Upon the May 12 adjournment, it became clear that the small business community had faired pretty well, but serious challenges lay ahead.
The 2022 legislative hurdled to a conclusion May 12. The session had convened on January 4, with Governor Phil Scott prioritizing Vermont’s workforce saying, “… whether it is training and recruitment, childcare, tax policy, housing, healthcare, infrastructure, or climate change, we must reverse our workforce trends.” Vermont received billions in COVID-19 financial relief from the federal government, of which $600 million was distributed to transform communities across the state and set us on a course that many never contemplated.
The Vermont General Assembly then went on to prioritize a number of issues: unemployment benefit increases, a clean heat standard, minimum wage increase, many employer & employee relationship regulatory efforts and building a budget. Upon the May 12 adjournment, it became clear that the small business community had faired pretty well, though serious legislative challenges likely lay ahead in 2023. Thank you to all our NFIB members who responded to legislative calls to action throughout the session; your voice truly makes a difference.
HIGHLIGHTS: NFIB Victories & Challenges
·Vermont Budget Surpassed $8 Billion for the first time ever
·Most Employer/Employee Relationship Mandates Failed
·Minimum Wage & Unemployment Benefits Increases Pass
·Business Recovery Funding Still Available
·Clean Heat Standard was Vetoed
·Expansion of the Bottle Deposit Law Failed
·State and Local Tax Deduction Cap Efforts to Continue
Vermont Budget for FY’23
H.740 is a record-breaking $8.2 billion budget, supplemented by an unprecedented amount of federal funding. The budget, and other related bills, includes the following of particular interest to NFIB members:
- Tax Relief: $40 million in tax relief for Vermonters.
- Broadband: $96 million to continue the state’s work to make broadband available to all Vermonters.
- Water, Sewer and Stormwater Infrastructure: $104 million to improve and expand water infrastructure that will support economic growth, ensure clean drinking water, help families replace failed systems and more.
- Workforce: $66 million to train, retain and recruit more workers.
- Economic Development: $87 million for initiatives that will help retain jobs, support businesses, and strengthen communities.
- Housing: $90 million to increase and improve rental housing, build more homes for middle-income Vermonters, help families exit homelessness and more.
·Energy Efficiency Promotion:
—$80 million for weatherization,
—$45 million in energy efficiency grants for towns,
—and more than $60 million for electrification initiatives.
·Electric Vehicle Promotion – currently there are 600,000 registered vehicles in Vermont, but less than 4000 are plug-in electric vehicles. Sales of these plug-ins will have to increase by more than 500% to meet the 2025 emissions reduction mandate in the Global Warming Solutions Act.
—$12 million will go to the fund that pays Vermonters up to $4000 to buy an electric vehicle
—$6.2 million was allocated for a grant program to encourage businesses within one mile of interstate exits to install electric vehicle fast chargers.
—$10 million will go to install vehicle chargers at multi-unit rental housing, state parks, workplaces, and other public venues.
Business/Employer Mandates Failed
There were more than a dozen pieces of legislation that would have put further regulations on the employer/employee relationship. For instance, there were proposals that would have mandated reliable work schedules, reimbursement of employee expenses, equitable pay ratios, disclosure of pay scales, paid vacations, and employer funded electric vehicle charging stations.
Unemployment Benefits Increase and Minimum Wage Increase Passed – $100M Cost to Employers
Minimum wage currently at $12.55 will increase to $13.75 on Jan. 1, 2023, and to $15.00 on Jan. 1, 2024. The legislature also passed a new $25/child unemployment benefit and the establishment of a task force to study a paid leave insurance program. The increase unemployment benefits will cost employers $100 million over the coming years, of which more than $90 million would come directly from Vermont’s UI Trust Fund, resulting in corresponding increases in UI taxes on employers. Specifically, the bill would create a $25 increase on all weekly UI benefits, including the maximum benefit. As introduced, the first two years of this increase would be funded through a special fund created with $7.8 million in federal ARPA dollars, and thereafter it would be funded directly out of the UI Trust Fund.
Business Recovery Grants (S.11) Passed
Vermont allocated $350 million of federal dollars received in relief for business. The Scott Administration proposed $26 million in business grants last year, but it never came to fruition. This session the legislature supported $19 million in business relief programs, which the Governor signed into law. The program is administered by VEDA and intends to help restaurants, lodging properties, and special events vendors who were forced to close or limit operations. Program will open later this summer; businesses who took on debt or who are still dealing with lingering impacts due to the pandemic should apply. In this legislation, there is also $3 million available through the Vermont Student Assistance Corporation (VSAC) for students who want to earn a skilled trade and demonstrate financial need. The money will pay for licensing and exam fees, as well as tuition payments on behalf of eligible individuals.
Clean Heat Standard Vetoed
This issue was front and center all session taking up much time in a number of committees, but it will not become law following a gubernatorial veto that was not challenged by the legislature in the closing days of the session. The Vermont Climate Council will meet again this summer. Late last year, the group urged the legislature to pass the Transportation Climate Initiative and the Clean Heat Standard, but neither occurred.
Background – In order to comply with the Global Warming Solutions Act, Vermont needs to lose about 1.26 million metric tons of carbon dioxide. According to this greenhouse gas emissions calculator, that’s equivalent of 124 million gallons of heating oil. Vermont could also meet the 2025 mandate if the state eliminated about half of the gasoline sold last year. Of course, this is just the first hurdle to their goal. In 2030, the law requires Vermont to shed 3.46 million metric tons of CO2, which is the equivalent of every drop of gasoline and diesel fuel sold in Vermont in 2021. So, what happens if the goal isn’t met? Vermont can be sued to force immediate government action, which could include a ban on the equipment that burns fossil fuels. Into this void comes the Clean Heat Standard (CHS), which is the most comprehensive carbon reduction strategy to emerge from the Vermont Climate Council. The CHS is a performance standard that requires Vermont fuel dealers to pay others to reduce their sales of oil heat, propane, natural gas, and kerosene if they don’t or can’t do it themselves.
What about motor fuels, you ask? The plan to reduce the sales of gasoline and diesel fuel include incentives for Vermonters to purchase electric cars and the installation of more electric vehicle charging stations. In 2035, the plan calls to ban the sale of new cars with combustion engines. Some lawmakers and lobbyists are worried all of this will be too little, too late to meet the mandates in the Global Warming Solutions Act. See General Fund Budget article.
Bottle Deposit Expansion
Efforts to expand Vermont’s bottle deposit law continued this biennium, with the Senate supporting H.175 on a vote of 17-13. No other formal action was taken as the legislation ran up against the legislature’s adjournment deadline. We anticipate that this conversation will surely be on the table next session as environmental advocates push to “modernize the law”. The bottle bill, originally passed in 1972, established a redemption system that charges consumers a deposit, worth a few cents, when they buy certain beverages. Consumers can recoup that money when they return the empty containers to redemption centers and retail markets.
State and Local Tax Deduction Cap (SALT)
As part of the Governor’s proposed tax relief package for the 2022 legislation session, a State and Local Tax (SALT) deduction cap workaround for pass-through entities (LLCs, S-Corps, and partnerships) that the IRS gave its blessing to in 2020 was included. Vermont has been behind in adopting what about 24 states have already done and about a dozen other states are working on. Recently the Supreme Court also refused to hear a challenge of the SALT cap, further cementing its prominence. The workaround would allow a federal tax cut to Vermonters at no cost to the state and is widely understood in most high-tax blue states as a way to be competitive with other states with low taxes that do not offer as many services. NFIB will continue to work on this issue in the upcoming legislative session.