Vermont Legislature SmartTranscripts:

[Robin Scheu (Chair)]: Good afternoon. This is the House Appropriations Committee. It is Thursday, 01/08/2026. It's 02:30 in the afternoon, and we have Emily Byrne, Deputy Fiscal Officer at Joint Fiscal Office, to talk about contingent appropriations that we put in the current year budget, which we all did last year. And I'm sure you all remember everything about this.

[Emily Byrne (Deputy Fiscal Officer, Joint Fiscal Office)]: But we've got to figure out what's happening, what

[Robin Scheu (Chair)]: we did, where we are, and all that good stuff. Take it away.

[Emily Byrne (Deputy Fiscal Officer, Joint Fiscal Office)]: Thank you for having me for the record, Emily Byrne from the Joint Fiscal Office. This is also we're going to do the contingent appropriations, but as part of it, the overview of how the closeout process works as well, which I think will be also a good they're interconnected, and it'll be good to have this preview before we talk about the language and the budget adjustment around the child care contribution special fund. This is the baseline. This is what happens, and we're adding a piece to that process. This So a good starting point for that. Let me share my screen. Can I share? Yeah. It's been six months. I forgot how to do.

[Robin Scheu (Chair)]: Yeah. Okay.

[Emily Byrne (Deputy Fiscal Officer, Joint Fiscal Office)]: Great. So the fiscal year, maybe it should be 25 contingent appropriations, actually. I've already screwed it up. Okay, this is the fiscal twenty five contingent appropriations. I'll fix it and post it into the website. That show that affected 2026 budget. That affected 2026 budget, but they occurred at the close of 2025. Maybe they are in 2026. Either way, it doesn't matter. We closed the fiscal year, and this is what happened. So when we talk about where the money for the budget comes from, right, at a high level. So the general assembly, you all build the budget based off anticipated revenues and transfers. The estimated revenues are from the January adopted consensus revenue forecast. We're going to get next Friday. You'll get next Friday, right? So you're setting your revenue number in January, but there's still six months of the fiscal year left where anything can happen, right? Also, you build the budget, we'll note you're accounting for, oh, we're going to do this tax credit, or we're going raise these taxes. That's accounted for when you build the budget. But the consensus revenue forecast is really the this is the number, our North Star. This is what we're budgeting to.

[Eileen Dickinson (Member)]: And

[Emily Byrne (Deputy Fiscal Officer, Joint Fiscal Office)]: sometimes, since it's adopted in January and there's another six months left of the fiscal year, sometimes it becomes apparent to those of us that are tracking the revenues, finance management and joint fiscal office, that the actual revenues in a given fiscal year are coming in higher than that adopted revenue forecast. When that happens, we build a contingent list. That's because that revenue isn't

[Robin Scheu (Chair)]: official until the fiscal year closes. So we know it's coming, but anything can happen between February and June or May

[Emily Byrne (Deputy Fiscal Officer, Joint Fiscal Office)]: receipts are coming in. So we don't put it in the actual budget because we don't know it's not the official adopted number. But once the signals are there and it's usually the April after the personal income tax comes in, the legislature in the negotiations with the administration sort of say, Okay, we all sort of can see the writing on the wall that the revenue is coming in higher than anticipated. And we should figure if we want to designate it any differently than what is currently allowed in statute. And that was last year. And that was last year. But as Chris said, right, past performance does not indicate future success or whatever. Correct. And it has. And what's also challenging is this has happened since COVID. There's been a little bit more uncertainty when April hits about where the revenues are going to land. And I think the economists are trying to get back to a steady state of what's happening. But there's a lot going on in the world and in the economy, and they're doing their best to forecast it. There has been this contingency list for the last couple of years, but I remember a time where this was not even Right. I didn't even think it was a pipe dream. Yeah. So the way we do it is we put it in the budget, and it's a list of items in priority order that only get funded in the event that the money shows up. So if the list may be $100,000,000 long, and at the end of the fiscal year, there's only $50,000,000 The first $50 get funded and the other 50,000,000 It's not a guaranteed funding. It depends on what we think is going to happen. And generally, don't know about the contingency list. If the general assembly should contemplate a contingency list until April, really, that's the biggest month for the general fund because of personal income taxes. So we're going to go back in time to where we were in April 2025. Yes. Okay. So in April 2025, we had the personal income tax, and we know that there's additional there is likely going to be an additional, approximately, over $100,000,000 more than what was forecasted in general fund revenue be deposited in the general fund in fiscal twenty twenty five. And at the same time as that happened,

[Robin Scheu (Chair)]: we

[Emily Byrne (Deputy Fiscal Officer, Joint Fiscal Office)]: were four or so months into the Trump administration, and we were starting to see signs of uncertainty in the economy. You may remember that's when the tariff conversation was tariffs, no tariffs, tariffs, no tariffs. The stock market was trying to react to what was actually going on. And at the same time, the president had released a budget. He had some suggestions on how to change federal programs that led to some uncertainty in states about how Congress was going react to the president's recommended budget and what was going to get implemented. And DOGE was out doing what DOGE was doing. So there was a lot of uncertainty in terms of the interaction between the federal government and state government. And you all were about to go home. Know that. When you're not here and things change, we have to follow different processes to react. So in May, one of the things you guys, you all, house corporations get the first bite of the apple on a budget. Senate appropriations has the benefit of just more time and additional information. When you moved to the budget in March, we didn't know generally where the like, whether or not to have a contingent appropriation list. So the House passed budget, had contingent appropriation lists. The Senate had the information around the personal income tax receipts and was able to add the contingent list into the big bill. And then the committee be discussed at committee conference too. It isn't like we don't get a chance to. Correct. So you just get to start it. Right. And it changed a fair amount between the two, but the committee of conference ultimately included the contingent list in the final working of the budget. So there's a couple of slides with a lot of statutory language I'm trying to just for thorough. But so in the budget, in section B11001, Subpart A, this is what gives finance and management the instructions on, Okay, so as you go through the closeout of the general fund, here are the steps you need to follow in this order. So the part in bold is what says so once you do the first section, we'll talk about what those first sections are. You're going to not withstand 32 BSA three zero eight, out how many of the contingent appropriations we can fund based on the amount of undesignated money, and then fund all those contingent appropriations. After you do that, then execute what's outlined in 32.308. The first part of closeout is when finance this is the first sentence of the section I just showed you. The first thing that finance and management does when it goes to close the books, once all the appropriations have been made and the transfers are done. If there's revenue left over, the first thing they do is make sure that the general fund stabilization reserve is filled. By statute, that is 5% of prior year appropriations. We budget for that. We assume that that is gonna occur when we build the budget. So that's the first transaction that they make. They fill the stabilization reserve. The next thing that happens by statute is then this three zero eight section, which we talk about a lot. So after you fill the stabilization reserve, then we're going to fill the balance reserve, which the balance reserve is the rainy day fund. Fill the rainy day fund up to no more than 10% of prior year appropriations. There's also General fund General fund appropriations. So it says put all of it in the balance reserve, except for then in subpart three, it says, all of that money that you're going to put in the balance reserve, 25% of it goes to the state employees retirement fund, I believe is what Chris just told you all about, and 25% to this post retirement adjustment allowance account, which relates to Chris is gonna correct me when I goof this up because I always goof it up. But the teachers retired teachers' health care fund. No. Pension fund. Sorry. See? Every time Both of them are pensions. One is just pensions and one state employees. Yeah. So it's anything that's left goes to the rainy day fund, except take that amount of the rainy day fund and send 25 of it to the teacher's retirement, 25% of it to the state employees retirement. But the contingent lists where the I'm going go back up to this original. I'll show you this original language. So the first sentence is put the money in the stabilization reserve. The next sort of section of it is put it in the stabilization reserve, but also take $138,970,000 and carry it forward into '26. When we built the FY '26 budget, we assumed that there would be $138,000,000 that would be built into the '26 budget. So if they hadn't done that first, then '26 would be out of balance right away. So first, take that money, move it to '26. After you do that, if there's anything after that, then fund this contingent list below. And if there's money after that, then do three zero eight. That's the sort of Pensions. Right. Pensions and rainy day fund. So this is the pensions and the rainy day fund. So the contingent list, that was the sort of subpart B below that list of instructions is if there is any unallocated balance determined in the section above, first transfer $8,000 or $8,000,000 excuse me, to the Communications Information Technology Special Fund. There was a request in the governor's budget to put $8,000,000 to deal with a deficit in that fund, last year's budget, if you want

[Robin Scheu (Chair)]: Yeah, they actually asked

[Emily Byrne (Deputy Fiscal Officer, Joint Fiscal Office)]: for $15,000,000 You may have done some, but we have allocated 8,000,000 And that's when we heard AES earlier this week. Correct. Yeah, you did part of that That's what this was about. And the base, and you put some of it on the contingency list. Like, if the money is available, we will keep paying down the debt. So that was the first thing that happened. The second thing was $50,000,000 was appropriated to the agency of administration to be transferred by the emergency board pursuant to 32 VSA 133. I'll talk specifically about what 32 VSA 133 is in the next slide, but that was the emergency board can only transfer appropriations. So this was a mechanism to set aside money that the emergency board could access in the event of something changing at the federal level. And we'll go into that. But as you're aware We took it. Okay. This is where the emergency board utilized funds to cover SNAP benefits when the government was shut down. After oops, taking Okay. After that, dollars 30,000,000 was reserved in the general fund for future appropriation or transfer by the general assembly to address federal funding shortfalls. And then an additional $30,000,000 was reserved in the general fund for future appropriation or transfer for federal funding shortfalls or other issues that are identified.

[Robin Scheu (Chair)]: So to just pause there for a minute, Emily, those $230,000,000 they're coming to the general assembly. It's not

[Emily Byrne (Deputy Fiscal Officer, Joint Fiscal Office)]: the Joint Fiscal Committee or not the, emergency board. So I'm thinking the assumption was that we would be back in session or we would be called into session because only the general assembly can appropriate that money. Nobody else can see it. Correct. It's nice. No, I have a slide on why why this construct. Right? Why not just appropriate it off to the emergency board? Why set it up this I'll get to that. So this I made tried to make a little chart. All of those all that got words and legalese about it, but tried to simplify it. So step one, you do 32 BSA three zero eight, put the money in the stabilization reserve up to 5%. Then you designate the unallocated carryforward, which is the $138,000,000 to be carried forward in the next fiscal year. Then you fund the contingency list in this order. And then follow 308c, 50% to the rainy day fund, 25% to state pensions, 25% to the teacher pension. This is just a quick summary of how it ended. So we had $138,000,000 was carried forward. The $118,000,000 on the contingency list was fully funded. And after all of that happened, there was still about $1,900,000 left over, almost $2,000,000 left over, that followed the statutory 50% to the rainy day fund, 25% to the pensions, and 20 to five the state employees, and 25% to the teachers' pension. So, yeah, we called it pretty accurately.

[Eileen Dickinson (Member)]: Which is

[Emily Byrne (Deputy Fiscal Officer, Joint Fiscal Office)]: why that happens in May and not in January. So, yeah, go ahead. Why

[Unidentified Member]: Why did you do the contingent list before the rainy day fund? Is that Well, it's not the balance

[Emily Byrne (Deputy Fiscal Officer, Joint Fiscal Office)]: reserve fund.

[Robin Scheu (Chair)]: Balance reserve fund is sort

[Unidentified Member]: of the mandatory one. Right, but then there's the rainy day fund in addition. Yeah, I

[Emily Byrne (Deputy Fiscal Officer, Joint Fiscal Office)]: think that was, you could have, I'm trying to think, and not knowing exactly why to do the contingent list and then the rainy day fund, I think it was, we'll put these

[Unidentified Member]: specific I presume you're going to

[Emily Byrne (Deputy Fiscal Officer, Joint Fiscal Office)]: have enough to all, but

[Unidentified Member]: I presume it's because you assumed there was going be enough to also push the rainy day fund.

[Emily Byrne (Deputy Fiscal Officer, Joint Fiscal Office)]: Possibly, then the rainy day fund is just like, in the event there's extra, this is where it goes. Less, not the reserve, that reserve doesn't have a minimum requirement or anything like that.

[Robin Scheu (Chair)]: It's just It's not a specified amount. Correct. There. Whatever's left

[Emily Byrne (Deputy Fiscal Officer, Joint Fiscal Office)]: goes there. A specific order of operations that we do this in to ensure that the contingent list gets funded. Okay. I had just thought the rainy day fund was required even though it

[Unidentified Member]: was a lesser amount that it was required in addition to the balance. It's just the balance reserve.

[Eileen Dickinson (Member)]: Just meant, it never really serves me that we did the, because we had no idea what was going to happen on the federal level, that contingency list, we had language for that, there were thresholds, if we got to this amount it went to the airport, it went over that, it went to something. Then if it was over a certain amount, it went to the general assembly and the governor would have to call us back. But we wouldn't have special committees trying to figure out how to fill in for these federal monies that may or may not be there. That was

[Emily Byrne (Deputy Fiscal Officer, Joint Fiscal Office)]: sort of in addition to the, that was a separate thing from the contingent list. We had, the governor could do up to whatever percent, and it's a lovely little spreadsheet that Catherine and Emily put together by government function. And then over that amount between X and Y, the joint fiscal committee and the e board could be involved.

[Robin Scheu (Chair)]: And then over that amount, we

[Emily Byrne (Deputy Fiscal Officer, Joint Fiscal Office)]: had to get back and nothing hit the special session.

[Eileen Dickinson (Member)]: We never had any, it didn't happen.

[Emily Byrne (Deputy Fiscal Officer, Joint Fiscal Office)]: It didn't happen.

[Eileen Dickinson (Member)]: It was really a concern almost all the way through last year phone call, and then it really was the language and special just to do it this way.

[Unidentified Member]: I'm just concerned about the order. Yes. Because I would have considered the extra money to go to the retirement funds more important than the contingent list.

[Emily Byrne (Deputy Fiscal Officer, Joint Fiscal Office)]: I pulled the language up on the contingent list and so that the representative Dickinson, what you were talking about is in section E127.2 of the Appropriations Act. That's where it outlines. So only the $50,000,000 would have been accessed by the e board or the joint fiscal committee in the event that there was reductions. It was you're right. There were thresholds around at what level who engages at what level of production. But it never triggered Never happened. It never happened. It's that far. And one thing I will put a nugget out there, it's one thing we're paying attention to, we'll probably have to talk about. But this the language on the 50,000,000 is this can be only used as set forth in that section of this act. So we're gonna need to look at in the budget process what if that how to potentially modify that appropriation. So it's how it applies the property. So do we just keep it there, and

[Robin Scheu (Chair)]: it would be like a carry forward, right? So we use 6,500,000.0. Maybe you have a slide.

[Emily Byrne (Deputy Fiscal Officer, Joint Fiscal Office)]: Coming ahead, yeah. We're going to go back to the future, right? Which is now, about where, what happened. So we did all that, that was May, right? What happened between now and May around these conditions? Here we are. Here we are. Delmarie, I got stuck. So the 50,000,000 appropriated for transfer by the emergency board, right? So it was appropriated to the agency administration to be transferred by the e board pursuant to the language that is around the e board. So the agency administration can't do anything with it other than transfer it to the Right. E Only the e board can authorize it to vote. And you'll recall back in October, the government shutdown had been going on for almost a month. There was some question about whether or not or the federal government had signaled that supplemental nutrition assistant payments were going to go out to recipients around the country. The e board met to try to backstop that program and to help get people resources on October 28. So they authorized $250,000 of the $50,000,000 to go to the Vermont Food Bank, in part because per the administration's testimony at the emergency board, they had to basically spin up a new program to release these funds. So it was going to take them about a week to get the money appropriated by the emergency board to move. So the food bank grant was to stop gap so that they could issue the benefit. They issued 6,300,000 to cover fifteen days' worth of benefits for folks. And the 6,300,000.0 also covered the administrative costs that the agency needed to incur to set up the program and to let recipients know what was happening. So the $50000000.6550000.00 is gone, leaving $43,450,000 in that appropriation, which is still over 85% of the funds that were appropriated. And the reason why it's $50,000,000 So the statute that governs the emergency board so the section A, we can ignore. But so pursuant to Part B, the board has the authority to transfer appropriations made to other agencies and to use the transferred amounts to make expenditures necessitated by necessitated, excuse me, by unforeseen circumstances emergencies. It doesn't happen very often. Before Maria retired and we were doing this and talking with her, there were a few instances back in the mid-twenty whatevers, 2012 with LIHEAP, where the purchasing power of the federal LIHEAP grant was not going to get people a benefit that was sufficient enough. So what the emergency board would do was transfer general funds from an area of state government to LIHEAP, and then in the budget adjustment backfill the department where the money came from. But the emergency board has the ability to appropriations, but it can move them up to 2% of the total general fund appropriated. There's a limit on the ability of the emergency board to move money around, which 2% of the FY 2026 general fund appropriations is $49,000,000 Now, it would have been a little bit higher had H91 not been vetoed, but 49 is close enough to 50. So that's why the 50,000,000 became the number for that appropriation. The other two tranches were reserved that can only be unreserved by an act of the general assembly. I think the thinking time was that if we got to a point where we had completely spent the $50,000,000 or had defied the emergency board, if they had fully transferred it out of that existing appropriation, or if the triggers that were set up around federal funding cuts exceeded the level where the Joint Fiscal Committee and the Emergency Board had jurisdiction, there would be money reserved for the general assembly could access if they needed to come back last fall and make any changes. And to the extent those $230,000,000 are reserved, they can I'm jumping ahead of myself. So we've got the $230,000,000 contingent appropriations. They're reserved in the general fund. So there's of the reserve, the 2,753 reserve and the human services caseload, now have these two additional reserves that are for these specific purposes. The only way that these funds can be unreserved is through an act of the general assembly. So the governor can recommend in his budget. He hasn't recommended anything in the budget adjustment, but in the budget could recommend they're unreserved for whatever purpose. We'll know whether or not that's part of his recommendation when you receive the budget the week after next. But for all intents and purposes, that money is there to be accessed if and when the general assembly deems it appropriate.

[Robin Scheu (Chair)]: We have to approve how those $230,000,000 is it possible for us to unreserve some of that for the budget adjustment if we want to?

[Emily Byrne (Deputy Fiscal Officer, Joint Fiscal Office)]: And you could

[Eileen Dickinson (Member)]: split it to federal? Right. Okay. Or false,

[Emily Byrne (Deputy Fiscal Officer, Joint Fiscal Office)]: which we've already started So I'm just asking the questions. I'm not sitting here saying, yeah, let's take 60,000,000 and have fun.

[Robin Scheu (Chair)]: I'm not either.

[Emily Byrne (Deputy Fiscal Officer, Joint Fiscal Office)]: I just want to know mechanically, we authorized so we can observe it and put it in the Green Day fund if you wanted to. Can put it in the pension fund. Can unreserve it and put it in the pension. Sort of your Do want your colleagues?

[Robin Scheu (Chair)]: I could argue why.

[Emily Byrne (Deputy Fiscal Officer, Joint Fiscal Office)]: I know, I know. We've been well trained. Yeah. So I think that's it. The e board money can the e board unreserve that? How that How do we get to use that money besides for emergencies now that we've put that over there? You would have to modify the appropriation language in the budget or the budget adjustment. But to be transferred to the E board.

[Unidentified Member]: Don't modify the appropriation to the agency administration. Yes.

[Emily Byrne (Deputy Fiscal Officer, Joint Fiscal Office)]: I think you would have to revert the appropriation. If it was in if you wanted to change it in FY '26, we would just modify the appropriation, change the amount that gets appropriated in '26, because we're still in '26. If you wanted to let it sit until June and we got it into next fiscal year, then you would revert it and then reappropriate it as you saw fit. But we can also we can do

[Robin Scheu (Chair)]: So that's money for us

[Emily Byrne (Deputy Fiscal Officer, Joint Fiscal Office)]: to do that, to play with, too.

[Robin Scheu (Chair)]: Okay. Wayne? Well, we probably should be careful. We don't know that we're out of the woods yet. Oh yes, well there's a looming government shutdown at the end

[Unidentified Member]: of this month. So we're,

[Robin Scheu (Chair)]: you know, I think we set ourselves up really well

[Emily Byrne (Deputy Fiscal Officer, Joint Fiscal Office)]: when we left

[Robin Scheu (Chair)]: the session last year, and so

[Emily Byrne (Deputy Fiscal Officer, Joint Fiscal Office)]: we'll see what inspires.

[Robin Scheu (Chair)]: Thank you, Eileen.

[Emily Byrne (Deputy Fiscal Officer, Joint Fiscal Office)]: That was great.

[Robin Scheu (Chair)]: Committee, that is what we have for today. So after the floor, we're done. Tomorrow, think that's So floor first at 09:30, and then I looked at the agenda and I could tell you exactly what

[Eileen Dickinson (Member)]: we're doing.

[Robin Scheu (Chair)]: We're having an ARP update from ACCD and then at 12:00 is our very first ever House Appropriations Budget Workshop.

[Emily Byrne (Deputy Fiscal Officer, Joint Fiscal Office)]: So, and is this, I'm sorry, did you say

[Eileen Dickinson (Member)]: at the beginning that this is going to be part of that workshop?

[Robin Scheu (Chair)]: The contingent appropriations second workshop, maybe we talk

[Emily Byrne (Deputy Fiscal Officer, Joint Fiscal Office)]: about it? I can't remember. Okay, I'm gonna have you do an exercise about the attention appropriation. Okay, the practice. That's right.

[Robin Scheu (Chair)]: We're doing that Friday. Okay, all right.

[Emily Byrne (Deputy Fiscal Officer, Joint Fiscal Office)]: So you put some of your colleagues through the exercises to be appropriate. To learn

[Robin Scheu (Chair)]: on this committee, you all can do it too,

[Emily Byrne (Deputy Fiscal Officer, Joint Fiscal Office)]: but you know, who've never done this get to the appropriators and say how they're going

[Robin Scheu (Chair)]: to spend the very limited Yeah, don't need that.