Vermont Legislature SmartTranscripts:

[Martha Feltus (Vice Chair)]: Fine. All right. Good afternoon, this is the House of Appropriations Committee. It's 01:00 on Wednesday the eighteenth, believe. We are going to hear from Douglas Farnam, our Chief Recovery Officer. Would you please take that seat? And then just looking at our agenda, I think after we finish this, we don't have any time until three. Is that correct? All right. So, we will do this and then we will go offline. And thank you very much for coming. I had sent you a request for checking in the state budget to figure out if there were funds to assist some communities in the Northeast Kingdom that did not get funding from FEMA for the disaster that occurred last summer or the years. Last summer. At any rate, would you please tell us what you've been able to find out?

[Douglas Farnham (Chief Recovery Officer, Agency of Administration)]: Thanks, madam vice chair. For the record, Douglas Farm, chief recovery officer, as you said, I'll start off with the funding source, right? And then circle back to the scope of the disaster, the funding the funding mechanism, etcetera. So when it became clear that the Trump administration intended to enact various levels of policy changes throughout federal government in the absence of changes in federal law. The general assembly created a federal I have to really reread the section in in the big bill from last year to get the language right, but it was essentially a federal impact reserve. Right? Funds intended to offset any changes in policy at the federal level, mostly thinking about Medicaid and section eight vouchers, things like that that we were seeing the administration talk about making changes. And, of course, FEMA, Federal Emergency Management Agency, has been in the president's crosshairs since kind of day one. I don't think it ever really came up on during the campaign, but after the president came into office, there were early on statements that FEMA should cease to exist, statements from interim managers of FEMA that the the threshold should be increased. Nothing official was taken there, but over the last year and a half well, well, sorry. Over the course of this administration, we have seen a change in behavior on approval of presidential disaster declaration. So after the disaster so this funding source was set aside, and it was intended to use receipts that came in over the official consensus estimate were put into this reserve and, had been deployed in minor ways so far, usually through the e board. But because this is happening during the legislative session, the administration is proposing to transfer the funds for this proposal from that impact reserve to AOT's Town Highway Non Federal Disaster Fund, and then to make specific and fixed awards based off of those amounts. So that's the funding source that we're proposing. That's kind of the origin story of it a little bit. And then to circle back to the disaster, as most of you are aware, but maybe for people who might watch this testimony, we had our third anniversary disaster in July 2025, right, and we're hoping to avoid a fourth, but this one was limited primarily to Caledonia County. They did have some damage in town bordering Caledonia, but because the federal disaster structure has always been based on county lines, we only crossed damage thresholds in Caledonia County to apply for federal disaster assistance. We did exceed the traditional threshold that FEMA public assistance has used to recommend disaster declarations to the president by approximately 50% using their methodology. So we haven't seen in the past one that was this far over the threshold be denied before, some that had been exceedingly close to the threshold. Like, you could argue rounding errors had been denied in the past, but this one was far enough over that historically it would have been approved. We have seen denials in other states of similar sized disasters, so it wasn't a specific action against only Vermont. It is an action by the president within their discretion under the Stafford Act against small disasters in general. So we appealed. We actually built our case as well on the codes and standards cost for this disaster, reached for the total disaster reached 2,900,000. Within Caledonia County reached approximately 2,700,000. So the difference between the initial estimates and and this 2,700,000 is when you have to come up to Vermont code and standard, it's more expensive than FEMA's repair and replace in kind estimation method, which they have to use because across the country, they have to do that quickly and they can't memorize every state's codes and standards. So the Caledonia County costs we're estimating currently through AOT working with the towns at $2,700,000 is primarily concentrated in Sutton, but with damage in Sheffield, Newark, and Burke. And our proposal is to generate awards based on that current cost at and so that should be the award cap, and then to reimburse the towns on actual cost expended up to the 50% intended to cover 50% of the project costs. I think I should say this is just looking at this disaster, really intended to be not proposing this as a long term mechanism, partially because the Stafford Act hasn't changed. Every prior president took the opportunity to sign disaster declarations. So I I do think, unless the Stafford Act changes, the administration isn't recommending a long term structural change in Vermont.

[Martha Feltus (Vice Chair)]: I would just pause

[Michael Mrowicki (Member)]: there, madam vice chair.

[Martha Feltus (Vice Chair)]: Just for comparison purposes, I would pause to indicate that if they these communities had received federal funding, they would have gotten 75% of the damages in the ward, but they were not able to that. That's just a clarification, yeah. Thank

[John Kascenska (Member)]: you, I'm sure this is going to be

[Michael Mrowicki (Member)]: helpful for the public towns.

[John Kascenska (Member)]: So the balance between what state is able to offer and the towns, the towns will have

[David Yacovone (Member)]: to come up with that.

[Douglas Farnham (Chief Recovery Officer, Agency of Administration)]: Yes. And I would add a layer on top of, for complexity and comparison, madam vice chair, this the towns would have received 75% from the feds, and then they would have received an additional 30 to 70% from the state of that nonfederal chair. So if a town has taken all actions that the state recommends, they only end up being responsible for seven and a half percent of the total cost. If they haven't taken any of those actions, they cover 17 and a half.

[Martha Feltus (Vice Chair)]: Which I believe is the case in most of these communities because you're referring to a recovery plan and an emergency management plan and something else that's required in order to get those smaller amounts.

[Douglas Farnham (Chief Recovery Officer, Agency of Administration)]: Hazard mitigation plans, AOTs, road standards, I think some of these towns are at 50%. So they've done some of the things, but not necessarily all of

[Martha Feltus (Vice Chair)]: the Just mitigation plan. It

[Douglas Farnham (Chief Recovery Officer, Agency of Administration)]: is challenging for smaller communities to get that 70%. With limited professional staff, it's very challenging for them to hit the same mark as the larger communities.

[Michael Mrowicki (Member)]: So no federal money here, so we're going to use state money and then the 50%.

[Douglas Farnham (Chief Recovery Officer, Agency of Administration)]: And I think this is, from a policy perspective, this is consistent with how we've approached how the administration has recommended through the e board, plugging some of the gaps that the federal policy changes have created. We've never recommended to step fully into the shoes of the federal government, but we've tried to dull some of the impact, and, usually, it's come somewhere somewhere approximately to to 50 of what the the feds were providing. But I think it varies a little bit.

[David Yacovone (Member)]: This is money that's going to the municipalities for municipal damage. This isn't for individuals who might be claiming damage. Is that right?

[Douglas Farnham (Chief Recovery Officer, Agency of Administration)]: Correct, representative. This would be specifically so for the town of Sutton, they have some culverts that were damaged, and most of that dollar amount comes into one specific bridge that was damaged. So in order to utilize that award, they would need to repair that bridge and repair those culverts that were identified as damaged. If they didn't repair the infrastructure that was damaged, then they wouldn't receive the funds. The state funds? The state funds. Yes. So are they do they have to

[David Yacovone (Member)]: be built? Again, you you mentioned something about how FEMA standards generally tend to be older, lesser than what over the over the course of the last over many years since I've been what we've experienced. Fact that FEMA would pay for a replacement of a culvert that may have been too small or it may have been proper fifty years ago that like once it broke we wanted to go in and replace it with something more substantial. There have been battles over whether FEMA should pay for that or how much it should pay for that. What are the standards that are being used locally here? Are they in order to acquire this reimbursement, So they have to they have to bond for the money. They have to come up with it or or pay for it out of out of their funds. What are the standards of rebuilding for for them to qualify?

[Douglas Farnham (Chief Recovery Officer, Agency of Administration)]: So FEMA, when they're conducting their initial estimates, does this repair and replace in kind number just for the purposes of making the disaster declaration recommendation to the president. If we get the disaster declaration, FEMA will then pay for the Vermont codes and standards in the town in AOT's Town and Bridge standards and the and ANR's regulations around rivers. So all of the standards that are in place for the towns are the same. That's what's confusing about it. Right? Well, FEMA will come in and say, oh, there's $1,800,000 of damage, but there's really $2,900,000 of damage because we don't allow people some states do allow people to just go back and and put in whatever was there. They have much I wouldn't say that Vermont has the strongest standards, but we are up near the top as far as road and bridge standards go. But we have seen a lot of return on investment of that. After Irene, we strengthened a lot of our standards, and a lot of those infrastructure improvements we made have paid for themselves and will continue to pay for themselves. So that puts the towns so whether it's a federal project or a state project, the towns have to hit the same mark as far as replacement of infrastructure, so they're responsible for that higher codes and standards than in many other states. So it is expensive to repair storm damage in Vermont. I think it's worth it, but funding it at the municipal level, particularly when a municipality is overwhelmed by a smaller disaster that doesn't make federal thresholds, it is challenged.

[Michael Mrowicki (Member)]: Bottom line comes down. Fix it once the right way, you have to fix it five other times. Right.

[Martha Feltus (Vice Chair)]: Donald?

[John Kascenska (Member)]: Do you wanna say something?

[Martha Feltus (Vice Chair)]: No. I just wanted to clarify that this total of 2.6 is an estimate to repair and replace in kind, not meeting the new standards, or is it?

[Douglas Farnham (Chief Recovery Officer, Agency of Administration)]: No, madam vice chair. This is codes and standards.

[Martha Feltus (Vice Chair)]: To meet the current codes, it's there.

[Douglas Farnham (Chief Recovery Officer, Agency of Administration)]: Without having shovels in the ground, this is the best estimate we can produce at this point in time.

[Martha Feltus (Vice Chair)]: Not just replace as new ones, to replace with new standards. Okay, gotcha. So I can

[John Kascenska (Member)]: summarize a little bit here, because you and I have talked about what Burke has been doing here, you know, for the first couple of rounds of employment that we had here, especially second round of things, anything that they did replace, like Culver's for example, and had to harden different parts of it, some different codes here today, standards for that, those things held up, maybe except for like one or two instances here, perhaps, here. So our towns are going through that process of things, of course they're going through that process now, having to kind of upgrade that particular infrastructure here by 2030 here. A lot of towns are doing that, even the small ones, but it takes time and And we also know here too, once having talked to administrator there, and taking a look at their budget here for the next year, we're just trying to pick up some of what we can here through the budget here for the year. So, CAPS folks are happy to pay for that, outside of any grants they may be able to capture, in addition to this, help.

[Michael Mrowicki (Member)]: State standards have to be followed by the towns anytime state money is involved. I don't know if it's just their money that they have to maintain with state standards. So

[Douglas Farnham (Chief Recovery Officer, Agency of Administration)]: I believe this wouldn't Yes, I think that would be a condition. I was trying to recall, and it is possible that a town can choose not to adopt AOT's municipal road standards. They're responsible for their own roads structures. Right? With a bridge, they can't replace a bridge without it. Mhmm. So I don't think it would actually change anything on the bridge, but these awards would have the AOT's municipal standards attached to them as far as the road repair. I was trying to remember if it would make any difference in any of these towns. I think they're all signed on. So

[David Yacovone (Member)]: So for you, Madam Chair, or for any of us, is this the place is this the rough financial equivalent of what representative Los Azac's request have been? Is that what his request were for any K?

[Martha Feltus (Vice Chair)]: He said he specifically said any K but he said you know yes we've we've helped other communities and why not help this community.

[David Yacovone (Member)]: Yeah yeah I just want to make sure I mean this is important. This is important period. This is important to our work this week because that request now is off our list of not sure we can fund those.

[Martha Feltus (Vice Chair)]: Right, right. It was on the great, great, big, long list, and it still appeared, but pretty darn far down.

[David Yacovone (Member)]: Yeah, so this is taking care of that. This would take care of that. So that's what's important.

[Martha Feltus (Vice Chair)]: Yes. I apologize because I was reading through the memo when you first started talking. Did you explain what this fund is in presenting this to us? I just want to understand what it is and its uses and how much is in that fund, etcetera.

[Douglas Farnham (Chief Recovery Officer, Agency of Administration)]: So I don't have the exact dollar amount off hand, but I do remember it was, I believe, well over $50,000,000 that was dedicated to act as a reserve against the impacts of federal policy changes.

[Trevor Squirrell (Clerk)]: Oh, that's fun.

[Martha Feltus (Vice Chair)]: Yes. Oh, okay. It's it I'm I'm sorry.

[Douglas Farnham (Chief Recovery Officer, Agency of Administration)]: So yes. There's a very similar appropriation Okay. That's much smaller that we're not proposing in this case. AOA has kind of two of these things. One is the very broad federal impact reserve, for lack of a more precise term, that is the excess general funds that came in above forecast. The smaller appropriation was made several years ago. 15,000,000 was set aside as a FEMA denial reserve and then amended to incorporate FEMA denials, but was intended to be for state level denials where the state had spent money itself and and the and FEMA specifically denied it. So this AOA reserve we're proposing using here is much broader. It just, I think, is appropriate for for this particular situation.

[Martha Feltus (Vice Chair)]: Okay. Was that a policy decision on that 15,000,000 to use it for only denial of statewide claims? Or was that statute or is that just a practice as a practice?

[Douglas Farnham (Chief Recovery Officer, Agency of Administration)]: I would say, Madam Vice Chair, of the testimony, the request, the intent at the time was that this was for FEMA denials for the state of Vermont. The language doesn't make it that clear and that specific. But I think, being there for the testimony and the request and everything, I do think it was not in the general assembly's intent for it to function as a broad statewide FEMA denial reserve. It's not nearly large enough for that, to be honest. But the federal impact reserve at AOA was intended to be broader and was not intended to just be limited to direct state expenses.

[David Yacovone (Member)]: Are you saying that this was the fund that paid for SNAP?

[Martha Feltus (Vice Chair)]: $50,000,000 Yes. Which is what?

[David Yacovone (Member)]: So is that the AOA's decision to make anymore or is it the emergency boards after after the BAA? We changed a lot of things in that and the decision making process was, I think, shifted to the emergency board.

[Douglas Farnham (Chief Recovery Officer, Agency of Administration)]: I think we always had to go through the emergency board to to deploy the funds representative. But I agree that we AOE could not do that by themselves. But because this is coming up during the session, we're proposing a transfer from that reserve for this specific purpose. It could also be brought as an action to the e board. But I think it just makes sense to handle it through the full general assembly.

[Martha Feltus (Vice Chair)]: Thanks for that clarification. It's a good flag. Which I think would mean we would have to pass legislation to not withstand the authority structure of it going to the board and allow the general assembly to make a decision. I was not on this committee last year when you set up that fund, so.

[Trevor Squirrell (Clerk)]: But I thought the e board only was active when we were not at session For

[Douglas Farnham (Chief Recovery Officer, Agency of Administration)]: spending money on this house.

[David Yacovone (Member)]: Like 60% or something like that can call it, the governor can call an e board meeting, the members of the board can call an e board meeting, that's not the schedule.

[Trevor Squirrell (Clerk)]: Yeah, things that we did last year, the budget, we had a bunch of different things that could happen. But with certain level of rescission from the federal government, if we were short a certain amount of money, it went to the Joint Fiscal Committee who made a recommendation to the e board, and then the governor could call a new session, and the whole legislature would have to come in to make the decisions. There was percentages and all those. But my understanding is that the board was primarily intended to be a way to decide to either cut back on funds or to spend funds when we were not in session as a legislature and then meet with the governor. That was our

[Martha Feltus (Vice Chair)]: That's best general intent to be, yes, to have that. We're here.

[Douglas Farnham (Chief Recovery Officer, Agency of Administration)]: Can go and put it in

[Trevor Squirrell (Clerk)]: the budget or whatever.

[Michael Mrowicki (Member)]: The board doesn't supersede the legislature. Yeah, the legislature cares about this.

[Martha Feltus (Vice Chair)]: Can you explain again, I'm sorry and I'm not trying to challenge it, just need to understand the fund that you are, the other funds that you're talking about, the $15,000,000 fund, Why is that not appropriate? It's for states?

[Douglas Farnham (Chief Recovery Officer, Agency of Administration)]: There's two reasons. When it was created, it was intended to be for state expenses. That was what the discussion, that's what everything was modeled off of when we were asking for that amount of money. It didn't contemplate municipal or individual impacts anywhere, right? It was all about state expenses, and so it was created for that purpose. The language, again, just says FEMA denials, so one could argue that this is a FEMA denial. It actually never got to FEMA because the president did not sign a disaster declaration. So FEMA did not deny anything. The president chose not to declare a disaster, so it's not a FEMA denial. Wouldn't hang my hat on that, I wouldn't argue that, it generally doesn't match the original intent of the $15,000,000 We have modeled out our risks at the state level, and that $15,000,000 is likely to be exhausted at some point through the appeals, through the audit process, etcetera, and we'll likely have to cover FEMA denials at the state level in some other way. So, we're likely to run out of that money. It's just a matter of timing. We also have multiple FEMA denials that have, through disasters, that have hit FEMA applicants that are not state, that have already gone through, and we're not covering those. And those already exceed the amount that's in this reserve. So if we said this use is appropriate for that small reserve that was established for the state, it would immediately be overshadowed by the the FEMA denials on record from the last several disasters. So it doesn't have the ability it wasn't created with the intent to cover that, and it doesn't have the financial capacity to cover it. And those denials are also not those denials aren't appropriate for the federal impact reserve because for the most case, are FEMA denials that are based on the policy and the analysis of Stafford Act, and we've looked at those and said those are actually you know, we might not agree with them in all cases, but they have sound legal basis. They're not they're not policy changes by the federal government. They're interpretations of the Stafford Act, if that makes sense.

[Martha Feltus (Vice Chair)]: You're aware of, I was told at one point that there was a funding source within the Department of Transportation and we know obviously they're in consideration as well, But there was an emergency fund for town highway construction within the transportation department, I thought. Are you aware of that at all?

[Douglas Farnham (Chief Recovery Officer, Agency of Administration)]: Yes. So the town highway non federal disaster program, I think that comes along with a fund. I think it's historically been oversubscribed, and the transportation fund is an increasingly unhealthy

[Martha Feltus (Vice Chair)]: condition. I understand. Yeah.

[Douglas Farnham (Chief Recovery Officer, Agency of Administration)]: So I think this is because we've always had in Vermont to deal with storm damage, disaster damage that doesn't fit federal thresholds and some that doesn't hit state thresholds, and I think that's the intent of that long standing program is to try to help towns with partial coverage of those nonfederal disaster damages. This is a weird one because under all previous administrations, this would have been federally reimbursable.

[Martha Feltus (Vice Chair)]: Okay, any other questions about the funding description, the proposed grant arrangements and or the source of the funds that are being suggested?

[Douglas Farnham (Chief Recovery Officer, Agency of Administration)]: Would I throw add one thing, madam Meister? So on the discussion of e board versus general assembly in the big bill, we did look at that, and it was primarily our recommendation is based on timing. I'm not denying that this is a burden for these communities, but most of the expenses are in repairs that need to happen, are in prospective repairs. If if this need had been expressed in response efforts that towns couldn't pay for, and they didn't have the money to pay for response or life life saving activities that FEMA would normally step in and help with, and they weren't able to do it because of that. I think the administration most likely would have gone to the keyboard if it was more time sensitive. But I think with these being longer term construction projects and the biggest expense being a bridge repair, we felt like the timing made sense for the big bill. So I think that the e board versus the general assembly, a bigger part of it was was timing.

[Martha Feltus (Vice Chair)]: Well, obviously, these communities have made do, they have closed roads, have closed bridges, they have made certain homes inaccessible, all of that sort of thing because the road is impossible and the bridge is non existent. So, that's the reason they were obviously asking for assistance. Any other comments? Thank you very much for coming in. We appreciate your information, and we will obviously figure out what to do if we can. Thank you.