How Vermont Is Spending $1.6 Billion in Federal Coronavirus Aid

Published May 27, 2020 at 10:00 a.m.

Bluebird Barbecue owner Sue Bette had high hopes for 2020 after Food Network star Guy Fieri featured her Burlington restaurant on a February episode of his television show "Diners, Drive-Ins and Dives."

"We were poised to have one of our biggest years yet," Bette said.

But barely six weeks after the episode aired, the coronavirus outbreak prompted her to close the Riverside Avenue restaurant and lay off all 39 of her employees.

Rather than sit home and stew over her predicament, Bette took action. Working with an ad hoc group of friends and colleagues, she organized the Vermont Restaurant Coalition and successfully sought a two-month deferral of the state's meals and rooms tax. After federal aid programs proved disappointing to the restaurant industry, the group cobbled together a request for $30 million to $40 million in immediate state aid — and up to $180 million in the coming years.

Gov. Phil Scott, it seems, heard their cry for help. At a press conference last week, he unveiled a $400 million economic recovery proposal that would provide $150 million in immediate cash grants to businesses in Vermont's hardest-hit sectors, including restaurants, retailers and farmers. "I know you're all scared, sad and probably pretty angry," the governor said. "I get it."

Bette, who hopes to reopen Bluebird Barbecue in June, was elated that state aid might soon be on its way. "It's huge," she said. "It's gonna help us retain our infrastructure, stabilize our businesses and give us the scaffolding to move into the next phase of the reopening."

But the check isn't exactly in the mail. Though Scott vowed "to get money out the door" as quickly as possible, his proposal was just that: a proposal. And while many top legislators say they broadly agree with the need for such a package, they recoiled at Scott's suggestion that they sign off on it within a week.

"Oh, gosh! He should've sent me a note," Senate Appropriations Committee chair Jane Kitchel (D-Caledonia) said when informed of the governor's preferred timeline. "A week turnaround on the expenditure of $400 million? I don't think that allows us to carry out our responsibility."

Given that the details of the governor's plan remain "fairly sketchy," said Senate President Pro Tempore Tim Ashe (D/P-Chittenden), agreeing to it prematurely "very much risks pissing the money away."

"It's the way governors operate in good times and bad: springing new ideas on the legislature and hoping that we'll rubber-stamp it," Ashe said. "You'd be effectively eliminating the legislature, and they should just propose eliminating the legislature if that's what they want."

The tempest over timing is just the latest sign that, after forging a frictionless partnership in the early stages of the outbreak, Vermont's executive and legislative branches are beginning to clash over competing approaches to long-term economic recovery. The fissures involve both policy and process — and they ultimately boil down to one question: Just how should Vermont spend the unprecedented sums of money it has received in federal coronavirus aid?

"It's upended the traditional and predictable budgeting process, and we're all trying to get our hands around it," said Adam Greshin, Scott's commissioner of finance and management.

In addition to increased unemployment benefits for Vermonters and more than a billion dollars in loans to Vermont businesses, the federal government has directed nearly $1.6 billion in coronavirus aid to the state, municipalities and other local entities. That's almost as much as Vermont's entire General Fund budget — and more per capita than nearly any other state has received.

While the feds have earmarked some of the funds for specific purposes, the bulk of the money — $1.25 billion from the federal Coronavirus Relief Fund — can be used as the state sees fit, with certain key caveats.

The sheer size of the cash infusion has inevitably incited conflict, according to House Appropriations Committee chair Kitty Toll (D-Danville). "It's a lot of money," she said. "Everyone has their priorities."

At last week's press conference, Scott said that, in addition to his $400 million economic recovery proposal, his administration anticipates spending an estimated $300 million on emergency expenses and another $300 million on a health care system bailout. That, he said, "doesn't leave a lot of money in terms of all the other needs we have."

Paradoxically, the state is currently barred from using the federal funds to address one of its most pressing needs: replacing $378 million worth of tax revenue it no longer expects to collect next year.

"Lawmakers are more broke than ever with state fund deficits while at the same time having gotten the biggest check from the federal government that's ever come," noted veteran Statehouse lobbyist Adam Necrason.

The federal guidelines pose yet more challenges: Coronavirus Relief Fund money may only be used to address fallout from the COVID-19 outbreak, cannot cover previously budgeted expenses and must be spent — not just committed — by December 30.

While some lawmakers are hopeful that Congress may loosen those requirements or provide additional funding in the coming months, they don't want to sit on money that could be deployed immediately, and they don't want to miss the deadline to spend it. "So it's a real catch-22: How long do we wait, and is Washington actually going to make that change?" Toll asked. "The clock is ticking."

The state has already spent or committed more than $166 million on immediate needs using an entirely unprecedented process.

At the height of the outbreak last month, the executive and legislative branches reached a deal to bypass the standard appropriations process, which involves the House and Senate agreeing to a budget and sending it to the governor for his signature. Instead, the governor was allowed to spend $75 million of the Coronavirus Relief Fund money unilaterally. He can dole out another $150 million with approval from the Joint Fiscal Committee, a group of senior legislators. The rest must be appropriated in the traditional manner, with the full legislature signing off. (The administration initially sought to spend $210 million unilaterally, provoking an early confrontation with the Joint Fiscal Committee.)

SOURCES: VERMONT DEPARTMENT OF FINANCE AND MANAGEMENT, VERMONT AGENCY OF HUMAN SERVICES, VERMONT DEPARTMENT OF PUBLIC SAFETY

Sources: Vermont Department Of Finance And Management, Vermont Agency Of Human Services, Vermont Department Of Public Safety

Last week, Deputy Administration Secretary Brad Ferland set off committee members when he asked them to expedite a $1 million request to pay a consulting company to advise the state on the acceptable use of federal funds. "The administration certainly had more time to present this to us," grumbled Sen. Dick Sears (D-Bennington), noting that Ferland's office had solicited bids from contractors six weeks earlier. The committee ultimately signed off on the request, though Rep. Bill Lippert (D-Hinesburg) complained that it amounted to "a windfall" for the consultants.

Rep. Janet Ancel (D-Calais), who chairs the House Ways and Means Committee and serves on Joint Fiscal, downplayed the disagreements. "I think where you see tension is just that the work that we're doing is really stressful, and the medium we have to do it in — the Zoom meetings and so on — are really difficult," she said.

Most of the state's expenditures have proved less controversial than the consulting contract. As of May 8, the administration had spent or obligated $72 million of its unilateral funding on emergency needs ranging from motel rooms for the homeless to personal protective equipment. Joint Fiscal has signed off on another $94 million worth of requests, including aid to hospitals, childcare providers and long-term care facilities.

On paper, Vermont still has nearly $1.1 billion left to spend. But, Greshin warned, "It will be taken up with requests rapidly."

Indeed, Bette and her fellow restaurateurs are hardly the only ones who have been pleading their case with state officials. Greshin said the administration has received dozens of funding requests, while Kitchel said she's gotten at least 30. "We're getting, 'Give me $15 million here,' 'Give me $10 million there,'" the Senate Appropriations chair said.

Letters provided to Seven Days by legislators, administration officials and lobbyists paint a picture of the range of requests.

A coalition of hospitals and other health care providers asked for $375 million, while the Vermont League of Cities & Towns said the state should compensate municipalities for an estimated $200 million in lost revenue over two years. The Vermont Brewers Association requested $50 million, the Vermont State Colleges System asked for $31 million and the Vermont Farm to School Network sought $930,000.

Kitchel said she even received a request to use Coronavirus Relief Fund money to battle Eurasian watermilfoil on Fairlee's Lake Morey.

"It seems like everybody has taken the standard asks of [the appropriations committees] and added a zero or two onto it," said House Speaker Mitzi Johnson (D-South Hero). "That's not to minimize their ask or disregard it."

Statehouse lobbyists say they've advised clients to tread carefully as they seek support for their businesses, nonprofits and programs. "The legislature and administration are overwhelmed with the communications they're getting that are actually crisis-related," said Amy Shollenberger, who represents a variety of social service, labor and conservation organizations. "So we're trying to be more direct and efficient with our advocacy."

That involves understanding what the federal funding can actually be used for and making realistic requests. "We make sure we're only promoting solutions that fit, because it's not a time for brainstorming what may work," said Necrason, the Montpelier lobbyist. "It's not a time for new programs or boutique special interests. It's a time for proven systems to show up and scale up."

At the same time, Necrason said, the coronavirus crisis has presented some clients with an opportunity to make a new case for an old ask. Citing the state's efforts to put up 1,400 homeless families and individuals in more than 100 motels during the outbreak, a coalition of affordable housing providers called on lawmakers to invest nearly $107 million in new housing and rental vouchers to keep them from returning to the streets.

"It took this awful occurrence to really lay bare all of the inadequacies of our current systems," said Champlain Housing Trust director of community relations Chris Donnelly, who helped coordinate the request. "Now we can fix them, and we can fix them with these federal funds."

Scott's $400 million recovery package ultimately included $50 million in housing assistance, which Donnelly called "a great first step," but he's hopeful the legislature will increase the appropriation.

Even as they field funding requests from outside organizations, many lawmakers have been focusing on their own priorities. Ashe, the Senate president, has been seeking to provide nursing home employees, grocery store clerks and other essential workers "hazard grants" worth $600 to $1,000 a month for the first two months of the outbreak. The $60 million program passed the Senate early this month, but it has withered in the House and earned the opposition of Scott, who argues that it may not qualify for federal funding.

Other lawmakers have emphasized the importance of building out broadband service, particularly given how essential it has become to students and adults learning and working from home. While Scott listed "broadband investment" as part of his $400 million proposal, he provided no details about what that would entail. Whatever the plan may be, it could prove challenging to actually spend money on such a complicated infrastructure project by the December 30 deadline.

Perhaps the least sexy potential use of Coronavirus Relief Fund money would be to backfill the state's ailing Education Fund, though doing so could spare homeowners a major tax increase.

Unlike many General Fund expenditures, which can be trimmed by state lawmakers when revenues are down, school spending decisions are made by local voters on Town Meeting Day. In the nearly four months since most districts set their 2021 budgets, Education Fund revenues have been downgraded by more than $100 million, largely due to expected dips in sales, use, meals and rooms tax collections. If nothing were done to fill the hole, property tax rates would spike.

During a meeting of the House Ways and Means Committee two weeks ago, Greshin proposed forcing every school district in the state to hold a new vote this summer or fall to reconsider their budgets. Lawmakers immediately panned the plan as unsafe and questioned whether voters would actually agree to cut spending.

Ancel, the Ways and Means chair, said she's committed to avoiding school budget cuts and additional property tax increases. "If we could do anything we wanted, we would just put [Coronavirus Relief Fund money] into the Ed Fund," she said. "We know we can't do that, at least under the current guidelines." Barring a change of heart by the feds, Ancel is hoping to find a creative workaround that may involve sending federal aid directly to school districts.

In the meantime, the Scott administration is hoping to move forward with its own plans for the federal funding. "Time is not on our side on this one," Greshin said. "The requirement is to get this money into the economy — to use it or lose it by December 30 ... We have a lot of businesses that are on the verge of closing. We just need to send them something."

Bette, the Bluebird Barbecue owner, agrees. "Without help, and really fast help, we're going to start losing industry colleagues quickly," she told legislators last week. "Debts are just mounting up. The stress and the trauma of managing this is starting to take a toll on [restaurant] operators that I've never seen."