Legislative Report

William Shouldice & Associates

Vermont Legislature

Vermont Grocers' Association

Legislative Report – 2005 Session

June 24, 2005

Prepared by Shouldice & Associates

 

Session Features a Number of Issues

·        Health Care Reform

 

General Business Issues

·        Minimum Wage Increases

·        ANR to Review Bottle Redemption Process

·        Direct Shipment of Wine under Study

·        Expanded Local Options Taxes Rejected

·        Streamline Sales Tax Agreement Reviewed – Beer Tax in 2006?

·        Legislation to Outlaw Restroom/Changing Room Surveillance Passes

·        Vermont Origins Rulemaking Oversight Proposed

·        Gift Card and Certificates, H.198

·        Ban on Phosphorus Use in Dish Detergents

·        Workers’ Compensation

·        Big Box Retail Regulation

·        Reduced Ignition Propensity Cigarettes

·        Legislature Eases Bad-Check Collection Notice

 

Energy

·        Renewable Portfolio

·        Sales Tax for Appliances not Passed

·        Vermont Yankee Gets Legislative Nod for Storage

 

Petroleum Issues

·        Predatory Pricing Is a New Vermont Crime under S.31

·        Vermont Ban on Gasoline Additive MTBE Matches Surrounding States

 

 

Rock’em and Sock’em

Governor Jim Douglas dominated the Vermont Legislature this year the way a large dog dominates a smaller one, sometimes growling, sometimes playful, sometimes biting, but always the aggressor.  For their part, the Democrats remained always in character with their role this year, sometimes whining, sometimes snapping back (from a safe distance), sometimes rolling over on their backs, but always with their tails between their legs.

 

The oddity in this scene is that with big majorities in both House and Senate, the Democrats should have been able to stand as tall as the governor.  The answer to this riddle, of course, is simple: The Democrats’ only inherent disadvantage was that they were afraid to fight, and Douglas and his team proved this year that they were not.

 

Every political junkie in Vermont knew from the outset that the 2005 session would have a dog-eat-dog quality, but after the November election it was not at all clear who would win when Douglas and the Democrats squared off.  Indeed, until about midway through the session most of the action was advance-and-retreat with neither side showing an overwhelming advantage.

 

Then the governor suddenly showed his teeth, threatening to veto a bill that had drawn scant attention from anyone outside the State House.  The legislation would have restructured three state pension funds, creating one management board to oversee all three-investment portfolios.  Moving relatively smoothly through the Senate and House, despite some grumbling from the administration, the bill that headed for the governor’s desk created a board structure he didn’t like.  So he killed it and in the process blasting the Democrats for trying to stack the deck in favor of labor.  The decisive move left the Democrats, including State Treasurer Jeb Spaulding, with their jaws hanging open. 

 

Despite the governor’s warning that a veto was certain, they evidently did not expect him to play so rough.  Finally they put together a campaign to override the veto, although it was clear from the outset it didn’t have much force behind it, and it did in fact fail.  This clear victory, which Douglas and his team were not shy in broadcasting, left him in the dominant position and from then on he had full control over the process.  At every step the Democrats were cautious to the point of timidity, glancing constantly over their shoulders to see where the governor was standing, and bemoaning the administration’s success.

 

By mid-May, Senate President Pro Tempore Peter Welch, D-Windsor, who was clearly the dominant Democrat in the General Assembly, was warning various proponents of specific legislation from his party that the Douglas administration was likely to win an ensuing press war.  Most of those special interests, like the Democrats, chose not to push their battles and avoided the confrontation.

 

The final proof of how important the pension fund veto turned out became near the end of the session when the ill-fated proposal was resurrected with only very slight change and then quietly passed and signed without fanfare by Douglas.  Clearly, what was most significant in the pension fund war was the battle, not the battleground, and the governor won simply by being decisive.  He never looked back and from then on the Democrats never regained their balance.

 

One other odd battle that exploded into a legislative crisis, eventually requiring a brief special session, came out of a dispute between the faculty and administration of Vermont State Colleges.  The Vermont Labor Relations Board, legally bound to choose between the two sides’ “last best offer,” had ruled in favor of the administration’s proposal.  Under a state law passed in 1977, said to have been largely crafted by then-Representative James Douglas, allowed the faculty an option of appealing the VLRB order to the Legislature.

 

When the state colleges’ dispute landed in the Legislature’s lap in early April, the Douglas Administration quickly sided with the management position, while Democratic leaders, backed by some Republicans, sought to find some other appeal process for the faculty.  The governor took a firm position, saying the Legislature ought to stay out of the labor dispute and that he simply wouldn’t allow them to interfere.

 

The Legislature veered sideways by attaching a state college amendment to the state’s big budget bill, evidently believing that Douglas would not dare veto the General Fund Budget bill.  After all, no governor had ever vetoed the state appropriations bill, so the General Assembly voted the budget and promptly adjourned on June 4.

 

The rest of the story…

But guess what? Douglas immediately said he would veto the budget and force the Legislature back into special session to write a new budget before the fiscal year ended on July 1.

 

He would veto the bill, Douglas said, because he had clearly told the Legislature that they better not include the state college provision, and they had defied him, siding instead with “big labor.”

 

It had been a blunt, I-dare-you-to message.  The Democrats caved quickly after one more hastily crafted “compromise” was rejected by Douglas, and they trudged back to rain-soaked Montpelier on June 16 to strip the state college provision out of the budget and pass a bill Douglas had demanded they pass in early-June.

 

Democrats’ spirits were as soggy as the State House grounds when they gathered for the four-hour session, and they complained bitterly about Douglas, but Republicans gave back as good as they got in angry floor exchanges that day.  As a result, the next day’s press reports made the session sound like a food fight among politicians suggesting nothing than a game.  And, to further solidify his total dominance of the legislative session, Governor Douglas still had one more move, following through on a threatened veto of the “health care reform” bill. 

 

Democrats came to Montpelier in January, fresh from huge legislative election victories, saying health care in Vermont was in crisis and they were determined to fix it.  The House and Senate pounded away all session on various proposals, each offering its own reform package, and they beat back every initiative offered by others, including the Governor.  In the end, the bill that emerged provided little substance other than further study, but it did put into law a financing mechanism for universal health care.

 

The Democrats’ final bill relied heavily on a new payroll tax to fund primary and preventative coverage.  Douglas had insisted that a new payroll tax was not acceptable, and he had proposed instead to pay for expanded health coverage through an increase in the existing tax paid on insurance premiums.  Several business advocates had put a proposal out in early-April that would have been a premium-based plan; requiring individuals to prove they had insurance coverage, similar to current automobile insurance coverage in Vermont.

 

But once again, the Democratic majority defied the governor’s veto threat and passed a health care bill he vetoed specifically because of the payroll tax.   Thus, in the end, the much-touted health care reform initiative of 2005 slouched out of Montpelier with much rhetoric and little substance.  However, Democrats anticipating the veto had inserted funding and language into the budget bill for the various studies and analysis necessary for their universal coverage system.

 

Unlike his other lightning-like vetoes, the governor appeared to be in no hurry to use the veto pen on the health care initiative and it remained on his desk for several days after the special one-day session.  During that time a couple of opinion polls surfaced showing some support in Vermont for universal health care coverage, even if that meant new broad-based taxes.

 

Health care reform, therefore, will again be the centerpiece of the upcoming legislative session, and the plan that gets the most public exposure in the interim will be the one favored by the Democrats because the Legislature has set up a hearing process that will ensure considerable press attention.  Some observers found a similarity between the public processes established this year for health care and the process employed when Democratic leaders were seeking public support for the controversial education financing reform that became widely known Act 60.

 

This time, though, the opponents to single-payer, government-run, taxpayer financed health care are taking the offensive.  The governor’s team has demanded that his administration have equal voice on the health care commission, setting up another loud confrontation between Douglas and Democratic leaders even before the health care study apparatus is built.  And advocacy groups of all political strips are putting in place strategies to educate their constituencies this summer and fall.

 

The tandem-issue in January to the health care reform debate was the looming “financial crisis” in Medicaid.  An $80 million shortfall in that program was forecast, with projections of future deficits soaring into the billion-dollar stratosphere.  There was lots of talk but no action, and by the time the adjournment gavel fell, the Medicaid disaster had simply gone away, disappeared with hardly a trace.  In fact, though, the crisis had not been resolved rather buried under a waterfall of money that poured down in the third and fourth quarters of the fiscal year.  The projected state surplus had grown enough by June to mask the Medicaid spending crisis, and it was hardly mentioned in the final days of the legislative session.

 

It is unlikely that anyone, regardless of political affiliation, will argue that the 2005 session was unremarkable except possibly in two ways: it marked the fifth longest session in history, and it was at least the fifth most bitter.  The most dramatic symbol of the bitterness came in the final hour of the last day of the regular session when Douglas obligatorily issued the assembled lawmakers a very brief, stiff, tepid farewell from the House podium, then went directly to a press briefing where he blasted the Democratic majority in language rarely used by one branch of government when speaking of another branch.

 

The Democrats put great stock in passage of an energy law that is designed to advance the cause of renewable energy, and they sang the praises of a bill that will require the Entergy corporation to pay the state about $2.5 million a year if it is allowed to construct dry-cask storage for spent nuclear fuel at the Vermont Yankee plant in Vernon.  But in both cases, compromises were made during the legislative process that made the new laws tolerable for the energy industry and the Douglas Administration.

 

The governor had supported the Democrats’ other favorite bill a minimum wage increase, providing for the first time an annual automatic cost-of-living adjustment.  To gain acceptance of the cost-of-living concept, though, backers of minimum wage bill had to drop a proposed increase for the current year.

 

And so the pattern was set: Democrats amend a bill in a way that Douglas wanted; Douglas would support it and even accept some credit for its passage.  But, if they refused to whittle the bill into a shape he liked, the governor would veto it and go on the warpath to make his case to the public.

 

The normal dose of political poison that seasons every legislative gathering became particularly potent early in the 2005 session when U. S. Senator James Jeffords reversed field and suddenly announced that he would not seek re-election in 2006.  The Jeffords’ move caught everyone by surprise and immediately set off a gold rush among politicians of all stripes.

 

All eyes turned first to Douglas and to U.S. Representative Bernie Sanders, who quickly confirmed the conventional wisdom that expected him to seek the open Senate seat.  The one-two announcements by Jeffords and Sanders put heavy pressure on Douglas to make his own declaration.  And he did, setting off another political tremor with what many considered to be a surprise announcement that he would not seek to fill Jeffords seat.

 

The upshot of the rapid-fire political moves was a scramble for position among every Vermont politician, and some would-be officeholders, many of whom had been held in a frozen election landscape for 15 years since Sanders was first elected to Congress in 1990.

 

So far only one Democrat, former state Senator Scudder Parker, has shown serious interest in challenging Douglas in 2006.  With no statewide elections under his belt and little in the way of broad-based constituency, Parker’s chances do not seem any better than the Democrats’ chance of overriding a gubernatorial veto.

 

However the political jockeying is resolved, one certainty is that it will not be over by the time the Legislature comes back to Montpelier in January.   So, those who enjoyed watching the bloody fights of the 2005 session ought to reserve seats soon for the main event next session.

 

Six prominent statewide business organizations formed a coalition, Organizations for Economic Vitality, this past session in response to proposed legislation that would increase the cost-of-doing business in the State of Vermont.  Among the most highly contentious of the issues was the payroll tax included in the Senate passed health care reform bill, H.524. 

 

The organization also shared their concern over: the potential for electricity costs increasing from the renewable energy bill, a new random tax on the owners of Vermont Yankee in exchange for authorization to apply for a permit to construct dry-cask storage; an increase in the minimum wage rate; workers’ compensation reform and other less broad issues.  It became clear rather quickly that the legislature was very busy doing committee work and passing legislation, but not necessarily understanding or considering the combined impact that all of these proposals would have on the economic vitality of Vermont.

 

Health Care Reform

The House and Senate both voted to approve the H.524 Conference Committee’s compromise health care reform bill – Green Mountain Health; despite clear indication from Governor Douglas that he would veto the bill if it contained a payroll tax.  The Governor said, "…their bill, and its flawed public policy, is unacceptable." Governor Douglas vetoed H.524 on June 22, 2005.

 

The legislative proposal would have provided primary and preventive health care coverage to all uninsured Vermonters beginning July 2006.  A benefit package would be proposed by the legislative Commission on Health Care Reform, and then need to meet the approval of the legislature.  However, following cost containment measures and performance benchmarks, the program will be expanded as follows:

 

• Primary and preventive health care coverage to all Vermonters (not just those currently uninsured) in July 2007

• Hospital coverage to all Vermonters in October 2008

• A common benefit to all Vermonters in July 2009

·        Cost control measures include:

• Global budgeting of and payments to hospitals

• Chronic care initiative

• Consumer access to health care price and quality information

• Health care information technology initiative

• Alignment of health care professional reimbursement with best practices and outcomes

• Integrated systems of health care

• Health care purchasing pool

• Prescription drug initiatives, including statewide preferred drug list, pharmacy discount plan, pharmacy benefit manager regulation, and manufacturer price disclosure

• Options for medical liability self-insurance; Safe apology

• Healthy lifestyles insurance discount

• Expansion of health centers and free clinics

• Integration of delivery systems

 

Financing of the plan was billed to the public as a contribution to be made by businesses and individuals to assist in paying for health care for all Vermonters.

• Employer "Health Effort Tax"

  • 1% tax on the first $50,000 of payroll

  • 3% tax on payroll above $50,000

  • Reduced by the employer’s health care spending, but no less than $0

• Individual “Health Effort Tax”

  • If health coverage for 9 of previous 12 months, no tax

  • Otherwise, tax is 1% of adjusted gross income

 

This issue will be studied over the summer and fall; in fact the general fund budget contains $250,000 to pay for staffing necessary to run the Health Care Commission.  The Administration has been given two-seats at the table of the 10-member Commission. 

 

Commission on Health Care Reform:

The commission, under the direction of co-chairs who shall be appointed by the Speaker of the House and President Pro Tempore of the Senate, shall monitor health care reform and recommend to the Vermont General Assembly actions needed to attain the health care guidelines and goals set out in H.524 as passed by the House and Senate.  Members of the commission shall include four representatives appointed by the Speaker of the House, four Senators appointed by the Committee on Committees, and two non-voting members appointed by the Governor. 

 

Starting this summer and through July 1, 2009, the Commission on Health Care Reform shall:

·        identify and report emerging trends and behaviors among various participants in the health care system;

·        assess the effectiveness of cost-containment and quality of care initiatives;

·        establish recommendations to the Vermont General Assembly for demonstration or pilot projects designed to contain health care costs, improve the quality of health care, and to integrate systems of care that promote: community-based evaluation and planning, improved financial management, information technology systems that advance the management and coordination of health care, governance models at the community level, and patient responsibility for and participation in health care decision making;

·        develop a plan for creating an integrated, regional delivery system and developing integrated systems of care that:

(1) Reorganize the health care delivery system to improve coordination, reduce medical errors, and reduce redundant or unnecessary care,

(2) Improve the quality of care in terms of process and outcomes, and

(3) Encourage alternative reimbursement mechanisms based on outcome-based payments to change the incentives for health care professionals and to control health care costs;

·        make recommendations to the Vermont General Assembly for a program to provide matching grants for long-term investments in health care systems, technology, and infrastructure in a manner that promotes the establishment of integrated systems of care;

·        assess the feasibility of:

o       a publicly financed stop-loss insurance policy for all health plans doing business in Vermont;

o       a public health care program that incorporates the health benefits covered under workers’ compensation policies;

o       tort reform consistent with the findings and recommendations of the medical malpractice study; and

o       a health care purchasing pool

·        recommend alternative reimbursement mechanisms for health services that encourage cost effectiveness, improve the quality of care, increase efficiency, reward primary care practices that prevent chronic illnesses, avoid preventable hospitalizations, and reduce long-term costs to the system, including a global hospital payment to each hospital.  A global hospital payment; an amount to be paid to a hospital by each health insurer, employer or the state for services received at that hospital by all individuals covered by a health benefit plan offered by or through that insurer, employer or the state, may be accomplished through negotiations between insurers or employers and hospitals, by requiring all public and private health insurers to pay for hospital services using this method to the extent permitted under federal law, or by another mechanism;

·        receive input and make recommendations, generally, to the house committees on health care and ways and means, the senate committees on health and welfare and finance and the general assembly regarding the long‑term development of policies and programs designed to ensure that, by 2009, Vermont has an integrated system of care that provides all Vermonters access to affordable, high quality health care that is financed in a fair and equitable manner; and

·        cooperate and coordinate with the public engagement process to receive public input on a health care reform plan.

o The commission shall select, subject to final approval by the Speaker of the House and the President Pro Tempore of the Senate, the services of one full‑time director and such other staff as is needed, and shall receive administrative, fiscal, and legal support from the joint fiscal office and the legislative council.  The director shall have expertise in finance, planning, systems analysis, and processes involving weighing competing interests among parties.  In addition, with the approval of the Speaker of the House and the President Pro Tempore of the Senate, the Commission may retain the services of one or more consultants or experts knowledgeable in health care systems, financing, or delivery to assist in its work and may request funding from the legislative budget.

o   The commission may request analysis from the office of Vermont health access, the department of banking, insurance, securities, and health care administration, and other appropriate agencies.  The agencies shall report to the commission at such times and with such information as the commission determines is necessary to fulfill its oversight responsibilities.

o The commission may meet as needed and members shall be entitled to compensation and expenses.

o The department of buildings and general services shall provide the commission with office space near the state capitol building in Montpelier for three individuals.

o To staff this commission, the legislature is authorized to establish three (3) new exempt positions; one commission director and two commission research/support staff in fiscal year 2005.

 

Studies on Health Care Reform, Economic, Financing and Administrative:

In order to assess more fully the benefits and costs and to prepare and plan for the implementation of full and universal access to health care in Vermont, the commission on health care reform, in consultation with the Department of Banking, Insurance, Securities, and Health Care Administration, shall direct that the following economic impact, financing, and governance studies be undertaken during the interim of the 2005 legislative session.  The Commission shall direct its staff or contract for one or more consultants to undertake the economic impact and financing studies.

 

Economic impact study:  The economic impact study shall examine the impact of implementing a system of universal access to health care for Vermonters versus the effects of sustaining the current system impact on business and the labor force, the future growth of the economy and the economic competitiveness of Vermont, and the effects on residents and population groups and on current and potential insurers and providers of health care.

 

Financing options:  The financing study shall examine the financing options that most effectively achieve the goal of universal access to health care and maintaining its affordability.  The study shall include examination of all financing options and their implications, including the income tax, a payroll tax, premiums or cost-sharing measures, consumption taxes, specific more limited taxes to support parts of the health care system’s financial needs, and other revenue sources including insurance risk pools and insurance assistance and incentives.

• The study shall reference the fact and supporting empirical evidence that many countries have achieved universal access and more affordable health care utilizing public financing as a tool to achieve this goal. The study shall consider the strengths and weaknesses of such public financing systems with respect to fairness and adequacy of funding, access to and quality of services.

• The study shall examine how implementation of any public financing options will be offset in corresponding reductions in premiums, other taxes, and individual cost-sharing contributions.

• The study shall examine how any proposed changes in financing or delivery of health care could affect benefits Vermonters currently receive through Vermont employers.

• The study shall address issues involved with federal law and taxation, including ERISA and other areas of preemption; technical proposals to exempt non-resident employees of Vermont businesses; a provision to ensure a soft landing for affected businesses and a recommendation as to the appropriate amount needed in a soft landing provision to mitigate negative effects on business; recommendations on the best method for unemployed individuals to contribute to the financing; a simplified structure based on employee numbers, employer payroll, or a combination for ease of administration and clarity; and the recommendations of the tax department.

• The study shall analyze methods for recapturing insurance premiums as a result of any reductions in uncompensated care, such as the Dirigo model enacted in the state of Maine, any reductions in insurance premiums resulting from public financing, and for ensuring that all Vermonters contribute to the financing of health care’s fixed costs.

 

Governance and Administrative Study:  The Secretary of Administration, in consultation with the office of Vermont health access, the Department of Banking, Insurance, Securities, and Health Care Administration, and the Agency of Human Services, shall examine and develop a plan for reorganizing their respective offices and functions to further full and universal access to health care in Vermont and the integration of the health care system.  The recommendations shall include personnel, operations, and budgetary requirements and consider the most appropriate and efficient approach to integrating health care policy, planning, delivery, regulation, and defining clear lines of accountability within the health care system.  The study shall include also an examination of means to coordinate or integrate a universal health care system with the current workers’ compensation system and the feasibility and merits of authorizing the state to act as an insurer in pooling risk and providing benefits, including a common benefits plan, to participants of the health care purchasing pool.

 

Reports, including findings and recommendations, from each study shall be submitted to the Vermont General Assembly not later than January 15, 2006.

 

Public Engagement Process:

In recognition of the importance of public engagement, the House Helath & Welfare Committee and the Senate Health & Welfare Committee shall have six public hearings during the interim of the 2005 legislative session to solicit input from citizens, employers, hospitals, health care professionals, insurers, other stakeholders, and interested parties about health care reform.  Throughout the interim, the Commission on Health Care Reform at the request of the Chairs of the Committees shall brief the Committees on the Commission’s activities and recommendations to date.  Committee members shall be entitled to compensation and expenses

 

Health Information Technology Plan:

The Department of Health Commissioner shall facilitate the development of a statewide health information technology plan that includes the implementation of an integrated electronic health information infrastructure for the sharing of electronic health information among health care facilities, health care professionals, public and private payers, and patients.  The plan shall include standards and protocols designed to promote patient education, patient privacy, physician best practices, electronic connectivity to health care data, and, overall, a more efficient and less costly means of delivering quality health care in Vermont.

·        The Health Information Technology Plan shall:

o    support the effective, efficient, statewide use of electronic health information in patient care, health care policymaking, clinical research, health care financing, and continuous quality improvements;

o    educate the general public and health care professionals about the value of an electronic health infrastructure for improving patient care;

o    promote the use of national standards for the development of an interoperable system, which shall include provisions relating to security, privacy, data content, structures and format, vocabulary, and transmission protocols;

o    propose strategic investments in equipment and other infrastructure elements that will facilitate the ongoing development of a statewide infrastructure; and

o    recommend funding mechanisms for the ongoing development and maintenance costs of a statewide health information system.

·        Beginning January 1, 2006, and annually thereafter, VITL shall file a report with the commissioner, the commissioner of information and innovation, the director of the office of Vermont health access, and the general assembly.  The report shall include an assessment of progress in implementing the provisions of this section, recommendations for additional funding and legislation required, and an analysis of the costs, benefits, and effectiveness of the pilot program authorized under subsection (e) of this section, including, to the extent these can be measured, reductions in tests needed to determine patient medications, improved patient outcomes, or reductions in administrative or other costs achieved as a result of the pilot.  In addition, VITL shall file quarterly progress reports with the health access oversight committee and shall publish minutes of VITL meetings and any other relevant information on a public website.

 

Other Health Care Proposals:

There are two other proposals out in the public domain that organizations and other interested parties will be working to educate Vermonters about over the off-session.

 

Vermont Initiative for Universal Health Access advocated for a plan that would have; required individuals to show proof of insurance, established a catastrophic common benefit plan affordable to more Vermonters, and many cost-containment measures that could have been implemented immediately.  The Vermont Grocers’ Association joined a number of other statewide organizations in supporting this alternative plan, for more information about this plan visit www.vtiha.org.

 

Governor Douglas’ Plan would have imposed an insurance premium tax on Blue Cross/Blue Shield VT and MVP for the purposes of funding a high-risk pool and would offer a low-cost common benefit plan intended to bring more Vermonters into the ranks of the insured.

 

General Business Issues

Minimum Wage Increases

Following a 25-cent increase that took effect on January 1, 2005, the legislature came right back this session and chose to move the wage again.  The final version of the legislation increases the minimum wage from $7.00 to $7.25 effective January 1, 2006 and includes a provision that it increases automatically by Consumer Price Index (CPI) annually thereafter. The CPI index was the lower of the two indexes under consideration by the legislature.

 

ANR to Review Bottle Redemption Process

The Senate General Committee met several times on S.106, which increases the bottle handling fee on returnable bottles and cans and collects the value of unclaimed deposits from beverage distributors. The handling fee is paid to the retailers by the beverage wholesalers or initiator of the deposit. 

 

A number of owner/operators of redemption centers worked tirelessly to obtain support for an increase in the handling fee this session.  Andrea Cohen, of the Solid Waste Division, told legislators that Secretary of Natural Resources, Tom Torti is committed to dedicating time this summer to negotiate with all parties so that they can look at a variety of bottle related issues, including expansion to other beverages and make changes through the rulemaking process or bring back a proposal to the legislature for next session.

 

Direct Shipment of Wine under Study

Following the Supreme Court decision, the House General Affairs Committee asked Vermont Department of Liquor Control Commissioner Mike Hogan to assess what the decision will mean to Vermont.  Commissioner Hogan has asked the Attorney General’s Office to review the decision and prepare an opinion. DLC is expected to meet with members of VGA and wholesalers prior to preparing recommendations to the legislature.

 

Expanded Local Options Taxes Rejected

In the closing days of the 2005 legislative session, lawmakers took out a proposed expansion of local taxing authority for sales and rooms and meals taxes. The Senate had included a provision in the miscellaneous tax bill that would have extended the taxing authority to every Vermont town. House conferees refused to go along with the expansion.

 

Streamline Sales Tax Agreement Reviewed – Beer Tax in 2006?

The legislature reviewed the status of the so-called “streamlined sales tax” this session.  The “streamline sales tax” language was passed with the Act 68 Education Funding law a couple of session ago and is intended to reach common tax definitions between states to eventually allow for sales taxes on Internet purchases.  However, the SST could force Vermont to adopt a sales tax on beer next spring, unless the existing sales tax on wine is repealed. SST rules allow for sales taxes on alcohol, but not just wine. Additionally, Vermont would need to tax all clothing or no clothing. Presently, Vermont law exempts clothing items that are less than $110 from the sales tax. The program is projected to be in place by April 1, 2006.

 

Legislation to Outlaw Restroom/Changing Room Surveillance Passes

The House and Senate passed S.15 which would outlaw surveillance of an individual’s “intimate areas” of a person in places like restrooms and changing rooms.  The bill would not affect a retailer’s ability to conduct surveillance of other store areas.

 

Vermont Origins Rulemaking Oversight Proposed

As controversial as this issue has been, it appeared to get even more controversial this session.  In what we believe to be an unprecedented action, Senator Vincent Illuzzi, R-Essex/Orleans introduced legislation, S.157, that would have required the Attorney General’s Office to take certain steps before any proposed rule is filed with the Secretary of State to initiate the administrative rulemaking process.

 

The Attorney General’s office has been in the process writing rules “to protect consumers” from businesses whose use of the word “Vermont” in their business name and product name.

 

Illuzzi’s bill, still live, would require the Attorney General’s Office to meet with the Senate Economic Development Committee twice – the first time after the publication of the consumer perception study being done by the Center for Rural Studies at UVM, and the second time after the final rule has been drafted.  In essence this legislation would interject the Senate Committee into the rulemaking process prior to finalization through the Legislative Committee on Administrative Rules.

 

Assistant Attorney General Elliot Burg presented results of a survey on the labeling of Vermont products to the Senate Economic Development Committee.

 

The results of the survey showed that 54% of Vermonters expect that if a product has the word Vermont on the label, it was made in Vermont.  Of people outside of Vermont, only 14% had that same expectation.

 

Senator Hinda Miller (D-Chittenden) cautioned Mr. Burg that the proposed rule would have an adverse affect on some who have used the word Vermont on their labels for many years as part of their branding.

 

It was decided to grant a six-month extension to continue crafting the rule. The expectation is the new version of the rule, based on the survey results, will be promulgated after a meeting between the AG’s office, the Agency of Agriculture, and the Agency of Commerce and Community Development.

 

Gift Card and Certificates, H.198

Introduced by Representatives Keenan of St. Albans City, Young of Orwell, Pugh of S. Burlington, Reese of Pomfret and Shand of Weathersfield, proposed to limit expiration dates and prohibit fees on gift certificates, gift cards, and stored-value cards.

 

The legislation as enacted requires that gift certificates shall be valid for not less than 3 years after its date of issuance.  The date of issuance and the expiration date shall be clearly identified on its face, or if an electronic card with a banked dollar value, clearly printed upon a sales receipt transferred to the purchaser of the electronic card upon the completed transaction, or otherwise made available to the purchaser or holder of the electronic card through means of an internet site or a toll free information telephone line.  A gift certificate not clearly marked with an expiration date or for which the expiration date is not otherwise made available as provided in this section shall be deemed to have no expiration date.  Following the expiration date of the gift certificate, the unused portion of the gift certificate shall be returned to the holder of the gift certificate, if requested.

 

Dormancy fees, latency fees, issuance fees, redemption fees, or any other administrative fees or service charges in connection with a gift certificate are prohibited.  If the remaining value of a gift certificate is less than $1.00, the gift certificate shall be redeemable in cash for its remaining value upon the demand of the holder of the gift certificate.   The issuer of the gift certificate, at the holder’s request, shall inform the holder of the unused balance remaining on the gift certificate and the expiration date of the gift certificate.

 

Initial concerns of the business community revolved around unintended consequences to such sweeping regulation as introduced.  It was understood that there are a number of companies doing business in Vermont that are conducting financial transactions and are strictly in the business of selling gift cards that come under no regulations whatsoever.  The Banking Department’s intention was to close this loophole and regulate the fees that these companies are charging consumers.  The Attorney General’s Office was interested in the consumer protection provisions that would provide protection to consumers from unclear fees and/or expiration dates. 

 

The Treasurer remains concerned that a number of cards and certificates go unused and wants these “unclaimed properties” to be reported to the Treasurers Office so that an attempt can be made to reconnect the holder/purchaser of these cards and certificates.  In other words a business would be required to send the money associated with an outstanding gift certificate or gift card to the Treasurers Office so that funds could be made available to the holder/purchaser, if the funds were not distributed to the “rightful” owner, the money would be transferred into Vermont’s General Fund.  We understand that last fiscal year the Treasurers Office transferred $7 million in revenue to the State’s General Fund. While the Treasurer’s office believes gift certificates escheat to the state after three years of inactivity under current law, however others disagree with that assessment. The legislature took out reference of the gift card escheat in H.198.

 

There is another bill, H.239 that is likely to be taken up next session, with similar issues on abandoned property.

 

Ban on Phosphorus Use in Dish Detergents

The House Fish, Wildlife and Water Resources Committee’s spent many hours early in the session taking testimony and discussing H.75, banning phosphorus use in automatic dishwasher cleaning detergents.  This issue has been discussed in previous sessions and again this bill remains in committee with no formal action taken this session.

 

The bill would essentially ban the use of phosphorus; a necessary ingredient according to the detergent industry to appropriately clean eating utensils and surfaces.  The Committee heard from Martin Wolf of Seventh Generation, a Vermont company that manufacturers a “phosphorus-free” detergent.  The costs associated with this legislation would be born by residential consumers due to the higher costs associated with non-phosphate alternatives.  The approximate cost to consumers is estimated at $1 million per year, about $12 per household.

 

Michael Winslow of the Lake Champlain Committee testified that if Vermont passes this legislation it could yield about $400,000 in savings through the elimination of costs associated with water treatment facilities.  Winslow could not provide any real evidence that the phosphorus levels would change dramatically or provide any analysis with regard to the contributors associated with phosphorus levels in Lake Champlain.  Experts agree that even if you tested the lake everyday after implementation of this policy, a 2-3% change could not be detectible.  Mr. Winslow suggested an April 2007 effective date for the bill, giving amply time for manufacturers to respond to the ban.

 

Vermont has made a commitment to clean-up Lake Champlain through Governor Douglas’s “Clean & Clear” initiative, but there is no evidence that New York has prioritized the lake clean-up on their side of the equation. 

 

Product manufacturing representatives from Proctor & Gamble said, consumers will not be happy with the product that is proposed as a substitute.  Proctor & Gamble lost $200 million on a test market study in Arizona because the product was acceptable in removing stains like tea and fruit juice or dealing with heavily soiled dishes.  Many consumers were rewashing in another wash cycle or hand washing their dishes before loading the dishwashing machine.  Many consumers asked for refunds and traveled outside of the test market to get traditional products like Cascade.

 

Workers’ Compensation

The Senate approved S. 98, legislation that makes some adjustments to how the provisions of how vocational rehabilitation is handled.  The changes were anticipated to have an adverse affect on premiums, but an amended version that passed the Senate mitigated some of those concerns.

 

Department of Labor & Industry Commissioner Laura Collins, voiced concerns in a letter to the Senate: "This workers' compensation bill, although touted as a 'vocational rehabilitation' bill, is now being used as a vehicle for several complex and broad reaching workers' compensation matters.  The issue of attorneys’ fees, interim orders and lump sum awards are wholly separate from vocational rehabilitation and deserve to be fully debated on their own, as opposed to being rushed through in a bill that deserves a much more thorough review."

 

Senator Vince Illuzzi, Chair of Senate Economic Development, Housing, and General Affairs, responded to these concerns.  "S. 98 simply refines and clarifies last year's workers' compensation bill, and seeks to correct what I believe are the cost drivers in the system– the unjustifiable denial of timely benefits, forcing injured workers to go without income and adequate medical care for up to two years, resulting in the need to hire attorneys, which in turn forces the insurance carriers to hire attorneys, expert witnesses and incur litigation costs. S. 98 will reduce workers' compensation costs. S. 98 will help create predictability in Department of Labor policy, which is necessary, but is virtually non-existent."

 

The bill remains in the House and carries over until next session.

 

Big Box Retail Regulation

The Senate Economic Development Committee heard from proponents, as well as opponents of S.153, legislation in response to concerns over Vermont becoming the employer for out of state companies that "rent our workforce to provide them a profit".  The Douglas administration strongly opposes this type of legislation, as does the Vermont League of Cities & Towns.  They believe that the legislature should providing the necessary training and tools in order to assist in providing parameters to development.  The League specifically said that they know their communities better than the legislature and know what products and services they need to attract development, placing arbitrarily caps on construction doesn't provide a town the necessary information to decide if the business with amenities is an economic engine for the community or detriment to the community. 

 

Paul Bruhn of the Vermont Preservation Trust believes that this type of legislation could provide communities with parameters but urge some “tweaking" of the bill before further consideration is given.  "We need to be encouraging development in our downtowns and sometimes development do need to occur on the outskirts of the downtown, but each town has different needs and developable opportunities.  We can be limiting their opportunities."  Karen Horn from the Vermont League of Cities & Towns believes the legislature could provide better support to the regional planning agencies and towns rather than limiting development opportunities.

 

This legislation is expected to be considered in the second half of the biennium.

 

Reduced Ignition Propensity Cigarettes

The Senate and House moved expeditiously in support of Vermont becoming the second state to require the sale of reduced ignition propensity cigarettes.  Advocates worked early this session, with a favorable political landscape, to pass a potential model act for the rest of the nation.  Effective May 1, 2006, cigarette manufactures will be prohibited from distributing in Vermont cigarettes that do not meet very specific safety standards.  New York spent the better part of two-years working their way through the rulemaking process; Vermont instead chose to combine the New York Statutes and Regulations into a piece of legislation that likely will require little if no rulemaking for implementation.  Retailers and Wholesalers have been given an open-end in terms of selling off any non-compliant stock beyond May of 2006 that was tax stamped prior to the effective date.

 

Legislature Eases Bad-Check Collection Notice
The House and Senate passed H.491, a bill that allows recipients of bad checks the choice to issue statutory notice by first class mail, rather than only by certified mail (as required under current law). The bill was introduced at the request of the Vermont Retail Association. The Governor is expected to approve this legislation.

 

Energy

Renewable Portfolio

Another issue that made its way through both legislative bodies this session was the renewable energy portfolio standards bill.  The committee of conference that negotiated the differences between the House and Senate passed versions of the bill decided to favor the House passed bill with some of the modifications that took place in the Senate.  A provision passed by the Senate but not endorsed by the House would have put requirements on energy efficiency standards for consumer and commercial appliances (compressors, etc.)  In the end the Senate ascended to the House and the provision was dropped at least for another year.

 

The final bill lists a number of interests that the Vermont General Assembly finds in the interest of the people of Vermont:

(1) Balancing the benefits, lifetime costs, and rates of the state’s overall energy portfolio to ensure that to the greatest extent possible the economic benefits of renewable energy in the state flow to the Vermont economy in general, and to the rate paying citizens of the state in particular.

(2) Supporting development of renewable energy and related planned energy industries in Vermont, in particular, while retaining and supporting existing renewable energy infrastructure.

(3) Providing an incentive for the state’s retail electricity providers to enter into affordable, long-term, stably priced renewable energy contracts that mitigate market price fluctuation for Vermonters.

(4) Developing viable markets for renewable energy and energy efficiency projects.

(5) Protecting and promoting air and water quality by means of renewable energy programs.

(6) Contributing to reductions in global climate change and anticipating the impacts on the Vermont’s economy that might be caused by federal regulation designed to attain those reductions.”

 

This bill is viewed by some as the catalyst for continued upward pressure on electricity rates by creating controls in the energy market.  Others insist that this bill will serve as the impetus for developing renewable energy sources here in Vermont. 

 

The complexities of this debate:

·        The definition of renewable energy specifically eliminates power generated by Hydro-Quebec because of the “size” of this power generation.

 

·        The mandatory vs. voluntary debate boils down to philosophical discussion over economics.  If the demand is there, the supply will follow or should the supply be available so demand is encouraged.  Wind has been controversial in Vermont to date, because of the vocal anti-windmill advocates who say they will ruin Vermont vistas, thus lengthening the permitting process.  Opponents to a mandated standard argue that it will lead to the inclusion of sources that are not necessarily cost effective.  The legislation requires each retail electricity provider to provide a certain amount of new renewable resources in its portfolio and shall not sell, provide or offer for sale electricity in Vermont without ownership of sufficient energy produced by renewable sources.

 

·        Opponents to a mandatory renewable energy portfolio tied to a “tradeable” renewable energy credit, argue that this is a formula for increased electric rates.  Whether an increase in the electric rates is a little or a lot; most agree there will be an increase of some level, opponents say any increase is too much.  Proponents to “tradeable” credits argue that may be the only way to reach the renewable standards goal.  The legislation requires the Public Service Board to adopt a system to “tradeable” renewable energy credits for renewable resources that may be earned by electric generation qualifying for renewable portfolio standard and there will be full disclosure.

 

·        The bill includes an incentive-based proposal called SPEED (Sustainably Priced Energy Enterprise Development) but also ultimately contains an RPS.  The opponents argue the bill is short-sighted in terms of developing the renewable resources necessary to comply with the program.  Proponents of this proposal advocate for a streamlining of the permit process (Section 248) which requires the demonstration for present and future power needs.

 

·        The debate over mandated energy efficiency standard for all appliances and equipment resulted in much debate.  There was concern on the part of the House that perhaps it would create some unintended consequences.  So it was decided to enact the bill without speaking to this issue, although it is expected to be brought up again next year.

 

Sales Tax for Appliances not Passed

The House Commerce Committee discussed, H.269, the imposition of a sales tax holiday for consumers who purchase energy efficient appliances, but took no formal action.  The two-day sales tax holiday would have taken place from June 10, 2005 to June 12, 2005.  The only opposition to this proposal comes from the Vermont Tax Departments, because of the potential loss in revenue that is projected to be approximately $110,000.

 

Vermont Yankee Gets Legislative Nod for Storage

In the debate over authorizing Vermont Yankee to leave the legislative process and apply to the Public Service Board for dry cask storage; the legislature imposed a $2.5 million fee on Vermont Yankee that is dependent on the “up-rate” (authority to generate more power).  These funds will be diverted into a renewable energy fund intended to help spur the development of in-state renewable energy sources.

 

The owner of the Vermont Yankee nuclear power plant, the Entergy Corp., was put in the position of having to seek permission from the legislature first before going forward on regulatory permission from the Public Service Board to store nuclear waste - a “dry cask” storage system - in Vernon, Vermont. 

 

The necessary legislation, a simple one-word-change, turned out to be one of the most politically charged debates of the session.

 

The legislature was involved in this debate only because of an unintended consequence from the transaction of the sale of the plant.  The one-word change, created a standoff where the company, backed by the Vermont utilities that sold the Yankee plant to Entergy, had refused to accept any new cost, saying that instead it would close the plant and leave Vermont.

 

A bill was introduced that would have wielded as much as $95 million from Entergy over the existing license period – to 2012.  A three member team instead following weeks of closed door