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Legislative Report

 

Vermont Grocers' Association

Legislative Report

June 4, 2009

Prepared by Wm. Shouldice & Associates, LLC

The legislative reports are a member service of the Vermont Grocers’ Association and are distributed on a weekly basis during the Vermont legislative session.

 

Special Session Report

At 9:49 pm Wednesday evening the 2009 Special Session of the General Assembly adjourned.  During the Special Session, the Legislature first dealt with the veto override on H.441, the budget bill.  The Legislature made history in overriding the first ever budget veto by a vote of 100 to 50, just meeting the 2/3 necessary to override the Governor.  The second course of action was to then pass a “companion” bill that would amend H.441.  Many Legislators said the bill was developed in advance in order to achieve the necessary votes to override the Governor.  By the time the Conference Committee agreed on the provisions that would be included in H.442, misc tax bill, it pushed the Legislature into a second day of work.    

 

Controversial provisions included was the addition of two sales tax holidays which are estimated to cost about $2 million, this expenditure is covered through adjustments in the income tax rates.  Lastly, the Legislature did take minor steps in addressing the shortfall in the Unemployment Trust Fund by increasing the employer’s taxable wage from $8,000 to $10,000, freezing the maximum weekly benefit at $425 and adding a legislative reform committee to meet during the summer to provide recommendation to the full legislature by January 15, 2010.  The Committee also included a “carve out” for farmers and wood lot owners to retain the full 40% capital gains tax exemption.  An amendment to reduce the “retiree’s” carve out from age 70 to 65 was defeated on the floor by a vote of 40 to 79.

 

The $4.5 billion budget passed during the regular session was increased during the Special Session to $4.53 billion, beginning July 1, 2009.  This budget includes American Recovery & Reinvestment Act funds, special funds as well as increases the Capital Gains tax, Estate tax, cigarette & other tobacco tax increases, taxes on digital downloads and adds a sales tax on spirits.  A portion of the tax increases will be used to decrease the personal income tax rates in a two step phase in. 

  

A new bill (S.1) was introduced, a vehicle to make technical amendments to the budget bill and H.313, the economic development bill.  In addition, a handful of other technical issues were discovered so amendments to the technical amendments bill was needed.  During the floor debate, several members used this opportunity to correct provisions that they did not support in the original bills.  No substantive amendments were passed in the technical corrections bill, S.1.        

 

A summary of H.442 is below for your review:

 

House 442 Fiscal Note

Sections 1-3 -  Unemployment Reform Sections

·            January 1, 2010 – December 2010 wage subject to tax $10,000

·            Freeze on maximum weekly benefit at $425 from July 1, 2009 – June 30, 2010

·            12 member reform committee created to meet 8 times during the summer to provide recommendation to the legislature by 1/15/10

 

Sections 4-7 - Clean Energy Fund – no GF budgetary impact 

·            Specifies duties of the Clean Energy Development Fund Board

·            Houses the fund manager in the Department of Public Service for administrative purposes, rather than the Treasurer’s office.

·            Allows the ARRA funds to be used, in part, for administration of the fund

·            Clarifies rule making process

·            Clean Energy Development Fund is expected to receive over $30 million in ARRA funds in the coming months

 

Section 8 - Vermont Telecommunications Authority

·            Raised total available to $750,000

o    Increased general fund from $250,000 to $400,000 (from bottom line of general fund)

o    Directs anticipated receipts of $350,000 from fines & penalties (special fund)

 

Section 9 – Bridge Funding for Tobacco programs

·            Provides $1,500,000 in one time funding from tobacco fund corpus to allow the Board the capacity to make orderly program reductions

 

Section 10 -11 Cost Reduction Authorization

·            Changes do not impact revenues

o    Requires administration to have plan approval if plan requires reductions in force exceeding 1% of state workforce

 

Section 12 -13 – State Employee Retirement Incentive

·            Potential state fund savings of between $1,000,000 to $1,400,000

·            Different departments will experience differing cost impacts due to uncertainty as to where layoffs and replacements will need to occur

 

Section 14 – North Link Funding

·            Provides $500,000 from general fund bottom line for North Link preserving substantial federal funds

 

Sections 16a – 24 Tax Changes in Bill Proposal

There is a number of tax changes included in the companion bill. In summary, these changes have approximately the same revenue result as the H.441 tax proposals.

 

Income Tax Changes (effective FY 2010, 2011 and 2012):

·            Changes reducing revenue

o The effective date of the capital gains provisions is changed to July 1, 2009.

o Capital gains from farms and timber retain the 40% exclusion.

o Taxpayers over age 70 may elect to either take the 40% exclusion or a flat $2,500 exemption between July 1, 2009 and December 31, 2010.

·            Offsets

o    The marginal rate changes are phased-in beginning with lower rates in TY 2009 and then lowered further in TY 2010.

o    The capital gains exemption is lowered to $2,500 to offset the over 70 exemption while that exemption is in place

o    Beginning in tax year 2011, the flat exclusion will increase from $2,500 to $5,000 and taxpayers over age 70 will receive the same treatment as all other taxpayers.

 

Other Tax Changes:

·            There will be two, one-day sales tax holidays in FY 2010 (August 22 and March 6).  The cost of this holiday is offset in the other tax changes. The fund implications are

o    $1,470,000 in lost GF sales tax revenue

o    $100,000 in general funds to make up lost revenue for local option towns and receipts for the pilot special funds .

o    $10,000 in general funds available to offset programming costs though application to the tax department (last time the tax credit was in place applications came in for hundreds of dollars not thousands)

·            The education fund implication is ($744,000) which will be absorbed in the fund bottom line leaving the reserve at 3.7% for FY 2010 and moving up to 4% FY 2011

 

·            Corporations will be allowed a Research & Development Tax credit that is 30% of the federal credit amount for Vermont based R&D activities. This will have a FY 2011 impact.

 

Section 25 Next Generation Funding

·            Provides $1,500,000 split between VSC, UVM and VSAC

·            Funds come from Extra estate tax revenues which otherwise would have gone to the Higher Education Trust Fund

·            Some funds will still go to the Higher Education Trust Fund depending on revenues

 

Section 26 Information Center Funding

·            Provides $300,000 from excess ARRA TANF funds in FY 2009 for information centers – rest areas due to a shortfall

 

Section 27 Waterfall Special Fund Assessment elimination

·            Adds to general fund waterfall elimination of special fund assessment

 

Tax Changes in H.441

Provisions of the budget bill that take effect on July 1, 2009 that were not changed by the companion bill, H.442 include:

·         Increases the Vermont cigarette tax by $2.50 per carton

·         Increases the other tobacco products tax from 41% to 92% of wholesale price

·         Adds the 6% sales tax to spirits

·         Adds sales tax to digital downloads

 

There will be a floor tax on tobacco inventories June 30. As additional information is available, VGA will pass it along.

 

Proposed Rules on ATV’s under Review

The Agency of Natural Resources is proposing rule changes that would increase the access on state land for ATV trails. As some stores might be interested in the issue, this is a summary listed in its rule notice:

 

“As the current 600 mile Vermont All-Terrain Vehicles Sportsman's Association (VASA) ATV trail system grows, ATV sales could increase, as well as an increase in business activity for motels, gas stations, restaurants and general stores with additional ATV riders coming to a particular area,requiring goods and services that these businesses provide. Additional income from repair service could be generated by ATV dealers. Potentially, private enterprises could benefit if they choose to begin to offer commercial ATV tours as a result of Vermont having a complete, state-wide trail network.”

 

A copy of the proposed rule can be accessed at: http://www.anr.state.vt.us/site/html/rule/AllTerrainVehicleUseStateLand.pdf

 

Written Public Comments on the Agency of Natural Resources Proposed Rule to set up a process to designate ATV connector trails on state lands.  The Public Hearing is 7-9 pm on June 15 at the Pavilion Auditorium in Montpelier and the deadline for Written Public Comments is June 22.  Written Public Comments should be sent to:

 

Warren Coleman, Esq.

ANR General Counsel

103 South Main St., Center Building

Waterbury, Vt. 05671 or 

Warren.coleman@state.vt.us

 

 

 

 

 

 

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