Vermont Legislature SmartTranscripts:

[Amy Sheldon (Chair)]: Welcome back to the House Environment Committee. Just to orient members and folks who may be following, secretary Moore and I at one of our meetings sort of were talking about the budget and questions the committee had and how to get more in-depth and better understanding on our part of the work that they do to build the budget. And so we came up with that's the series of of witness testimony this week, some of it directly tied to the budget and others more just timely topics of interest for the committee from the agency. And so we had to work, obviously, with a lot of people's schedules to make this work. So I'm glad we could. Welcome secretary Moore and Steve Gomez.

[Steve Gomez, Chief Financial Officer, Agency of Natural Resources]: Thank you. Good afternoon, everyone. For the record, Steve Gomez. I'm the chief financial officer for the agency of natural resources.

[Julie Moore, Secretary of Natural Resources]: I'm Julie Warren, the secretary of Natural Resources.

[Steve Gomez, Chief Financial Officer, Agency of Natural Resources]: So this afternoon, I'm gonna walk through a couple different pieces of how ANR handles a budget. So I'll cover kind of the development of the budget in terms of the complete cycles. So take a twelve month snapshot and kind of what happens behind the scenes at ANR. Also highlight again, our FY twenty seven budget that we presented earlier to all of you, and then cover some of the funding sources, the major funding sources we have and how those work as part of our budget and then also the day to day budget management. So as I'm going through, feel free to jump in and ask questions. I'd prefer that than having to go straight through this without a break. Please jump in. So I'll start here with, this is a really big picture overview of the state's entire budget. And I think this helps with some context here. So this slide was published by the Public Assets Institute from data provided by the Joint Fiscal Office. And basically on the left hand column, you'll see major revenue streams for the state. And on the right hand column, you'll see major programs for the state. And if you look on the right hand column there, third from the bottom, natural resources and climate, that's where our programmatic work is focused. And you can see essentially kind of how the major dollars flow here. So you'll see at the very top on the left hand side, the green and blue that represents a lot of the tax dollars through personal income, meals and rooms, things like that. A lot of that money flows to public education. And then you'll see at the bottom of the left hand federal dollars there, A lot of those dollars flow to health care. But again, wanted to just provide like a context of where natural resources sits within state state budget.

[Rep. Christopher "Chris" Pritchard (Member)]: Great graphic. Yeah.

[Steve Gomez, Chief Financial Officer, Agency of Natural Resources]: It's a good one. It's one of my favorites. Yeah. I use it quite often. It's beautiful. Talking about our budget development cycle, I consider it a twelve month process with fluctuations. So there are times when our budget type agency, all we're doing is budget development in one way or another. Other times it's not necessarily on the front burner, but it's always there. And when we come through and present a budget to all of you, what we're presenting there is the annual operating budget for the agency. It's also called the current service level budget, but there are also different budgets that we are managing in different ways. We have the capital bill. So the Department of Environmental Conservation, Fish and Wildlife and Forest Parks and Recreation, they all receive capital bill dollars and I'll touch on that a little bit later. There's also like the clean water budget ends up getting rolled into our annual operating budget but there's a separate process there. So we're managing kind of these different timelines and tracks these different budgets as we kind of roll everything up in terms of getting the work that we need to with these dollars. The Department of Finance and Management, that's the lead department in the executive branch for budget development. So when the agency is working on its budget, we flow information and requests through that department. The Department of Finance and Management also issues budget instructions, which I'll touch on in a couple slides, but those are really kind of the rule book developing the budget. It tells us all the information that we need to kind of get the budget ready for the governor's recommended as timelines and kind of the, what we should assume in terms of expenditures and general fund. And then again, the current service level budget, there's different ways to do budgeting. So you could do like a zero based budget, which is kind of you start fresh every year. The model that the state uses as a current service level budget. So if our budget was $10,000,000 last year, that's our starting place as we build the next year's budget. And so that's kind of, or that's how we manage it on the state side in terms of developing those budgets. And then we're dealing with regular budget pressures. So for example, healthcare costs, things that are built into the collective bargaining agreement for state employees in terms of salary, those sorts of things that we know are going to be increasing. Those are built in pressures that we have to manage before we decide to do anything else. So those are kind of the first step in the budget cycle is understanding what those pressures are, those base pressures, and that gives us kind of a starting place. And then in our budget, general fund is an incredibly important piece as it is for a lot of departments, but with our special and federal funds, they have very specific purposes usually. So those dollars can't be moved from one thing to another. So for example, if you have the game wardens, if they need extra additional funding, you can't just grab that from any place. It usually has to come from general fund or some sort of state source federal funds, and the special funds are restricted in a lot of ways.

[Rep. Christopher "Chris" Pritchard (Member)]: Representative Pritchard. Why wouldn't we use a zero based budget? Mean, it makes no sense to me that we don't do that. It qualifies everything, and it makes Sam in every program you have in place. And to assume that, oh, yeah. We're okay. So let's go forward from here. It's probably why we're in the mess that we're in. Does that make sense, or is that

[Steve Gomez, Chief Financial Officer, Agency of Natural Resources]: I understand where you're coming from. I mean, like I said, the Department of Finance and Management, they're the ones that set those instructions for us. I mean, so I think that, you know, that question for for that team is where that should be directed. And we have a zero based budget. I've been with the state since 2012. I've always incurred service level budgets in that time.

[Julie Moore, Secretary of Natural Resources]: I think the assumption that underlies that is we have so many statutory obligations that actually aren't discretionary, that doing a zero based budget would sort of give a a bit of a false sense of what we actually have. We, ANR, or even the executive branch have decision making authority.

[Rep. Christopher "Chris" Pritchard (Member)]: Wouldn't it allow you to separate statutory and have a true starting point? To me, I think that Yeah.

[Julie Moore, Secretary of Natural Resources]: Mean, the 98% of what we do is probably driven by statutory obligations. That's, I should take that back. That is somewhat of an exaggeration, but the things we do that aren't statutory obligations are largely education and outreach functions supporting our statutory obligations.

[Steve Gomez, Chief Financial Officer, Agency of Natural Resources]: Yeah. That's interesting.

[Amy Sheldon (Chair)]: But I do I am curious about the history of this and, like, why like, what would it be a lot of more work? Because it would really just be showing the whole picture, wouldn't it?

[Steve Gomez, Chief Financial Officer, Agency of Natural Resources]: Yeah. I I mean, the the the general premise with zero based budgeting is, like, you're starting at zero. Basically, how I've seen it presented previously is, Okay, these are the highest priorities, and you start building that budget until you hit whatever your cap is. If you're working in private business, you're like, we're projecting $10,000,000 in revenues, we'll build our budget to $10,000,000 and basically from there, those other things, and you have questions around those. Versus with the current service level budget, we are assuming everything that we did last year as a base function is going to be in the next year's budget. I would say it focuses on it emphasizes prioritization, the zero based budgeting piece.

[Rep. Sarah "Sarita" Austin (Clerk)]: Sarah Sarita, it's I would assume tell me if I'm wrong, that that would mean, though, that if if a certain line item costs less one year than the previous year I know they generally don't, but they but they but they certainly can. Right? And if if certain costs did go down or if or if the requirement for a certain level of service changed in a way that that would cost less money, that that would be reflected in in the budget recommendation.

[Steve Gomez, Chief Financial Officer, Agency of Natural Resources]: Yes. It would be captured in the budget recommendation. Yes.

[Rep. Christopher "Chris" Pritchard (Member)]: That's correct.

[Steve Gomez, Chief Financial Officer, Agency of Natural Resources]: Alright. So I'm gonna walk through a general timeline for how we develop budget at ANR. So this first snapshot is our initial development and submission. So usually this is on a July to October timeline. And at this point, the budget manager from a different department, we're collecting a lot of data. We're going back and we're looking at previous year actuals over three plus years and then budgeted it. And what we're trying to do there is a line on account code line item. So if you all look at like one of our budget books, it has like, you know, for like line item for like envelopes and gasoline and it gets very granular. And so what we're doing at this stage is we're going through those individual lines and deciding, okay, based on actuals and based on what we know is needed for the upcoming year, where should these individual budget numbers land? And so that helps us to kind of address if something, if there's program, you know, for example, if there's maybe savings somewhere, we would identify that. If there's a large increase, let's say that, you know, gas prices, for example, using, you know, different federal agencies, can kind of look at a multi year outliers. That allows us to start piecing that together. At the same time, in August, we received budget instructions from the Department of Finance and Management. So that's our rule book. So that allows us to start to understand when things are going to be due and kind of the percent general fund increase and those sorts of things. Also, is this interesting piece where we are connecting with our policy teams at the agency and understanding if any policy proposals may have budgetary impacts. So again, trying to make sure that we incorporate those into any budget recommendation. And then where we end up in this first phase is in October, we submit our initial draft budget to the Department of Finance and Management. So that's really, I would say, in terms of budget development, this first phase is probably 60 to 70% of the work because we're gathering everything and basically consolidating and putting it into the formats for the governor's recommend. So I'll take a pause here and just talk about the budget instructions. So these are shared on the Joint Fiscal Office's website. And basically these are usually about eight to 12 pages long and they provide us with the blueprint for budget development. So it identifies what the general fund change will be for that individual year. So for example, and for the FY '27 budget, had a 3% general fund increase was the amount identified in previous years. Sometimes that's flat. It has been negative as part of the exercise. So there's different options there. Also the annualized cost of salary changes that gets incorporated into our budget build. Each year with cost of living increases and steps, which are basically the increase in staff salaries, those get incorporated and captured as part of the budget development process. Also the budget instructions will identify holding places for benefit rate increases or internal service funds which are the internal service fund is the amount of money we pay other departments for services. So while finance and management may not know the actual figure at this point, both tell us put a 10% placeholder in for health, 8% for retirement, 8% for internal services. So we walk through that exercise. Also in the budget instructions, they identify if how we will present any restructuring or reduction options as part of our budget. So in a normal budget year, we usually get to a place where the expenditures are outpacing revenues in this initial submission that we make in October. And at that point, we have to identify any sort of reduction options that may be available for the department to meet the budget target. At the same time, there are usually instructions in there that identify if we have any new initiatives. So this is something that goes outside of that current service level budget. So it may be a new program. It may be a new fee depending on the year. It could be anything that's captured there. And then, again, with the policies, ask for any policies with budgetary impacts, and then also provides us timelines for when we need to submit these different pieces of the budget. And that gets us to essentially that first phase where we submit the budget in October, and that's kind of the I can't call it a draft, but it's that first budget submission.

[Julie Moore, Secretary of Natural Resources]: If I could add a little bit there. Just generally, we've seen, as Steve indicated, is a 3% increase in our general fund allocation. He has slides on down the line that will show general fund is about a quarter of our overall budget. One of the agency's most significant challenges is that currently about half of our budget is federal funds. A lot of that's passed through grants and contracts, but we also receive sort of base federal allocations that support staff, notably in the Department of Environmental Conservation, and those federal dollars haven't increased in almost twenty years now. And so when we have 8% increases in health benefits or retirement, upward pressures on internal service funds, and then the pressures from the collective bargaining agreement and steps in COLAs, we're trying to cover all of that increase as much as possible on our limited pool of state dollars. And that that is our budget has a diversity of funding sources, and Steve's got a couple nice graphics about that. But one of the downsides is is not all of them are sort of keeping pace with inflation.

[Amy Sheldon (Chair)]: Are any of them keeping pace with inflation?

[Julie Moore, Secretary of Natural Resources]: I guess I defer to you, Steven, what you think. That is not really.

[Steve Gomez, Chief Financial Officer, Agency of Natural Resources]: Yeah. I mean, there's some interesting it's hard to answer that question, for example, because with the wildlife restoration money that the Fish and Wildlife Department receives, if you were going to ask that question from last year to this year, the answer is probably no, but there are points in history where it has. Like as the federal, some of these federal funding sources have unique ways that they collect funding for it. So there can be like these weird multi year blips where they do keep pace with inflation. So for example, the wildlife restoration dollars, I think it was maybe eight to ten years ago, was. There was a period where it was keeping up. But at the moment, most of our federal funding sources, I would say, are not keeping up with the amount that the state budget is growing at ANR.

[Amy Sheldon (Chair)]: Representative Pritchard.

[Rep. Christopher "Chris" Pritchard (Member)]: So the restoration, I wasn't a

[Steve Gomez, Chief Financial Officer, Agency of Natural Resources]: lot of that's Pittman Roberson, Bingle Johnson too, isn't it? Yep. It's yeah. Wildlife Restoration is the is the Pittman Roberson piece. Yep. So that's all based on what the sports sports folks are spending. Exactly. Yeah. And that's right. Like, that's the unique thing about some of this is we get these weird situations where you capture a period in time where there's a lot of activity happening that's generating money that's flowing to the federal program and it flows to the state. So solely funded by sports folks. Wildlife restoration. Yeah. There's a mix and match of recreational shooting and, yes, hunting. Yep.

[Amy Sheldon (Chair)]: People purchasing guns. Wildlife restoration guns.

[Rep. Christopher "Chris" Pritchard (Member)]: Whatever you use. Lot lot of things. Yep.

[Amy Sheldon (Chair)]: I guess I'm trying to understand. So the federal dollars, though, in this case, are they tied to our, sort of base staffing levels, or are they in funds that could be, like, a restoration program can ebb and flow, you could use it for land conservation one year maybe, or not if it's not there. But if it's affecting our base level of functioning is where it becomes an issue, and I'm hearing it is. So we're to kind of get to understanding that.

[Julie Moore, Secretary of Natural Resources]: We'll talk a little bit more about that. That's part of the set of decisions we make every year. We put forward to the governor a set of proposals that are consistent with the direction we received from. So and then the governor has the option to sort of buy back some of what the changes we propose to make to our budget. Generally, I would say our budget is growing between 58% a year with all of the upward pressures and we received 3% general fund. You're talking about the wildlife restoration money, but the 3% increase in general fund? Correct. But in DEC, about half of staff costs are covered with a performance partnership grant with the EPA that brings money in under the Clean Air Act, Clean Water Act and Safe Drinking Water Act. That funding hasn't increased in almost twenty years. And so we struggle to keep up with that growth across the board. So generally, when we're sending forward our initial budget proposal, it includes reductions that we are proposing to make. And then the governor and his team review that in light of all the other budget proposals. And oftentimes, we'll buy back some of the cuts we had proposed to close our budget gap.

[Steve Gomez, Chief Financial Officer, Agency of Natural Resources]: So looking at the October to January snapshot. So at this stage, we have a meeting with the Department of Finance and Management. It's usually very similar to budget testimony. We walk through a presentation of what's included in our budget submission. They ask questions. It's kind of an exchange of information. Also during this time, departments are continually updating forecasts for both revenues and expenditures. For example, there may be like a federal agency or a federal award where they'll be like, oh, it's going to change by 5% this year. It's going be a 5% increase. It's going be a three percent decrease. So we're going back and forth and constantly adjusting numbers during this phase. Also, this is when we receive our finalized numbers for employee benefits and internal service funds. So this is things like the internal service funds are things like human resources and insurance costs. Also the agency of digital services. So those numbers get finalized in many instances when those numbers are finalized, there's an additional general fund apportionment to cover those costs. So that may change, you know, for example, this year there was the 3% general fund increase instruction. But for example, like FPR, the Forest Parks and Recreation, they had a 1.7% general fund increase. The reason it was less is because insurance costs went down. The general fund portion of those insurance costs were swept back. So they actually saw a smaller than 3% increase in general fund versus like the Department of Fish and Wildlife. It was I think seven and a half percent increase in general fund because when we went through this stage of the budget, we started finalizing these numbers. There was additional general fund added to cover those costs. So the three percent is the starting place in that initial exercise. The second phase, things may shift from that 3% depending on the individual department. And then once we get through everything, get to the governor's budget address. So at that point, the governor's recommend is finalized in January. Then we get to jump to the legislative process. So that's when we get to come through and do testimony in house and Senate appropriation committees and then our policy committees of jurisdiction. So again, similar process where we come in, present our budgets, answer questions. At some point, the House Appropriations Committee takes the governor's recommend and the work that they've been doing that gets converted into what's called the big bill, the Budget Act. And essentially that then is the conduit for all this information that gets carried through both chambers. Budget passes usually in May. And then on the agency and department side, once the budget's passed, we have to go back and reconcile what was passed versus what the governor's recommended budget was. Sometimes there's changes there, so we have to make sure that everything is trued up at that point. We go through and prepare division or program budgets. This is, you know, a finer level of detail so that individual directors and program managers can execute their budgets. We finalize those and then budget information is entered into the vision, which is the state's accounting system. And that allows us to basically get off and running on July 1 when the fiscal year starts and when fiscal year starts, one's ending and we're planning for a third. So this is always an interesting time of year where we're doing three budgets at once, usually around July 1. Any questions before I move away from the timeline piece?

[Amy Sheldon (Chair)]: It's going be a quiz.

[Steve Gomez, Chief Financial Officer, Agency of Natural Resources]: I hope not for all your sake. It took me a while to learn all this. So this is just refreshing a couple of slides that we went through in our original budget testimony. So ANR's budget was just under $300,000,000 this year. About two thirds of that was with the Department of Environmental Conservation. And then you can see there, there's also on the low end, the 1% that's ANR's pilot payment. So that's the payment we make to towns for lands that we own. Our budget is constructed. It's about half is going out the door through contracts, grants and loans. A third of it's for salaries and benefits for our full time workforce and our temporary staff. And then the rest of that about 16% goes for all of our other operating. So that includes the internal service funds and includes leases for office space, pilot payment, vehicles, gasoline, office supplies, basically anything else that you can go to that you would need day to day to operate a six eighty two person organization.

[Amy Sheldon (Chair)]: Representative Morris. Thank you,

[Rep. Kristi Morris (Member)]: madam chair. Do the pilot payments go up 3% every year or the 3% strictly for operation?

[Steve Gomez, Chief Financial Officer, Agency of Natural Resources]: So the pilot payments so it's

[Julie Moore, Secretary of Natural Resources]: There is a separate piece of statute that governs pilot payments. It's a process we update once every five years. They're not growing at 3%. They're growing at the rate of, I think, increases in property valuation through a process we have established with the joint fiscal office. So we've been applying a growth factor to our pilot payments annually. And I believe next year, we will be back in front of you all with the once every five year update to what that growth factor is that will apply for the next five years. I believe right now it's just shy of 2%, but it does grow every year.

[Amy Sheldon (Chair)]: Thank you.

[Rep. Christopher "Chris" Pritchard (Member)]: Chris Pritchard, is this part of the environmental conservation is current use in there? Current use is forest parks and recreation. That's where that program was. So is this for conserving land? Mean, I may count them to a literate

[Amy Sheldon (Chair)]: Environmental conservation? Yeah. That's that's for

[Steve Gomez, Chief Financial Officer, Agency of Natural Resources]: the Department of Environmental Conservation as a whole. So there's a wide range of programs there from air quality to drinking water capitalization projects. Yeah. So it's a large portfolio.

[Rep. Christopher "Chris" Pritchard (Member)]: Thank you. Yep.

[Steve Gomez, Chief Financial Officer, Agency of Natural Resources]: And then this next slide again, we provided this before, but this provides a snapshot over time of the different funding sources and the overall budget at ANR. Flagging at the very top, the dark green you'll see there that's federal dollars that are coming through BIL, IAJ. So we saw the peak of those dollars in FY twenty six. Those will eventually tether off and be back completely off of our budget and we'll resume back to the pre 2023 kind of budget funding sources there. So you'll just see that dark green bar at the top is a blip in history that'll eventually fade away. In our budget, about 16% general fund, 30% special funds, and then 5% IDT fund, which is interdepartmental transfers. That's just us or somebody paying another place in state government. So it could be you know, one department paying another essentially. So those dollars have some other sort of backing. Like, they're either general fund special or federal funds, but they show up as IET in all of our budget documentation. So All right. I'm going to cover our major funding sources here and provide some background. So general fund at the agency in FY '27, it's $48,700,000 is what was in the governor's recommend. Looking at this from a programmatic perspective, what these dollars cover is a lot of the program work that happens within the secretary's office. Most of our pilot payment, also it covers administrative staff across the agency. So, you know, whether that's business office staff or legal staff, those sorts of positions. Also fish culture operations at Fish and Wildlife and Game Wardens have sizable general fund portions. The forestry division at FPR and then the office of waters at DEC. So looking at it programmatically, those are some of the large investments of general fund dollars. And then looking at it from more of an accounting perspective, two thirds of our general fund goes towards staffing costs, which are again highlighted in those programs I just covered. And then our next biggest category is internal service funds. So about 14% of our general fund goes to cover insurance, human resources, agency of digital service costs, those sorts of things. So just between staffing and internal service funds costs, it's about 80% of all of our general fund are dedicated just to those two places. Also with general fund, it covers a lot of the legislative acts that are passed that work. So, flood safety act, the environmental justice work that our agency does, climate action office, land use planning, Act two fifty, Section two forty eight. A lot of those acts are covered with general fund dollars, so that's another part of that portfolio there. And then you'll see in the graph what that shows is in the dark green, it shows the general fund amount, and then the total bar graph for each department shows their total budget. So you can see the general fund portion among the different departments is relatively equal. However, you can see, for example, like environmental conservation, that department has a very small percentage of general fund compared to its overall budget versus the secretary's office. It's a much larger percentage. So just wanted to provide that context also. Special and restricted funds. So we have over 30 different special and restricted funds and these cover a wide range of things. It can be from the Fish and Wildlife Fund that collects hunting and fishing license fees to permit fees collected for different programs. So there's a very wide range here. It's about $91,000,000 of our budget is a special or restricted fund. Again, like these funds range from very small amounts of revenue in the thousands of dollars to tens of millions of dollars. So each special fund is pretty unique. Also, there is many times a very specific statutory purpose for these funds. So I provided an example of three of our special funds here. So the environmental contingency fund about $2,600,000 budgeted in FY '27. Those funds by statute can only be used for the investigation and mitigation of hazardous material releases to the environment. The National Resource Management Fund that one's even a little bit more unique that in the fact that there's the Secretary's office, Forest, Parks and Recreation and then Department of Environmental Conservation, all operating pieces of that fund. So it includes Act two fifty and Section two forty eight fee revenue. It includes motor fuel tax and includes some grants that come in. And so right now that's budgeted at $810,000 in in FY twenty seven. That one, the work is the expenditures are tied to the funding source. So like in the secretary's office, we collect the Act two fifty and Section two forty eight fee revenue. That money then gets reapplied to our Office of Policy and Planning. So that's the team that does a lot of the Act two fifty and Section two forty eight work. So we make sure that those revenues line with the expenditures of where the work's actually taking place. And then the last one is again a unique one. The Green Mountain Conservation Camp Endowment Fund. This is actually a registered five zero one C three. There's a board associated with it. They collect donations that then are used at our two conservation camp facilities in the state. So Buck Lake and then Key Ho. Thank you, man. I'm struggling. Key Ho. Those two facilities. So it can go for equipment or education programs, and there's $3,000 budgeted there. But again, wanted to just provide like a broad example of these different special funds and purposes and kind of the different dollar amounts. And, you know, for example, if we have like a budget problem in one area of the agency, this is when it starts getting complex to try to solve for, because when we go through these special funds, like none of these may even though we may have money available, like some of these just may not be eligible for where that budget gap is. So we have to try to align where the budget gap is with the actual available revenues to fill that gap. It's never a one to one for us, or very rarely a one to one for us. Next federal funds. So this is the, in terms of funding source, the largest portion of our budget, just under $145,000,000 budgeted in FY '27. We have 37 different grants that were identified in FY '27. Wanted to again, just to provide some examples here. So I think it provides some clarity around the complexity here. So the wildlife restoration and basic hunter education grant that's Pittman Robertson, 5,200,000.0 budgeted for that program. Those dollars can only be used for if you're looking on the wildlife side, wild birds or mammals. So thinking can't cover insects, can't cover other species or genre species there. It's just for those two. It can also cover hunter education in a different sub account and also recreational shooting. Sport fish restoration, 4,200,000.0 budgeted. Again, the purpose there is there's a couple of essentially the restoration and conservation and management of sport fish species and populations. And then it also allows a separate sub account for boat access to public water. So our fishing access area program, a large portion of that money comes from this federal pot and then there's also a matching state portion through the motorboat registration dollars. So that's how that program's funding stack is developed. Next, the drinking water state capitalization grant program, just over $14,000,000 budget budgeted, and this is focused on low cost long term drinking water infrastructure around capitalization grants. And then the last one before I take a pause Brownfield Response Program, almost a million and a half dollars budgeted. And this is looking at setting up standards and policy for site cleanups and then approving site cleanup plans and those sorts of decisions. So again, the dollars tied to those federal funding sources can't just be moved and used for any sort of budget gap. They have to meet the criteria and the eligibility. So again, same with the special funds, but when we take the special and federal funds, have about two thirty million dollars out of $300,000,000 that are usually tied to very specific purposes within the agency's mission.

[Amy Sheldon (Chair)]: But these federal funds are the ones that haven't increased in twenty years?

[Steve Gomez, Chief Financial Officer, Agency of Natural Resources]: I mean, most of them, if that's a

[Rep. Christopher "Chris" Pritchard (Member)]: There's a mix there.

[Steve Gomez, Chief Financial Officer, Agency of Natural Resources]: Yeah, there's a mix. For example, wildlife restoration. I think don't hold me to this, but I think when I started with the Department, that was around $3,000,000 in 2012. It went up to like $7,000,000 at its peak and now it's around $5,000,000 So that has increased in the last twenty years. Less than it was four or five years ago, but it is still more than it was ten or fifteen. And I think the programs you were talking around were the the DC

[Julie Moore, Secretary of Natural Resources]: Yeah. Was gonna say if you wanna flip back to that stacked chart.

[Rep. Christopher "Chris" Pritchard (Member)]: Yeah. Yeah.

[Steve Gomez, Chief Financial Officer, Agency of Natural Resources]: This one?

[Julie Moore, Secretary of Natural Resources]: No. The line graph.

[Rep. Christopher "Chris" Pritchard (Member)]: Yep. That's fine. Yeah.

[Julie Moore, Secretary of Natural Resources]: So reflected in that 144,000,000 is both the sort of blue bar, which is our fed our base federal funds and that dark green wedge at the top of this graph, which is the one, well, it's more than one time money, it's the five year program money we're seeing under the inflation reduction or bipartisan infrastructure law, excuse me. So it's a little bit of a mix. If you look at that blue bar in the middle, though, you can see it really doesn't change very dramatically over time. Our green bar, our special funds bar grew much more significantly. Our general fund bar has also grown as a percentage more significantly, but the federal funds, that blue wedge, has been fairly consistent with the changes really coming in the Fish and Wildlife and Forest and Parks account as opposed to the DEC account. I think the other thing that's probably important to mention is we often are using those general funds and special funds to meet match requirements for federal funds. They vary from program to program and fish and wildlife. It's it's 1 state dollar for and we're able to pull down 4 federal dollars. When the drinking water capitalization grants, I think it's 1 state dollar pulls down 3 federal dollars and there are other places with lower ratios. But so we're also always trying to make sure we have the right amount of non federal dollars that we can point to as match for those federal funding sources.

[Amy Sheldon (Chair)]: And have we left any money on the table that we didn't match?

[Steve Gomez, Chief Financial Officer, Agency of Natural Resources]: Federal dollars? Don't think so.

[Julie Moore, Secretary of Natural Resources]: To my knowledge, we work really hard to do that. We also sometimes will actually allow in the clean water space, the Lake Champlain Basin program to point to some of our clean water dollars because they also need to prove match in order to access federal funding, but then ultimately comes to us. So we're sort of providing a two step match process to help ensure the Lake Champlain Basin program also pulls down the 30 or so million dollars of federal funding they have available to them that supports our work.

[Steve Gomez, Chief Financial Officer, Agency of Natural Resources]: Yeah, and I think that's like one of, when we're in the budget development process, one of the considerations is with the federal dollars. So if we're looking at a program and it's, you know, we save 1 state dollar, but then we have to cut 3 federal dollars, so essentially you lose four program dollars, right? Like, that's a hard justification. And if you can go find somewhere that there's maybe a one to one reduction, so that is part of the discussion that we have internally. And then when we work with the Department of Finance and Management of, like, these are options, but again, like the, you know, you're kind of a fourfold impact in terms of making that same cut. So that is part of the calculus with developing the budget.

[Amy Sheldon (Chair)]: Bennington Morris? Thank you, Madam Chair.

[Rep. Kristi Morris (Member)]: I'm looking at the Brownfield Response Program, and I realize this is federal funding. And I realize cleanup site cleanup reuse decisions are standard. I realize that's a lot of money if you can't fund that every year towards folks then, I understand that. But is there, where does the Brownfield Assessment Fund come from that our RPCs are using to identify where sites are?

[Julie Moore, Secretary of Natural Resources]: That is also federal money. Generally, the RPCs are making direct applications to EPA for those funds, and and that comes on top of what EPA supports our own internal response program with. So we're sort of the technical capacity to help with that work, and then they provide additional financial assistance directly to RPCs to conduct

[Rep. Kristi Morris (Member)]: those assessments. Your graph then doesn't show those monies. That's separate. That

[Amy Sheldon (Chair)]: reminds me of the word grant in this context. Are they competitive grants that you have to apply for annually and manage as a grant, or is it more like granted to us?

[Julie Moore, Secretary of Natural Resources]: A little column A, a little column B. EPA money that goes into DEC comes under under the umbrella of something called the performance partnership agreement. So it's a recognition that EPA has delegated a bunch of responsibilities to the Agency of Natural Resources under Clean Water Act, Clean Air Act, Safe Drinking Water Act. We sit down annually and talk to them about what effectively we can afford to do with the dollars they're providing. It's a negotiation and a back and forth, but then as long as we're keeping up with the commitments we've made, they continue to provide those dollars. Perhaps the best example of a competitive grant is a lot of the US Forest Service grants and recognizing FPR is in a different part of this building, but it's within our agency. Are applying for competitive grants through the US Forest Service and more recently the Northern Borders Regional Commission that helps support various facets of their work. In those instances, we are acting just like any grant recipient of our dollars would, where we are committing to a set of deliverables and then providing proof and seeking reimbursement for work we're performing under the terms of the grant.

[Amy Sheldon (Chair)]: And Are you involved in all of that? Like, how does that even logistically work? All of that, like you're negotiating with EPA that just like

[Julie Moore, Secretary of Natural Resources]: So it's different teams within the agency, depending on what funder we are working with, what projects we are proposing to do. We do for each department and the secretary's office prepare an audited overhead rate. So how much staff time does it take to do this work, which factors into each one of those grants. So unlike if you were hiring a consultant where you might negotiate over rates in addition to the scope of work, we're really just talking about the scope of work, what we can afford to do for the funding that's being offered to us. So it's a little bit different than a private sector negotiation. But yeah, we spend a significant amount of time, I would say, in that contract and oversight. Steve and I were talking about it on the way down and our best estimate is somewhere the agency has six eighty two full time equivalents about 50 and maybe even a little bit north of that of those folks are in one of the business offices, either in the three departments or in the secretary's office. So we have upwards of 8% of our staff are really just managing, I would say grants in, grants out, accounts payable, sort of the money side of what we're doing.

[Steve Gomez, Chief Financial Officer, Agency of Natural Resources]: All right. Wanted to provide a snapshot of the capital budget. This probably doesn't flow through this committee very often, but it is a significant part of ANR's portfolio. So in the capital bill, we have two sections that we usually have funding identified in. The first is section nine, which is specifically for our agency. And this provides a, this can change the capital bills on a two year cycle. So we, you know, it's a, you know, changing target depending on the types of projects. But basically we have matching dollars tied to for EPA water infrastructure grants, usually money tied and associated with dam safety state parks is the biggest user of capital dollars. So that's in that third line there park infrastructure. And then the public lands and access infrastructure line that covers basically all non state park type recreational lands that that FPR owns. And then for fish and wildlife, the major maintenance that covers fish culture operating stations, it covers fishing access areas, wildlife management areas, things like parking lots, roads, those sorts of things. And then occasionally there's a smaller amount Lake Chimplain Walleye Association gets a pass through of capital dollars for managing walleye rearing ponds at one of their facilities. So that's a general normal request for the agency. Also in section 10, there's clean water funding there. That entire section 10 appropriation is usually about $10,000,000 annually. We at ANR in the FY '26 budget, had $4,000,000 for municipal pollution control grants and then $200,000 for forestry roads and water quality improvements. The Agency of Ag also receives some of those clean water dollars and also VHCb is the other recipient in FY '26.

[Julie Moore, Secretary of Natural Resources]: The only other thing I'd point out there is just that the agency owns and stewards about a billion dollars worth of assets statewide between we own 80 dams, including the three major flood control facilities at Wrightsville, Eastbury and Waterbury, the 55 state parks, 200 fishing access areas, 600 miles of roads, and then 370,000 acres of land. And so one of our efforts underway is to develop asset management system to help us better ensure we are making the highest priority investments of the limited capital dollars we see. We own either we're either second or third in terms of the value of the property we own with VTrans and BGS being the top two. And I believe we own more land. We are the largest land owner within state government. So it is a really significant set of assets that this agency stewards on behalf of Vermonters.

[Amy Sheldon (Chair)]: It is, and we appreciate it.

[Rep. Christopher "Chris" Pritchard (Member)]: Question on this slide too. Representative Morris. It's a quick one.

[Steve Gomez, Chief Financial Officer, Agency of Natural Resources]: We've had a lot of

[Rep. Kristi Morris (Member)]: conversation in this committee about the three acres rule. You got a line item on your park infrastructure, which I think you kind of alluded to a little bit, explanation. Is this all staffing or is this part of this actual maintenance or infrastructure upgrades?

[Julie Moore, Secretary of Natural Resources]: It's projects. Projects. Yep.

[Rep. Christopher "Chris" Pritchard (Member)]: Thank you.

[Julie Moore, Secretary of Natural Resources]: Yeah. Our staff is at the park system is generally paid for out of the park special fund, which is where we deposit all of the gate revenues as well as our ski area lease payments because we have there are eight skiers.

[Steve Gomez, Chief Financial Officer, Agency of Natural Resources]: Seven or eight out of

[Rep. Christopher "Chris" Pritchard (Member)]: eight point.

[Julie Moore, Secretary of Natural Resources]: That lease state owned lands as part of their their ski operation, And we receive annual compensation from them for those leases that is also deposited into that fund. Just in terms of the three acre rule compliance, parks has There are 13 of our 55 state parks that trigger the three acre rule and so are subject to the state regulatory requirements.

[Rep. Kristi Morris (Member)]: This is our own three acre compliance. Correct.

[Steve Gomez, Chief Financial Officer, Agency of Natural Resources]: Yes. Yes. Three acre compliance at state parks.

[Rep. Christopher "Chris" Pritchard (Member)]: Yeah. So each link who has to have a little retention punk.

[Julie Moore, Secretary of Natural Resources]: I think generally what they have been pursuing is either removing impervious surface or treating road runoff through the park facilities.

[Steve Gomez, Chief Financial Officer, Agency of Natural Resources]: This I'll run through pretty quickly, but just wanted to provide some examples of how behind the scenes these dollars are managed. So in terms of tracking spending, we have what's called the chart of accounts for the entire state that we utilize. This helps us basically identify the funding source, which division department program those dollars are being spent from, if there's federal funding tied to it, and if so, like which federal grant. We have this established so that we can track all this money in terms of where it's being deployed and then able to reconcile to federal boards or other audits. Budget reports, so we're providing divisions and or programs with regular budget reports, they're able to track their spending. So that's something that the budget managers and you should individual departments are working on. So this helps reconcile what was passed by the legislature in terms of the budget, what's actually being spent and making sure that we are on a proper course in terms of spending those dollars and not overspending through the fiscal year. Also, there are a series of internal controls established. So we have annual internal assessment that we do that the state manages. So this is usually somewhere between 80 to 150 questions that we go through answer. And this is kind of our opportunity to identify if there's internal control deficiencies within our agencies or departments so that we can correct those. Also, the agency is subject to a wide variety of audits. These can come from our federal funders like the U. S. Fish and Wildlife Service or EPA. Also, the state has a contract with a third party to do audits on departments and agencies. Then there's also the state auditor that we have audits done that are completed through our agency on occasion. Variety of different auditing methodologies. And then in terms of compliance, there are a whole range of different rules and procedures that we have to follow highlighting some of the larger ones here. Bulletin 3.5, so that's for contracting and procurement. Those are all the rules in terms of, I wanna buy a piece of software for $10,000 Like how do I do it? It tells you the number of bids you have to get, like how that has to work, who has to sign off on it for approval includes. Think it's almost a 200 page document has everything you could imagine around trying to buy something. And then bulletin five, that's for sub grants. When we're passing money through a sub grant process that has a different set of rules and that's captured in bulletin five. And then there are a series of policies that the Department of Finance and Management manages. So this includes things like payment terms. So for example, the normal payment term for the state of Vermont is thirty days. So when a supplier submits an invoice to the office, they will get paid in thirty days. There are exceptions to that, sometimes for grants or maybe smaller entities that are working on a very tight cash flow. So that provides the payment terms of if you want to change that thirty day number to ten, twenty, something like that, how you go about doing that. There's a range of policies and procedures for pretty much everything you could think of in terms of around accounts payable, contracting and grants, that's where those live. So wanted to flag that because that's something that happens behind the scenes, but does kind of roll up into the piece that the secretary was mentioning around the staff that we have in the business offices to make sure these dollars are deployed. You know, part of that is making sure we're are in compliance and that those dollars are being spent being spent correctly. And then last, I wanted to just provide an intro for the two presentations that are scheduled in this committee tomorrow. So we have identified a couple of different divisions to come in that provide a contrast in terms of different division budgets at the agency. The first is the Water Investment Division. This is in D. C. Their budget's about $114,000,000 which is about 38 percent of the entire agency's budget. And you'll see in that breakdown below, 92% of that is contracts, grants and loans. So for that division, they have a large focus on moving money out the door to other entities. Also, have a complex funding stacks, federal funds and other funds tied in there. It's a glorious, little chaotic funding stack there. And then the second one to provide that contrast is on the warden services division at Fish and Wildlife. So there you'll notice that the budget is predominantly salary and benefits, 87% of that. So that kind of provides that contrast of what a budget that looks like that's heavily personal services versus money going out the door looks like. And also with the warden service division, it's mostly state dollars. It's general fund, Fish and Wildlife Fund, which is hunting and fishing license fees. I think there's like $25,000 of federal funds in their budget out of the $8,600,000 if I remember correctly, that comes from the Pittman Robertson federal funding source. But essentially it's a state funded budget. So that will help you kind of, you know, I think, reconcile with some of the slides I presented previously around how each of those dollars has like a different eligibility criteria and how that kind of shows up in individual divisions.

[Amy Sheldon (Chair)]: Representative North.

[Rep. Christopher "Chris" Pritchard (Member)]: I'm going to be really interested to find out the DC budget, given all of the flow through money that occurs there, that who that all flows out. Subcontract and then subcontract again, how far does that money flow and how much do we get to peel off for administration each time?

[Julie Moore, Secretary of Natural Resources]: Yeah, mean, Steve, you want to flip back to your pie chart, because on that slide, there's some statistics about at least the first question you asked representative North in terms of how those dollars go out, right? Obviously, numbers at the bottom there total up to more than the $114,000,000 that's in the but the water investment or yeah, water investment division is the lion's share of those. And I suspect they are disproportionately responsible for loans, but then have a large role in grants and contracts. Generally, are restrictions placed on how much overhead someone can charge back to the state, either an audited rate or in some instances, it's it's a fixed or a capped amount depending on how the program was established either in statute or rule. But that program those folks will be in a great position to talk to you about their their specific programs.

[Rep. Rob North (Member)]: In addition to its money flowing to and through ANR, are there other, maybe directly contractors or directly agreed agencies, quasi governmental agencies that receive money for conservation type things?

[Julie Moore, Secretary of Natural Resources]: So the Lake Champlain Basin program, which only works in the Lake Champlain Basin, so about half of Vermont, receives federal funding for a lot of work that is similar to work we are doing at ANR. If it's identical, they oftentimes will actually just send the money to us to administer as opposed to creating a redundant grant or contract opportunity. But they see about $30,000,000 a year, roughly 18,000,000 of that comes to Vermont and the balance goes to New York and Quebec. So that may be the largest federal funder explicitly in our space. Another really important partner, though, in conservation work is the Natural Resources Conservation Service, which is part of the US Department of Agriculture. They provide cost share for a lot of agricultural practices, as you might imagine. But in our space, a lot of private forest land stewardship work is also funded through cost share and incentives offered through NRCS. They have a state technical committee that meets at least quarterly and may meet more frequently, but allows us as well as folks like conservation districts and other partners that help encourage landowner participation in those programs to make sure that we're coordinated, that we are providing sort of a single set of messages to landowners about what those opportunities look like, and that there's ideally we're working from a shared set of priorities. But I would say those are probably the two biggest funders. There are other organizations out there. Northern Borders Regional Commission is another one that provides, may provide direct grants to communities or other organizations eligible organizations for specific projects. But those tend to be more one off as opposed to the basin program funds and the NRCS funds, which are pretty generally

[Rep. Rob North (Member)]: available year to year. Yeah, it'd be interesting to kind of get a whole picture of all of that conservation work that's being done and where all that funding has come, because clearly it's not all within your pie.

[Julie Moore, Secretary of Natural Resources]: Correct, and VHCV plays an important role in that space too, and has access to other federal funding programs that we don't, as well as the agency of agriculture. So where would one go to kind of

[Rep. Rob North (Member)]: get that big picture of that? I I know you're not responsible for it, I don't ask you to do that, but is there a place to kind of get that big picture?

[Julie Moore, Secretary of Natural Resources]: I don't know. I mean, some of it may be in the Act 59 report that is being worked on as we speak. Obviously, that was intended to be comprehensive look at conservation in Vermont. Haven't seen sort of what the working draft of the report will deliver to this body over the summer looks like yet to know if it's in there. But the first piece of that was to figure out the conserved lands inventory. And so it would seemingly make sense that we'd also be looking at those sources of state, federal and philanthropic funding that is available to support conservation work.

[Amy Sheldon (Chair)]: That's very much act with land focused. I think you're talking

[Rep. Christopher "Chris" Pritchard (Member)]: about everything. Oh, yeah. And of it. I

[Julie Moore, Secretary of Natural Resources]: don't know that that exists.

[Rep. Christopher "Chris" Pritchard (Member)]: Yeah, realize it's a dumping scope.

[Julie Moore, Secretary of Natural Resources]: Correct. And it's almost like a set of Venn diagrams, right, where I'm aware of where the work of ANR, for example, overlaps with the work of the agency of agriculture and sort of the places where shared funding sources that can hopefully address goals of both agencies. But then ag would have access to money for rangeland or grazing programs. That doesn't really intersect with ANR's interests very much. So, I don't have the same sense for those programs as I would for some of their agronomic practices and general farmland conservation practices. Thank you.

[Amy Sheldon (Chair)]: Comments, questions? Thank you.

[Steve Gomez, Chief Financial Officer, Agency of Natural Resources]: Thanks for bearing with us.

[Rep. Christopher "Chris" Pritchard (Member)]: Sorry. User friendly.

[Julie Moore, Secretary of Natural Resources]: Please don't hesitate to ask if you have questions, particularly after you have the benefit of the two presentations Steve teed up for tomorrow, which hopefully give just a kind of that next level dropdown. It didn't seem possible to do all of the agencies divisions and certainly not the programs that sit under those divisions. But if there are other areas of particular interest, please let us know. Those were the two that sort of came to front of mind for me because they are kind of the extreme ends of the warden service that's almost exclusively general funds and then the water investment division that is nearly fully pass through funds, grants and contracts and loans.

[Rep. Christopher "Chris" Pritchard (Member)]: Just one quick question. When do we expect to be passed beyond that CIL or above curve? When are we going to get back to normal?

[Julie Moore, Secretary of Natural Resources]: I think we have one more year after So the federal fiscal year and the state fiscal year don't line up, right? We start July 1, they start October 1, so there's a little bit of out of sync. I think we have one more full year. We may actually have that three month piece on the other end. So there'll be a tail. But as that graph showed, we have certainly peaked and are on the back end of that. That said, a portion of those federal funds that came to us under the Bipartisan Infrastructure Law have gone out as loans. And so they will be paid back over time. The team tomorrow can talk to you a little bit about the state revolving fund. That's not just a one. It truly does revolve, right, where we are capitalizing new loans, making those loans, we charge modest interest rates to municipalities, but those loans are paid back over time and allow us to push new loans out. So, there's both the capitalization grant each year where we're getting new federal money matched with capital fund dollars, as Steve spoke to, but there's also loan repayment money. And it's that both of those numbers taken together that allow us to see how much loan we have or how much we have available to loan in the coming year.

[Rep. Christopher "Chris" Pritchard (Member)]: Any idea how much of all that ARPA bill money actually, I mean,

[Steve Gomez, Chief Financial Officer, Agency of Natural Resources]: on that kind of program where it's

[Julie Moore, Secretary of Natural Resources]: Will get revolved? I want to say it's about half. So there were absolutely components of it where the intent was to incentivize some certain types of investments. And so the way to incentivize it is to make the money really appealing by either increasing the amount of what we call subsidy, which is how much of that loan you don't actually have to pay back or turning it into a direct direct grant. So for things like emerging contaminants, lead service line replacement, at least half of the dollars we received are going to not need to be paid back. There are other parts of that funding where it was just supplemental clean water and drinking water loans. So just doing more of what we're already doing in terms of reinvesting in our municipal drinking water and wastewater systems. They received maybe a more favorable set of terms. But in general, those need to be paid back. But the staff tomorrow will be able to talk to talk about that in a bit more detail.

[Amy Sheldon (Chair)]: Thank you again. It's really

[Rep. Christopher "Chris" Pritchard (Member)]: great programs, by the way.

[Julie Moore, Secretary of Natural Resources]: We have way, way, way

[Rep. Christopher "Chris" Pritchard (Member)]: more demand than we had dollars in programs

[Julie Moore, Secretary of Natural Resources]: Because it is such an affordable And unlike, there's a lot of places where people don't want a long term loan, right? Like it just They're accruing interest. The loans through the state revolving fund tend to be low cost, and municipalities ideally are never going out of business. And so our ability to offer longer term, like thirty year loans, also helps with some of the affordability challenges in keeping up those systems.

[Amy Sheldon (Chair)]: Absolutely. That ongoing bump is pretty intriguing, so maybe we'll learn about that.

[Julie Moore, Secretary of Natural Resources]: You will. I mean, most of that bump is being managed through the water investment division. Okay, great.

[Amy Sheldon (Chair)]: So Some people still want

[Rep. Christopher "Chris" Pritchard (Member)]: to bring up brown pits. We have the right heart. We

[Amy Sheldon (Chair)]: are meeting at 08:30 tomorrow morning to look at H 727 just

[Rep. Christopher "Chris" Pritchard (Member)]: Thank you. Schedule and take

[Amy Sheldon (Chair)]: A half hour early so that we can walk through the changes that they made at our recommendation and to struggle on. Would ask members to think about we're going to hear from Jared Carpenter, who we didn't get to hear from today on the chloride bill. A lot of testimony on this last year. The bill hasn't changed significantly, but I'd like you to think about questions you have and if there's anyone you need to hear from on it. So with that, we're back on tomorrow morning, and we'll see you then.