Appropriations and Revenue Bills

I have found the Vermont Statehouse to be largely nonpartisan. This is most evident within committees, which for the most part put politics aside and try to derive the most workable solutions to the problems they face. The Judiciary Committee, on which I serve, has so far this session passed twelve bills out of committee, each on 11-0 votes.

This past week, the Appropriations Committee on an 11-0 bipartisan basis voted out of committee the budget bill for fiscal year 2016 (H.490). The nonpartisanship abruptly ended. However, once the whole House took up this bill along with a revenue/tax bill (H.489), which had passed out of the Committee on Ways and Means on a party-line 8-3 vote.

Before the third reading of these bills, a group of Republicans offered amendments plainly aimed solely at scoring political points, not at trying to resolve the underlying issues facing the legislature. They sought to cast themselves on the side of lower- and middle-income Vermonters by suggesting a reduction in taxes on those making less than $60,000 and an increase in spending on low income heating assistance. They did not, however, provide offsetting additional taxes on those earning higher incomes or realistic spending cuts.

In any event, the budget and revenue bills did eventually pass with some bipartisan support and without the Republicans’ amendments. And despite the political game playing that occurred, I do recognize the benefits of having a minority party that acts as a check on the majority. Further, through trying to reach compromise among the parties – the Democrats, Republicans, and Progressives – the legislature as a whole can achieve a better solution. In order to reach compromise, though, each party is likely going to have to accept some outcomes or positions that they find disagreeable.

Indeed, this was certainly the case with both the revenue and budget bills. I initially found aspects of the bills to be objectionable, but those aspects were the price of passing bills that, overall, are steps in the right direction for fiscal sustainability in Vermont. Also, as I delved more deeply into the explanation of those aspects of the bill, what I found alleviated my concerns enough so that I was comfortable voting for the bills.

As to the revenue bill, I disliked its apparent potential disincentive to charitable giving. Among other changes to the tax code to raise revenue, the bill caps itemized deductions, including for gifts to charitable organizations, at two and a half times the standard deduction amounts (a couple filing jointly, for example, could still deduct $31,500). Because these deductions provide an incentive for giving, a number of nonprofit organizations objected that scaling them back would hinder their fundraising.

As I learned, though, the actual impact on charitable giving would likely be very limited. Most of the tax benefit from a charitable contribution comes from the federal deduction, which is two to three times more valuable than the state benefit. It would make little financial sense to stop contributing to charities because of the limitation of the state deduction while foregoing the more valuable federal deduction.

People donate for a variety of reasons, not simply to receive a tax deduction. In fact, only 30% of Vermonters itemize their deductions but many more than that contribute to charities. The cap on deductions will affect a small group of taxpayers, resulting in a tax increase for slightly more than 6% of filers.

In effect, the cap on deductions, as well as other aspects of the revenue bill, results in a more progressive income tax. Given that the income growth for the top two income brackets in Vermont has grown significantly over the past several years, while middle class income has for the most part stagnated in the state, adding progressivity to the tax system made good sense to me.

I had a number of issues with the cuts proposed in the budget bill, but my major concern related to a $6 million cut in funding to the Low Income Heating Energy Assistance Program (“LIHEAP”). During the floor debate, however, I learned that the effect of this cut should not be dramatic. LIHEAP is a federal program. Up until recently, Vermont supplemented the program by providing state dollars through the Emergency Board, which would consider the need for additional funding in the fall after federal dollars for the fund had been designated. Two years ago, the legislature instead appropriated money for LIHEAP up front rather than waiting until it understood the extent of the federal investment in the program. The budget bill will return the state to the previous procedure.

Further, as the economy has improved and as fuel costs have decreased, the pressure on LIHEAP’s resources have decreased. As of the end of February, LIHEAP still had $3 million available if it needed a crisis grant, which is an additional benefit provided to households experiencing a heating crisis. This amount, if unused, will roll over to next year’s program. Finally, an amendment was approved that will designate up to $5 million of any general fund surplus at the end of this fiscal year to LIHEAP. In short, low income Vermonters are not at risk of losing the LIHEAP assistance that they may need next winter.

Having largely addressed my major concern with the budget bill, I was able to focus on its more positive features. First, in conjunction with the revenue bill, it closes the $113 million budget gap that the state was facing in the next fiscal year. Second, the FY 2016 budget is not an end point but part of a long term process of fiscal change to achieve a balance between the state’s spending and its expected revenue growth rates. Spending was projected to grow by five percent annually, while the state’s domestic product is projected to grow by only three percent annually.

As the Appropriations Committee has explained, to meet this balancing goal, the budget bill:

1) Reduces reliance on one-time funding. In the last fiscal year, the budget relied on $53 million in one-time funds. This budget includes $25 million in one-time funds and next year’s budget is projected to include just half that.
2) Reduces the rate of spending growth. To this end, the budget includes a number of efforts to reduce long-term spending in corrections, public safety, buildings, and other areas.
3) Sets forth two additional longer-term goals: to move toward budgeting for less than 100% of projected revenues and to explore a two-year budget, allowing time in the second year to focus on results-based accountability, evidence-based budgeting, and structural reforms.

Slower than anticipated economic growth, continued federal reductions in programs, and a growing demand for state services have created a difficult budget environment. The FY 2016 budget that was passed on to the Senate starts a multiyear process that will bend the spending curve toward long term sustainability. For more on these bills, I would suggest reading April Burbank’s recent article in the Burlington Free Press.

Judiciary Committee Update

In the past week, the House passed a variety of bills that had been voted out of the Judiciary Committee. One such bill would ensure that States Attorneys file cases involving juveniles in the Family Division of state court, where certain confidentiality and other procedural protections are in place, rather than in adult criminal court, which lacks such protections (H.95). Another bill would make it a crime to disseminate sexually explicit photographs or videos of individuals online without their consent, even if the subject had consented to the taking of the photograph or video (H.105 as amended). A third bill would make it easier to prosecute home improvement fraud (H.483).

The Judiciary Committee took testimony on a bill passed out of the Senate that would modify procedures related to placement on the Sex Offender Registry (S.13). Currently, the Department of Public Safety administers the Registry, making decisions as to the posting of an offender’s information to the Registry before his release from incarceration. The bill would instead have the court make determinations related to an offender’s inclusion on the Registry at the time of sentencing, deciding whether the offender should be placed on the Registry and, if so, for how long. In addition, the bill provides a procedure to allow individuals to challenge the information on, or to request removal from, the Registry. These changes were prompted by audits of Registry’s error-rate, which were performed to determine whether address information would be included on the Internet version of the Registry. The Committee is considering what Registry error rates would be acceptable to allow an individual’s address information to be placed on the Internet Registry, which would be widely available to the public.

In addition, the Committee has taken up a bill relating to criminal justice reform (H.221). This bill would, among other changes, reduce the number of crimes punishable as felonies; eliminate jail time for non-violent offenders; prevent people from being kept in jail at the end of their sentence due to lack of housing; expand parole eligibility for individuals who have serious medical conditions, were sentenced for an offense committed as a juvenile, or are 65 years of age or older; and eliminate incarceration for violations of parole conditions that are not new crimes. The overall aim of the bill is to reduce unnecessary incarceration and thus reduce Vermont’s prison population and its associated costs. It represents a start in updating the 19th and 20th century solutions in Vermont’s criminal code that are currently used to address our 21st century problems.

Judiciary also took testimony on the enforcement provisions of the water bill (H.35). It has made recommendations to the Committee on Fish, Wildlife, and Water Resources suggesting changes to those provisions of the bill. In addition, Judiciary started its consideration of the Child Protection Bill, (S.9), participating in a joint hearing with the Human Services Committee.

Judiciary took testimony from and worked with the State Court Administrator and Chief Superior Judge to evaluate efficiencies that could lead to savings in the Justice System. For example, the state courts are considering an initiative to start conducting arraignments by video conferencing, which would produce savings from decreased need to transport defendants and for Court security. The Committee provided its various proposals related to Court savings to the Committees on Ways and Means and Appropriations.

False Claims and Young Dems

It has been a busy week in the legislature after returning from the Town Meeting Week recess. The House passed a bill, H.40, that sets a renewable energy standard for Vermont, with emphasis on utilities meeting goals for renewable energy and efficiency. The Judiciary heard extensive testimony on enforcement provisions included in the water cleanup bill, H.35. In addition, Judiciary passed out of committee three bills: H.95, which makes incremental progress toward having cases against juvenile offenders brought more often in the family rather than the criminal division of Superior Court; H.105, which makes it a misdemeanor to disclose sexually explicit images without consent (so called revenge porn); and a committee bill that strengthens the ability of the Attorney General to bring cases against contractors for home improvement fraud.

Today, the House passed a bill, H.120, that I helped report out on the House floor yesterday.

Reporting Out H.120

The bill proposes to create a Vermont False Claims Act — an anti-fraud law modeled on the Federal False Claims Act (“FFCA”). The FFCA was first enacted in 1863 to combat fraud by suppliers of goods to the Union Army during the Civil War. Since that time, the FFCA has been amended several times to broaden its scope and enhance its ability to combat fraud against government funds in all sectors. Starting in 2009, the federal government has used the FFCA to recover over $23 billion in cases related to government programs.

The Vermont False Claims Act would provide for penalties for anyone who knowingly submits false or fraudulent claims to the State’s government. It would also authorize a person who has evidence of fraud, called the relator, to bring action on behalf of the State against those who commit fraud against government programs. Any recovery is refunded to the State, and in certain circumstances such as those involving Medicaid, to the federal government. Relators are eligible to collect a percentage of the funds recovered as an award for having rooted out such fraud.

The federal government has had such success in combating fraud and abuse with the FFCA that it created incentives in the Deficit Reduction Act (“DRA”) of 2005 for states to enact anti-fraud legislation of their own. These incentives relate specifically to recovery in cases of Medicaid fraud. The Medicaid program is funded jointly by the federal government and each state’s governments. Normally any recovery of funds fraudulently obtained under the Medicaid program are returned to the federal and state governments proportionally to the shares that each pay into the program. States that enact DRA-compliant legislation are qualified to receive a ten percent increase in their share of any amounts recovered under these laws. As a result, the majority of states have enacted some form of a False Claims Act.

If H.120 is ultimately enacted, Vermont’s share of Medicaid fraud recovery will increase from 46% to 56%. The financial incentive would allow Vermont to compensate Relators, while ideally detecting, enforcing, and recovering a greater percentage of the fraudulent claims filed in the state.
Enactment of the bill would have a positive impact on revenue for the State. The Joint Fiscal Office estimated that, through the law, Vermont could recover at least $280,000 dollars annually.

Earlier this week, we were visited by members of the South Burlington High School Young Democrats. I introduced the group from the floor of the House and the four South Burlington representatives chatted with them about our work. Here we are with the Young Dems.

Young Dems Visit the Statehouse

Town Meeting Day 2015

Today is Town Meeting Day in South Burlington, and tomorrow is Election Day.  I prepared a summary of my Committee’s activities so far, as well as other relevant legislative updates, as a handout for my constituents on Election Day.