily closing.

Who knows whether they think they can make a go of it eventually.

But businesses, downtown Burlington really hurting right now.

Construction is a big problem with that.

And what else are they saying about telling the mayor?

I'm.

I'm very static.

We need some help here.

Yeah, absolutely.

The there are a lot of things happening in downtown Burlington that are putting a lot of pressure on businesses.

You know, since the pandemic, we've heard a lot about the public safety challenges that Burlington has been experiencing.

And today, a group of businesses sent, signed and sent a letter to the mayor's office basically saying we need help and, you know, they pointed out a number of things that they think she could look at.

You know, some one of them being just to the to the large and small, you know, on all scales, one of them being, you know, please address some of the behavior in our parking garages.

You know, that's that's a priority because they need people to feel safe to come to work for people who parking those garages and tourists to come in.

I mean, there's already pressure on the city budget with the, you know, with President Trump's attitude toward Canada, where Burlington is seriously concerned about the amount of revenue it could lose as tourists reconsider coming here.

But the public safety thing is, is has been an ongoing challenge.

You know, like, there's people are are very concerned about it.

And I think this construction project that you mentioned is, is kind of like insult to injury.

It's it's a project that started a year ago.

It has closed portions of Main Street, which is literally the main street in Burlington, for months at a time and will not be finished for another two years, two years, two years.

And I think businesses are truly wondering if they can survive that.

Yeah, that's a difficult one.

And, you know, to your point about a lot of Canadians not coming here, Lola, you were saying that, you know, part of the money that we're getting from the surplus comes from the sales and the rooms and meals tax is doing so well, that money may not be coming as it was.

Right?

I mean, yes, we have a surplus this year because the economy is doing really well.

That includes sales taxes.

That includes meals and rooms in Vermont that's heavily reliant on tourism, and everyone is expecting us to have a terrible tourist season.

So yeah, I think those figures will look very different next year.

Calvin, I want to get to, something that was launched this week, the announcement of a Vermont immigration legal defense fund.

What's behind that?

How is it going to work?

Yeah.

So this is a philanthropic fund that was launched earlier this week from, Sue Minter, former transportation secretary, former state rep Patty Conlin.

The, United Way of northwest, or north northwest Vermont, is basically it's a legal fund that will accept donations to help pay for lawyers, legal proceedings, legal counsel, for undocumented migrants who might be facing immigration enforcement from the Trump administration and from immigration officials.

Certainly this has come, there was, three migrant farm workers from a Franklin County dairy farm that were deported this week.

Motion model.

We, who was detained by Ice and, is still facing charges from the, from Homeland Security and the federal government.

He also was at the state House endorsing this program, saying that it's important.

We've talked a lot about how reliant are especially agricultural economy, but our visitation economy, our ski economy, you know, lodging, etc., is on migrant labor.

And so they see a real threat here.

In terms of what that that could mean for our economy.

So that's what this fund is, is aimed at.

But again, it's not no taxpayer funds.

It's all donation.

Philanthropic, organizations coming together for this and sort of related, there's a separate efforts, to launch a study about whether or not an office to, should be open to help specifically with immigration issues and to help folks get along with that.

Exactly.

Yeah.

There's a bill in the state legislature which would study creating a new office of New Americans, basically, which would be there as a resource to help, new Americans, refugees, people looking to assimilate and integrate into society, helping them with, you know, workforce, issues being number one, getting them jobs.

But number two, transportation, language, housing.

So really stepping in where, where, you know, some some offices have had, you know, challenges in years past.

That's what this bill would do.

But again, it's just a study right now.

Okay.

I'd love to end on some good news if we can.

And Lola, this is something we did not get to a few weeks ago when we had you on.

But there's a growing demand for Vermont's technical centers.

That's that's some good news, right?

That is some good news.

Although I also have some bad news for our.

Come on.

I'm doing my best here.

It's just it's very exciting.

The kids want to go into the trades.

And, that that is very good news because we need them.

The problem is our, tech centers are underfunded and maxed out.

And so a lot of those kids are finding are landing on waitlists.

Okay.

So they're on the waitlist, though, and perhaps they can get in there.

But certainly you need electricians, plumbers that are very important jobs.

And at least we're going to try to have something positive to say about that.

We do have to leave it there.

For today, I want to thank our panel so very much today, Calvin Cutler from WCAX, Lola Duffot from Vermont Public.

And Courtney Lamton from Seven Days will be tackling these issues again, of course.

Thank you all for watching and listening.

I'm Mitch Wertlieb, but I hope you join us again next week for Vermont this Week.