The Budget Adjustment Act is a traditional document which, in a typical year, includes dozens of accounting adjustments and net neutral changes with anywhere between $3 - $10 million in appropriations. This year, the BAA is quite different than a typical year in size, scope and importance. Total appropriations exceed $200 million in this BAA and the bill contains critical proposals and key issues for Vermonters.
Because of that, as the Governor indicated in his remarks, it is more important than ever to invest wisely in the BAA to make the most of the historic level of federal recovery aid and state surplus money.
This afternoon, and likely throughout the rest of the week, members of the house and senate conference committee will meet to discuss the BAA. The legislature has spent significant time on this bill and the Administration appreciates their efforts and the fact that we have many shared priorities.
Despite those shared priorities, however, we continue to have concerns about how decisions made now will impact the Governor’s future vision for Vermonters, so, I wanted to take this opportunity to elevate some of our greatest concerns which relate to ARPA funding and putting the opportunity to build resiliency and lower statewide debt at risk.
The BAA currently before the conference committee invests substantial ARPA funds without considering the larger economic revitalization needs of the state or maximizing the value of this money. The House Amendment to the BAA results in over $106 million in net new ARPA spending, and the Senate amendment spends $114 million more ARPA funds, which is $84 million more than the Governor’s version.
Further, the Legislature directs those ARPA funds outside of the five spending categories agreed upon by the legislature and the Governor last year – Housing, Climate Change Mitigation, Water, Sewer and Wastewater Infrastructure, Broadband and Economic Recovery.
In total, legislative changes to the BAA reduce available ARPA from $508 million to $423 million – a 17% reduction. That’s almost equal to the total appropriation to broadband in the Governor’s FY23 ARPA budget. It exceeds the total appropriation to water and sewer projects in that budget. And, perhaps most importantly, the Legislature has made these significant cuts without providing a vision or road map as to how, or if, they plan to fund these essential infrastructure projects in the future.
We appreciate the Senate adding waterfall language which would allow a portion of this ARPA funding to be recaptured if there was a surplus at the end of the fiscal year, but even this construct only allows for a recapture of approximately 34% of the additional ARPA funds allocated by the Senate.
So, while this is certainly a step in the right direction, the surplus construct continues to place ARPA funding at risk and does not adequately address the Administration’s primary concern with use of ARPA dollars for short term, programmatic needs.
The investments the Legislature makes with these ARPA funds may be worthy efforts – but they do not maximize the return on investment or accelerate Vermont’s economic recovery.
The infrastructure projects proposed by the Governor are critical, and they are expensive. That is why they haven’t been done, and they might never be done if we fail to direct these resources to once-in-a-generation investments.
In addition to concerns about the way APRA funds are being allocated in this year’s BAA, the administrative proposals to pay off state debt are put at risk in the current version of the bill. Several proposals in the Governor’s BAA were designed to improve the state’s financial standing now and into the future.
The Governor, with the support of the Treasurer’s office, proposed to retire $20 million general obligation bonds.
In addition to the benefits received from interest savings, this sends an unmistakable message to our creditors, and the credit rating agencies, that financial sustainability is a top priority for government leaders. The House declined to fund this priority, the Senate put it into waterfall language in the event of a surplus, we ask the Committee to restore it outright.
The Administration also requests the legislature fully fund the Governor’s initiative to close the Property Management internal service fund deficit. This deficit – currently $21 million – has been on the State’s balance sheet for almost two decades. There’s a plan to close half of it, but there’s no plan to close the remaining $10 million. The Governor’s budget adjustment included the full $10 million, the House cut this in half. The Senate put the remaining half into surplus waterfall language, but we ask that it be restored in full. This is not the kind of initiative that gets top billing when money is tight, but it should be a prime consideration before surplus funds are allocated to new programs or services which may not be sustainable in future years.
Similarly, the Governor’s budget adjustment put $6.7 million towards bolstering our state liability fund. We are pleased the Senate restored this funding in full and urge the conference committee to retain all $6.7 million in the BAA. We should be putting aside more money in this area to build resiliency, not less.
In conclusion, the Administration is asking the Committee specifically to:
- Adhere to prior commitments, included in last year’s budget, to continue using ARPA funds for high-value, transformational infrastructure projects, including housing, clean water, climate action, broadband and economic revitalization in every county in Vermont.
- To remove ARPA-funded proposals for short-term needs from the BAA. These one-time, programmatic needs could be better supported through traditional General Fund dollars.
- And, finally, to restore, in full, the funding for the Governor’s proposals to reduce the State’s debt, close longstanding deficits and generating future savings for Vermonters.
These remarks were delivered by Secretary of Administration Kristin Clouser at the Governor's weekly press conference on February 22, 2022.