Vermont Legislature SmartTranscripts:

[Robin Scheu (Chair)]: Good afternoon and welcome to the House Appropriations Committee Second Budget Workshop. Today we are going to cover budget basics and delve into the budget itself. We can have Brady Nixon and other folks from the office here to talk to us and answer your questions. And then we have a fun activity at the end. We are recording the presentation part and then as we did the last time we will go offline for the activities so we're going to have that up there. We'll be reaching out for questions at the end of the sections and we'll go from there.

[Unidentified Committee Member]: So

[Trudy Nixon (Fiscal Editor, Joint Fiscal Office)]: Thank you for coming. My name is Trudy Nixon. I'm the fiscal editor at the fiscal office. So if you notice any typos and any budget bills, you may be yell at it. Today we're going to be talking about the basics. I guess, I'll ask you to go to the next slide.

[Unidentified Committee Member]: Thank you, Chris.

[Trudy Nixon (Fiscal Editor, Joint Fiscal Office)]: Thank you, Chris Roop. He's an associate fiscal officer at JFO and Clicker. At the end of the talk, today we'll just be doing a quick recap the process for those of you that are first workshop. And then we'll be going through some definitions of budgetary terms that are considered often times during the floor reports, and you'll see them in the bill when reading it. And then we'll just go through how to read big bill. So first off recap of the budget process. As my colleague James Duffy mentioned in the first budget workshop, this is a train that the legislature is hopping on to about three quarters of the way through its journey every year. So this process starts in September to October with agencies and departments developing the budgets for the budget recommendations of the governor. Then the governor's team reviews that meets with agencies and departments discusses their budgets and then finally in January that budget is then presented to the legislature and given to the House of Repropriations Committee. January to March the House of Repropriations Committee works on their version of the budget and presents it on the house floor. The house votes on it sent to the senate. The senate does the same and then if in any crazy situation there are any differences between the senate bill and the house bill. So first up we have appropriation, this is often good in terms of spending authority. This is a specific amount of money that the general assembly authorized he withdrawn from a specific fund for a specific purpose. This can only be done by the general assembly, so that's where you'll hear that power of the first term. And the general assembly can only appropriate directly to a state entity. So if you want to direct funds to a non state entity, they first have to be appropriate to a state entity. These will appear in the big bill, which is what we often call the budget as number sections quote unquote, or as one time appropriations. And you'll see at the top of this slide, an example of one time appropriation that would always have the specific dollar amount than the specific fund source, then you were appropriating it and then it would say to what state entity that appropriation is being made. Other appropriations which you'll hear refer to as base appropriations or number sections look like that example below. So we'll get into the actual mechanics of that later in the presentation, but those numbers section what we're talking about when we say face appropriation. Next up, we have allocation. This is the divvying up on spending authority. So it's by explicit language that's saying of that money that was appropriated, we want to spend this way and want to divvied up to people. So you'll see an example here. This is saying of an appropriation that is made in section b two zero nine, 2,000,000 is allocated exclusively for purchasing and out of any assignment and so of state leased vehicles. So this is sort of drilling down further into that.

[Robin Scheu (Chair)]: So that might have been say a $5,000,000 appropriation and then it says, you know, B and C would be a million to this and then in this case C is 2,100,000.0 for the purpose. So we can direct it more specifically. It can be as general or as specific as we want in doing this.

[Trudy Nixon (Fiscal Editor, Joint Fiscal Office)]: The general assembly or the specific assembly. Next up we have obligated and on the flip side of that you'll hear upon obligated. This is in covered citizen. What that means is money that the state has committed to spend after it's been appropriated either through a grant or contract or some other means for a specific purpose, but that money has not been spent yet. So it's executing after an appropriation is made at the state entity executes an agreement, but that money has not actually gone out of the door. For example, the agent transportation executes a grant agreement with time for a true $400,000,000, the general assembly appropriated some larger amount of money to the agency of transportation and then the agency of transportation is to a specific grant now with the town of Richford. Then we have extended or unexpended funds or expenditures. This is money that the state has actually spent. It's money out the door. So for example, now the agency of transportation pays the town of Richmond $150,000 for completing part of the grant. They agreed, they obligated to spend a million dollars on that grant. Now $150,000 of that is actually going up the door to Richard. Then we have reversions. Reversions send all of what we're targeting prior year impact to the original fund source. So the general assembly can appropriate amount of funds and then due to under utilization or other circumstances, revert some of that spending authority back to the original fund source. Funds can also be carried forward from one fiscal year to the other. This is often referred to as carry forward. This just means that an appropriation can be used by an agency or department in a future fiscal year. Yes.

[Unidentified Committee Member]: If I could interrupt the question. So appropriate back to the original fund for source is like general fund, not back to age as such and such.

[Trudy Nixon (Fiscal Editor, Joint Fiscal Office)]: Correct. Okay.

[Robin Scheu (Chair)]: So we might have given human services $10,000,000 or diva or something for a specific program, and at the end of the year, they spent $8,000,000 and there's $2,000,000 left. And so at closeout, usually the administration looks at things and says, are we gonna leave the money in that $2,000,000 and carry it forward so it stays in that budget, or are we gonna revert it back to from whence it came, in this case, the general fund. If it was a global commitment thing, it would have to go back to multiple categories.

[Trudy Nixon (Fiscal Editor, Joint Fiscal Office)]: Exactly, and so you can kind of think of these as two sides of the same coin. And then just to point out for you something that you'll see later throughout the budget bill is this phrase here that says these funds shall carry forward each fiscal year until fully expanded or reverted. And that's not always used, but if the general assembly theoretically the intent is that those funds state that agency or department, that's gonna be explicitly laid out.

[Robin Scheu (Chair)]: Or we might say the other side of that, if we really only want it for one year, any money is not used will be reverted to the general funds.

[Trudy Nixon (Fiscal Editor, Joint Fiscal Office)]: Absolutely. We

[Robin Scheu (Chair)]: can do that too.

[Trudy Nixon (Fiscal Editor, Joint Fiscal Office)]: In a recent budget, the general assembly did that with ARPA funds. They made it very explicit, the reversion process for those funds that would have expired if they weren't obligated by the end of a certain calendar year. Next up we have is transfers. So this is the movement of money from one fund to another. There's a section of the bill that Paul will explain later, where all those transfers happen. So you can go paging the bills to those. And these are often, if you're not in that section, you'll see a million dollars or whatever some of money is transferred from the general fund to the education fund. So it's just explicitly lending out that amount of money from one fund source to another.

[Robin Scheu (Chair)]: So it isn't going to an agency or department, it's funds specifically.

[Trudy Nixon (Fiscal Editor, Joint Fiscal Office)]: Next up we have reserves. And this is money that is held in a fund that can only be released for brokerage or transfer under specific circumstances that are laid out either in statute, which is an active law that continues on in perpetuity with its effect or session law, which is only applicable to the current year. You'll see the term shall be reserved frequently. And then below you'll see a few examples of quote unquote statutory reserves. You have a 27.53 reserve, the stabilization reserve, the general fund that when you quote unquote rainy day fund also purchased the balance reserve.

[Robin Scheu (Chair)]: But wondering if people know what the 27.53 reserve

[Trudy Nixon (Fiscal Editor, Joint Fiscal Office)]: Yeah, so the 2753 reserve relates to the fifty third of Medicaid and the twenty seventh payroll. So in certain years, there is an accurate week and we need to account for that extra spend. So that reserve exists for that purpose.

[Robin Scheu (Chair)]: So it's like every seven or nine years or whatever it is, you put money in every single year. And if we didn't, we'd have this huge multimillion, tens of millions of dollars of suddenly we'd have to pay. So we're saving up to pay it off and then we build it up again. So we're always putting money into that.

[Unidentified Committee Member]: The year there's 53

[Trudy Nixon (Fiscal Editor, Joint Fiscal Office)]: pay weeks and 27.

[Robin Scheu (Chair)]: Right, and 0.7 payrolls and 53 Medicare.

[Trudy Nixon (Fiscal Editor, Joint Fiscal Office)]: Before we move on to the second part of the presentation, are there any questions? Okay, great. So how do you read the big bill? Now we're going to get into the mechanics of actually reading the budget. I wanted to make a few budget cards, but a totally different number and structure from any other bill. But that number and structure is mostly the same in every single budget bill. There are a, b, c, d and sections and then some peers through other sections that will demonstrate. A sections are annual standard explanatory sections. These appear at the very beginning of the bill and they include an explanation of the purpose of the bill definitions of terms used in the bill and the legend, which is your roadmap to how to read the bill. So if I'm MIA, go to section A108 of the bill and he'll cert in my stead. This outlines the authority that's being given to the administration in terms of how the administration can interpret what we see in the bill as well. And these sections are largely the same year to year. They really don't change. This is what AA108 looks like. So again, this is the legend, this explains to you where you can find different things in the build by function area of government. So that outlines it there and then it also explains where you can look for transfers, the reserves and things like that.

[Robin Scheu (Chair)]: And I'll just mention that we'll post this presentation on our website as well. That's a lot on that.

[Trudy Nixon (Fiscal Editor, Joint Fiscal Office)]: So then we have a B sections of the bills. The bill, this is the number of sections that I was referring to earlier. These are mostly base appropriations for the coming fiscal year, which is spending authority or appropriations for ongoing expenses. So this is really, this covers one time expenses or one off investments. These are the things that we expect to fund for ongoing expenses year to year. Each function area shows where funds are going and where they're coming from. So when I say function area, I mean, right next to the section number there, I'm sorry, it's a little small, you'll see section B100, secretary administration, secretary's office. That is the function area that's telling you what part of government this appropriation is for. Then you'll see below that major objects that personal services operating expenses grants. On the other side of that, you'll see how much of the appropriation is going to each of those major objects. Then below you see fund sources, so it's telling you where the money for that appropriation is coming from. And then on the bottom both, you'll see a total. So for the money going out, there's a total and the money going in, there's a total. And if JM posted its job well, then those numbers should be the same. Next, just a brief aside, JFO produces what we call the Web Report. This is an online resource. Every time the bill is on the floor, will also have printouts of that available on the house. This is a resource that matches exactly with the number sections and it shows changes at each stage of the build process. So again, apologies for the small font here, but you'll see this corresponds to that B100, it's the same function area of government. And then it shows what those numbers were on the governor recommend, then the house, then what's the difference between the governor recommended in the house, Same for the senate and then same for the community conference. So this is from the final web report of act 27, the fiscal year 2026 budget bill, but it shows all that movement in all of these decisions.

[Robin Scheu (Chair)]: And it also at the bottom, my favorite piece is the little description. It says the house did something. In this case, we've removed 120,000 and everybody agreed, but sometimes there's a very long section that says governor did this, the house did this, the Senate did this, time of committee conference did that. You get a sense of how we ended up and where we ended up, because there's that little history of what happened. So that's where we got this

[Trudy Nixon (Fiscal Editor, Joint Fiscal Office)]: all part. Back to the B section. So there are other B sections. These will include one time appropriations, which is spending authority that's given from revenues that may not prepare. So the appropriations committees don't want to build their budget off of money that might not come in the following year, but we might have a pocket of money that the general assembly can tap into. So this is where the general assembly will make one time appropriations with those funds for discrete projects investment typically not on the expenses. You'll also see sections that deal with contingent transactions. So sometimes the Department of Finance and Management will flag for the general assembly that anticipated revenues may exceed what the budget was built on, which is that consensus revenue forecast. And the general assembly may decide to include language specifically laying out what to do with those revenues if they do in fact come in.

[Robin Scheu (Chair)]: So last year, for example, we knew we were gonna have extra revenue, but once the tax money came in, by the end of the committee of conflict, had language to reserve money in the event that federal funds not coming through. We had $50,000,000 through

[Unidentified Committee Member]: the inter board. We used 6,500,000.0

[Robin Scheu (Chair)]: of that for SNAP when the government shutdown happened. The board had some extra meetings around that. And we had another 30,000,000 for more federal funds and another 30,000,000 for a number

[Unidentified Committee Member]: of other things. It could have

[Robin Scheu (Chair)]: been that with housing or education, property tax relief, etcetera. So we had a good sense of how much money we would have left, and that's where we put the contingencies in. It was in a priority order. So if you only have some of the money, so we had like 118,000,000, I think. If we'd only had 100,000,000, we would have used all of number one, all of number two, maybe part of number three or whatever until we got to the site.

[Unidentified Committee Member]: Yes, with respect to the one time appropriation, are they always at the end? So if AHS has B318 and that's where I see base appropriations for three eighteen. If there is any one time associated with that same area as apartment program, etcetera, is

[Trudy Nixon (Fiscal Editor, Joint Fiscal Office)]: it always gonna be at the end or will

[Unidentified Committee Member]: it be up to that B-three 18?

[Trudy Nixon (Fiscal Editor, Joint Fiscal Office)]: That's a great question. So there are other sections of the bill that actually do line up with the number sections. So I'll get into that a bit later. But the appropriations in that one time appropriation section jump align with that number structure for the base appropriations. They will always appear though as section B 1,100 of the bill. So anytime you're looking for where those one time appropriations are, you can go to section B 1,100.

[Unidentified Committee Member]: And so it usually starts up

[Robin Scheu (Chair)]: at 1,100 A and B, right? We go through the alphabet. And then if you get to the end of the alphabet, you go to AA, DB, and what did we go

[Unidentified Committee Member]: to last year? AG or

[Robin Scheu (Chair)]: HH or something like

[Trudy Nixon (Fiscal Editor, Joint Fiscal Office)]: Personally, didn't need to go to AA at the end of last session. All right. Next up we have C sections of the bill. So these are current year adjustments, appropriations and amendments. Every year the general assembly typically will have a budget adjustment act, which is making changes to the budget that it enacted the prior spring. But things can change after the DAA is enacted. The budget presents the next opportunity to make changes to the current fiscal year. Typically because these are time sensitive changes, they occur on, they're effective on passage. So any current year adjustments will typically be in C sections. There's a lot of and sometimes why that goes on with these rules. So I'll explain a difference at the end of the presentation, but the C sections will always impact current year. Then there's the D sections. The D sections include transfers, reversions and reserve allocations for the coming fiscal year. Section D100 will always be the allocation of the property transfer tax. Section D101 will always fund transfers. Section D102 will always explicitly lay out reversions that are occurring, and section D1 and three will always include reserves.

[Unidentified Committee Member]: So the section C will be budget that you're currently building FY '27, but it's using the current year monies, not necessarily.

[Trudy Nixon (Fiscal Editor, Joint Fiscal Office)]: So it's it would be. I'm trying to think of as you so if the

[Unidentified Committee Member]: EAA is done, but we're adjusting the current fiscal year. But the section C, which will be in the budget that we passed, you're still adjusting current year monies. So are we adjusting current year monies revenue? Yes. In the next fiscal year's budget. Is that correct? Then things are still changing right as we go along. Have a pretty proposal but but still some things are going to change until we get to the end of the year. Okay.

[Trudy Nixon (Fiscal Editor, Joint Fiscal Office)]: And it may not just be changes to money, it could also be a time sensitive policy department or agency needs to change or create a position in a very time sensitive manner. Thank you. And then we have the E sections, which are everything else for the most part. These are what we refer to as the language sections of the bill and these correspond to those number of sections. So you'll see this example here, there's section B600 which is the base appropriation from the University of Vermont and then there's section E600 that speaks to the University of Vermont and what finance management should do with that appropriation being made in section B600. So every E section links back up to an E section. If there's any language relating to a B section of the bill, you can find it by saying it's B600 or look and see if there's an E600.

[Unidentified Committee Member]: Back to the question about one time funds, would you likely see a descriptor for the E section that kind of

[Trudy Nixon (Fiscal Editor, Joint Fiscal Office)]: marries up based one time fund? In some instances, not always. So you may see it referred to, you may see explanatory language for one time appropriation in the one time appropriation section, or for instance, there may be a one time appropriation to the University of Vermont, and then there's a lot of policy change going surrounding that. And so then you may see an E 600 secondtion saying of the one time appropriation reading section B 1,100, this is what it's about. If there needed to be extensive language related to one time appropriation, it would still be tied to the relevant base appropriation.

[Robin Scheu (Chair)]: So think of the 1,100 secondtion is if you can't explain it in like a sentence or two, then there's going to be more language in the E section to further explain it, because maybe there's a whole lot to be said, we don't want to use that B section to blather on with that, whatever it is.

[Unidentified Committee Member]: No blathering fool.

[Trudy Nixon (Fiscal Editor, Joint Fiscal Office)]: And just very briefly, then we have Section E-one 100. Section E-one 100 will always include position changes. So if you're looking for any positions that are being added or switched from limited service to permanent or classified to exempt, all of those changes occur in section E-one 100. And then we have FGA, etcetera. So as I mentioned earlier, other sections are pulled into the bill and can change year to year. So there's some quick examples from the past few budget bills here. You'll see an Act 78, which was the fiscal year 2024 bill. The F sections touched on workforce and economic development policies. Then following fiscal year act 113, the F sections touched on financial regulation fees. Act 27, our current budget, the F sections were actually the FY 2025 budget adjustment act. You may recall the budget adjustment was eventually folded into the big bill given the timing and the inability for the budget adjustment to be enacted independently.

[Robin Scheu (Chair)]: We never passed a budget adjustment last year. So we had to put all the relevant pieces that we could into the big bill. So we've got its own special sanction,

[Trudy Nixon (Fiscal Editor, Joint Fiscal Office)]: Right, and that's what I had alluded to earlier, flagging that in Act 27, there some current year fiscal adjustments made in the C sections, but then there were also many sections in the F section that did impact the current fiscal year because in this special instance we haven't done that yet. And then finally, the effective date section, which is always last and will always have its own section letter. So you'll see that again changes year to year what section letter it is, but it's always its own discrete section of the middle. So just to wrap up, there is a lot of standard language in the budget that appears year to year and doesn't change from year to year. The A sections explain the bill, the B sections, those number sections make appropriations. The C sections affect the current fiscal year. The D sections move money around and then the E sections contain language relating to corresponding B sections. And then there are other sections which vary year to year and those can often come from other bills.

[Robin Scheu (Chair)]: And this will be on our website post op this afternoon maybe.

[Trudy Nixon (Fiscal Editor, Joint Fiscal Office)]: Great, and so now we have a little workshop activity. Think, Robin, we can go off to live now.

[Robin Scheu (Chair)]: Now click