Updated May 17, 2024
The Vermont legislative biennium finished on May 10 with lawmakers agreeing to come back to Montpelier on June 17 for a veto session. A return trip to Montpelier seems likely given the Governor’s objections to several pieces of legislation passed by the Democratic supermajority. Below is a summary of what we have been watching and what comes next.
Tax & Spend
Vermont will spend $8.5 billion over the next fiscal year under the budget passed by the House and Senate. The average Vermonter will see their property tax bill increase by about 14% if the annual yield bill (H.887) becomes law. The state spends nearly $2 billion per year on public schools, and property taxes are the largest source of revenue for the education fund. A summer study committee has been tasked with figuring out how to spend less. While a 14% bump in property taxes may be more than many Vermonters can afford, it's less than what was projected earlier this year. A new 3% tax on short-term rental housing, a new tax on cloud-based software, and $25 million from a one-time state budget surplus helped “buy down” the sharp increase. A veto may come from Governor Phil Scott, who asked for more cost-containment measures for education spending now rather than later. The legislature also passed a 3.4% property transfer tax for anyone buying a second home. Two tax sunsets (H.546) have also been moved. The 2-cent per gallon fuel tax on heating oil, propane, kerosene, and dyed diesel was reauthorized for another five years, and the exemption on the sales tax for wood boilers was extended another three years. In addition, a 0.44% payroll tax passed last year will take effect on July 1. The revenue goes into a fund to help pay for childcare programs. Download the Child Care Contribution Guide here.
Energy & Environment
Lawmakers passed first-of-its-kind legislation to add up the cost of climate change on Vermont infrastructure and ask large oil production and refining companies to foot the bill. The legislation (S.259) spends $600,000 to tally up the damage and determine who should pay hundreds of millions into a “Vermont Climate Superfund.” It will almost certainly result in a legal challenge. Lawmakers also passed a Renewable Energy Standard (H.289) that requires Vermont’s electric utilities to purchase 100% of their energy from renewable sources by 2030. The requirement could cost Vermont ratepayers an extra $1 billion over the next decade due to increased power supply and transmission investments. Lawmakers also passed a study (S.253) examining whether and how Vermont can enforce building energy codes. Another energy bill (S.305) allows Efficiency Vermont to spend up to $2 million a year on thermal and transportation programs while removing the authority of the Public Utility Commission (PUC) to review how they spend the money. In response to a request made by heating fuel sellers, legislation changes the Clean Heat Standard’s annual dealer registration date from January to June. It also clarifies that confidential information about gallons will not be posted on the PUC’s website. The earliest the Clean Heat Fee could be implemented is on January 1, 2026, according to a PUC order. Learn more about the Clean Heat Standard at CleanHeatVT.com.
Transportation
The House and Senate agreed on an $879 million transportation spending plan. The legislation (H. 868) sets aside about $150 million for fixing state and town roads. There is $56 million for public transit programs, $1.1 million to electrify state-owned fleet vehicles, and $70,000 in e-bike incentives. There are also new fees for electric vehicles (EVs) and plug-in hybrids (PHEVs), which will go into effect on January 1, 2025. EV owners will pay an extra $89 annually, and PHEVs will pay $44.50. Given the number of electric cars on the road, this is expected to raise $1.7 million in 2026. Money from the fees on EVs will be set aside to fund more electric vehicle chargers. None would go to fix Vermont’s roads. At least not until the state creates a Mileage-Based User Fee (MBUF), which won’t happen until at least 2026. The Agency of Transportation will have to figure out how to roll out an MBUF and what regulations are needed to ensure EV chargers work correctly. The legislation (S.309) also clarifies that vehicles over 15 years old that have not changed ownership since January 1, 2024 are exempt from needing a title. The proposal also requires EV owners to have the letters “EV” stamped on their license plates to alert firefighters, starting on July 1, 2026. That is the same deadline for removing aftermarket tint on front side windows (if greater than 30%) to pass inspection. Finally, used vehicle dealers must get their customers to sign a form acknowledging when the vehicle was last inspected at the point of sale.
Housing & Economic Development
Lawmakers approved a two-year extension of the Vermont Employment Growth Incentive Program (H.10). This crucial economic development tool includes job creation, wage lifting, and capital investment programs. The incentives are delivered to businesses only after the Vermont Tax Department confirms that the investments have occurred. Lawmakers also passed several changes to Act 250, Vermont’s half-century-old land use law. The legislation (H.687) integrates environmental reforms with initiatives to increase housing production, such as simplifying the construction permitting process and reducing bureaucracy for developments near more urban areas of Vermont. The exemptions from Act 250 review are only for specific housing projects based on location, which is an attempt to facilitate immediate development in designated areas. However, it creates some uncertainty and imposes even more regulatory authority on rural areas of the state. To prevent “forest fragmentation,” anyone who wants to build a driveway greater than 800 feet on their land must get state approval first. Governor Scott supports the housing provisions but opposes expanding environmental regulations that could limit new housing in rural areas of Vermont.
Business Regulations
Vermonters may soon be able to more easily sue companies that misuse their personal information. The legislation (H.121) prohibits the sale of sensitive data and allows consumers to file civil suits against companies that violate data privacy regulations. If the bill becomes law, it would introduce rigorous and untested regulations impacting businesses of all sizes. There is a concern that this could open the door to frivolous legal suits against Vermont companies. Another measure (H.606) allows any individual who meets the standards required by the State to obtain a professional or occupational license or certification, regardless of their immigration status. Under S.102, employees would be allowed to leave a company meeting without retribution if they perceive it to be political or religious in nature. H. 707 would create a new position in state government to coordinate workforce development efforts and develop strategies for comprehensive and integrated workforce education and training. H.704 requires any Vermont employer that advertises an open position to include the compensation range for the job.
Public Safety
Widespread concerns over crime led to legislation (S.58) creating harsher penalties for drug-related offenses. Other actions include a measure (S.195) to increase supervision of people who are accused of crimes before their day in court and a measure (H.563) that would make it a crime to “trespass” in someone’s vehicle. Another proposal (H.534) creates stronger penalties for retail theft. Currently, anyone caught stealing merchandise valued at less than $900 constitutes only a misdemeanor offense. The bill would result in substantial fines and potential jail time for repeat offenses.
Communications
Governor Scott signed into law Act 99, which is designed to support the continued development and success of Communications Union Districts (CUDs) in providing high-quality broadband service to underserved areas. It focuses on enabling mergers and cooperative efforts among CUDs, ensuring they can operate effectively in a competitive market without relying solely on public funding. The law also protects CUDs' business data to maintain their competitive edge. Additionally, the act will allow for consolidating resources and expertise among Vermont's CUDs to enhance their capacity to deliver reliable and fast internet services across rural regions. The law could lead to more efficient service provision and potentially lower costs due to the larger scale of combined operations. Municipalities would be required to hold hybrid meetings that the public can attend online or in person if S.55 is signed into law. Members of the Vermont Communications Union Districts Association (VCUDA) asked that CUDs be able to continue to have fully remote meetings and not require a “hybrid” option since many do not have a physical location. While all other entities must have an in-person option for any online meeting starting on July 1, 2024, CUDs were given a six-month extension. If signed into law, H.657 would change the contribution method for the Universal Service Fund, moving from a 2.4% proportional charge on telephone and cellular phone service to a flat, per-line fee of $0.72 per month. The legislation is anticipated to generate $8 million in annual revenue, with 17% (about $1.4 million) allocated to the Vermont Community Broadband Board. Fiscal note here. The legislation also clarifies that telecommunications equipment is considered tangible personal property for tax purposes and includes physical infrastructure like wires, cables, antennas, poles, and wireless towers. The Public Service Department and Agency of Transportation will also be required to examine how the public right-of-way (ROW) in Vermont is used by telecom companies. The legislature wants to know how the ROW is accessed and whether the state should charge these companies for using it.
Health Care
H.861 mandates that health plans pay the same amount for an audio-only health care visit (i.e., a telephone call) as an in-person visit. Currently, the Department of Financial Regulation requires that an audio-only service be paid at 75% of an in-person visit. H.766 could eliminate health plans' tools to contain costs that ensure members pay the appropriate amount for their medical services. This includes restrictions on Step Therapy drug protocols requiring patients to try therapeutically equivalent, lower-priced medications before moving to higher-cost drugs. Meanwhile, insurance premiums are expected to increase by as much as 19% next year. Roughly 45,000 Vermonters are insured by Blue Cross Blue Shield, while MVP insures nearly 26,000 Vermonters on small group and individual plans. Both companies say the proposed hikes are needed to meet rising costs for hospital services, drugs, and an increase in people seeking health care.