Vermont Legislature SmartTranscripts:

[Speaker 0]: Good morning. Today is February 2005. We are here in the Ways and Means Committee Room. We have another very day before us with many more witnesses than we had yesterday. We're starting the morning, getting an update on the child care contribution tax. This is really just to get our heads around how much money's coming in, how much money's going out. That makes sense? Cool. Fairly new tax. And then we are getting our having our hearing on the Department of Tax's budget request for our budget letter that will go to the Appropriations Committee. Appropriations has requested a new format for all budget presentations this year, and looking forward to the new shiny version from tax. And then we'll take a break, and we're going to need to take a timely break since we're hosting a joint hearing down in Room 11. And first, we'll need time to set that up. And then after lunch, we have a very comprehensive stack of witnesses to talk to us about the federal link up language. And that's that. Anyone want to say anything? Read anything? Cool. I have Andrew first. Does that work for you?

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: Sounds good.

[Speaker 0]: Great. Would you like to come sit in the chair? And is Maude sharing

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: the screen? Is that the same? For the CCC. And she joined because my computer had an update this morning. So if I'm unable to share on here Go ahead. She's gonna share for the budget presentation. Great. And we'll go from there. How do you all plug in here?

[Speaker 0]: You join a Zoom call. Sourcia will probably send you with your invitation to join us.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: Okay. I'll have to do that when it comes time for the budget.

[Speaker 0]: Will indeed. Okay.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: So the CCC, child care contribution, last year was the first full fiscal year of the child care contribution. I just have a bunch of figures and things. I was uncertain what you all wanted to know about. I chatted with Charlie yesterday morning, met with him and representative Nigro

[Unidentified committee member]: Oh, Andrew Stein, of House of

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: Chief Operating Officer of Taxes. Good to be here with you all. Looking for a pen in case I need it. Thank you for having me. So child care contribution, I mean, Charlie told me there were two main things you all wanted to know about. One was how much money are we getting? And two, what's the compliance looking like? And I'm happy to chat about some other things. Emily Byrne and I have been meeting with appropriations committees to talk about the timing and some end of year processes, which I'm happy to highlight for you all as well, and why we implemented it the way we did, and a little teaser of something that might help with those end of year processes in the next couple of years. So I'll start with the money.

[Speaker 0]: And you have a piece of paper with your numbers on it. What I anticipated is you're gonna say numbers out loud.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: I am.

[Speaker 0]: And then everyone's gonna scribble them down furiously. Yes. And sometimes maybe we're gonna transpose numbers when they scribble them down furiously.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: We can send you all an email.

[Speaker 0]: Thank so much. Appreciate that.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: Yes. Happy to.

[Speaker 0]: Sounds good. Everyone are scribbling.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: No. It's fine. I I mean, to be very straightforward, I was in back to backs all yesterday, and it was around 05:00 that I started the other things.

[Speaker 0]: Glad you're here.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: Yeah. So high level, you're looking at about eighty to eighty two million dollars from this revenue source. So there's a number of different ways that we we can look at this from last year and this year. If we just pull the data, I'll I'll give you three looks just so you you understand how we can look at this. One is we look at returns that were for last fiscal year. Now, some of those returns didn't come in until this fiscal year. So in terms of the cash coming in, that's not necessarily the ideal way to look at this. But we got about $80,400,000 from those fiscal year twenty five returns, withholding tax and personal income tax. If we look at this fiscal year, so far, if we look at cash receipts, so that's cash in the door, which I think that's how you really want to look at this, you're looking at $61,400,000 so far, and that's three quarters. So if that's three quarters, you have another quarter. At about that average, you're looking at about 80,000,000 to $82,000,000 If we look at calendar year '25, which we got four quarters worth of cash receipts in, it was and this is actually pretty incredible. Gotta give JFO a shout out. I don't know if it was Patrick or Ted, but between oneone and twelvethirty onetwenty five, we collected $81,800,000 in child care contribution revenues. And the JFO estimate for this was $81,900,000 which is pretty incredible. There was a big discrepancy between what The Economist forecasted

[Speaker 0]: Particularly, yeah.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: And there I think there was just some confusion around the tax base. It's it's you know, I'll defer to them. But ultimately, this is this is a tax on employers, not on individuals. So it's really not the same as the withholding tax base. There's also some other differences. And they were aware that it wasn't the same, but I don't think they understood some of those discrepancies as well. But I'll defer to them on that. But anyways, so I think you're looking at 80,000,000 to $82,000,000 In terms of revenue, in terms of reliability, I don't think you're going to see a lot more initially when the, you know, the first quarter of this revenue source, brand new revenue source, we we had we had some compliance issues due to just, like, a lack of understanding about how this worked. And there was also an issue with one of the really, really, really big payroll companies where we flagged the calculation issue. So if we look at what we collected between October and December year, it was closer to 18,000,000. But then the following quarter, we caught up and it was above. It was like around 21,000,000. And then around Q4, it returned down to like 20,400,000.0. And this year, what we're seeing in fiscal year twenty six, we saw 20,100,000.0 and then just about 20,000,000 for q two. So you're looking at about $20,000,000 a quarter, give or take, you know, 5 to $750,000. So in terms of compliance gains, I think most of those compliance gains were early on. We do have a ton There were a lot

[Speaker 0]: of rumors about noncompliance early on. Yes.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: There were yeah. You know, there were we probably identified 50 to a 100 medium to larger withholding taxpayers that needed to adjust some things early on very clearly. But outside of that, the list was not huge and the gains are not huge. We're talking pretty small gains. So we do have a targeted audit program for this, and it is helping to improve compliance and bring in more revenues in this space. But the tax gap at this point is well less than a billion dollars. So you're not you're not looking at we're not leaving a bunch of money on the table here. We're probably maybe there's several $100,000 that that we can get annually in addition to this. We're continuing to do education outreach, big education and outreach campaign at the outset of this. The reason we decided to stand this up, and we weren't certain that we'd be able to, but the way that it ultimately passed was simple enough. There were a bunch of different versions of the childcare contribution in terms of a payroll tax structure, which from my seat, it ultimately is. But we'll call it the childcare contribution.

[Speaker 0]: You're welcome to tell the truth.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: Okay, okay. So there were a lot of different ways that this could have been passed in policy that would have made it complicated. And ultimately, the legislature went with a very simple approach, which was great for several reasons. One was by not standing it up as its own tax type, we were able to save the general fund about 1,500,000 1,500,000.0 to $2,000,000 We had that appropriation. We didn't use it. The

[Speaker 0]: original estimates for the cost of implementing this from you all were remarkably high at the time.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: Yes. And they were they were based on what other what other states had done. I will say on the administration side, it is still something that is requiring a fairly heavy lift and a lot of attention to get it right. And we also use resources, we flex resources between tax types, so withholding, childcare contribution, personal income tax, depending on the time of year, depending on what's going on, will shift resources to focus on. But you

[Speaker 0]: were able to save about $1,000,000 on implementation. Is that what you're

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: Definitely more than that. Yeah, yeah, it would have been more than that.

[Speaker 0]: But how much were you able to save?

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: So we had, I think, like a 2,000,000 I'd have to look. It was for fiscal year twenty four, but it was I think it was a $2,000,000 appropriation for that implementation, and we didn't spend any of that part of it.

[Speaker 0]: That's great.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: Yeah. So that was a bonus. And then the other element of this is just making this easier for taxpayers. And the easier you make this for taxpayers, the easier it is for them to comply, the better our revenue gains are. It's true of any public program. Benefit programs, if we want better uptake, we make it simpler for people to be eligible for it and enroll in the program. So we looked at it in a similar way. The lion's share of this tax base is withholding taxpayers. So 98.5% of revenue from FY '26 came from withholding taxpayers. So businesses who have wage earners, 1.5% came through personal income tax, that's self employed individuals. So, again, the heart of this tax base is withholding that tax base. So, by adding this as a line on the quarterly withholding form and for return, what we were able to do is make it so that businesses and also adding in this line on the personal income tax for self employed individuals is we made it so that individuals and businesses could comply with this new tax law and file with their other taxes, which makes it easier for them. And that was really a key decision point on this. What that ultimately did is it did make it a little more administratively difficult for the state. So especially in the first year, and I defer to finance and management and Emilie Byrne with the joint fiscal office on all of the ins and outs around the end of the year procedures and why this needs to be done. But when we set this up, there wasn't a great way to get the money into the childcare special fund when the payments came in. So a lot of withholding tax payments come in at a much higher frequency and on a quarterly basis. It depends on the size of the business. And all file their return on a quarterly basis. So the return gives us the data we need at the tax department to ship the money to the correct funds. So the money sits in the general fund until we have the return with the data that tells us how to direct the funds. So what that means is at the end of last fiscal year, because the final quarter of withholding tax returns came in after the fiscal year, it meant that there was about $20,000,000 more in the general fund than there should have been, and about 20,000,000 less in the childcare special fund than there should have been, which on its face didn't seem like a huge issue when we were implementing this and we flagged this for folks. But what finance and management and the joint fiscal office flagged at the end of the year is there's some required statutory transfers if that money is still in the general fund, and that would shift out of the general fund to some other areas, and it wouldn't then be available to the childcare special fund. So essentially withholding tax, the first Oh, go ahead. With withholding tax, the first returns we received were by 10/25, then 01/2025, then 04/25, but the last one were 07/25. So that's after the end of the fiscal year. So that's that's where the issue came from. And so we've worked with the joint fiscal office and finance and management on an end of year process.

[Speaker 0]: Great. Representative Russell?

[Rep. James Masland (Member)]: Yeah. Thank you. Maybe we'll see the numbers when we, at some point, get how much money are we talking about here? It on the transfers, not transfers, and whatnot. So rate zone or

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: or So so we're talking about, like, $20,000,000 on average is coming in a quarter. So ultimately, what happens is when we get those returns Yeah. By October 25, January 25, April 25, and July 25, when we get those, we have the information to transfer over the correct amount. So it can vary a little bit. It's like 19 and a half million to 21,000,000 depending on the time of year.

[Rep. James Masland (Member)]: Not decimal just.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: It's No. No. Not at all. Used to say. Yeah. No. Not not decimal just. Thank you

[Unidentified committee member]: very much.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: Exactly. So you're looking at 19 and a half to 20,000,000, twenty one million, I'd say. Money. Thank you. Thank you. Yeah. Yeah. Quarter. So annually, 80 to 82,000,000. Quite a lot. Yeah.

[Rep. Charles “Charlie” Kimbell (Ranking Member)]: Make it remarkably stable quarter to quarter. Yeah. Nice. Excellent.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: Yeah. Withholding is pretty stable too. Yeah.

[Unidentified committee member or staff]: Anything else you want to know?

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: No. Anything you all want to know about?

[Speaker 0]: Oh, I'm excited about how much you were able to save in implementation.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: Yeah. Thank you. You were too. Are you hearing from DCF as well?

[Speaker 0]: Yeah. They're right.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: Behind it. Do do you want to shift to them?

[Unidentified committee member]: Do you?

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: It would be helpful if I get out of the chair.

[Speaker 0]: Whatever you want to say.

[Unidentified committee member]: Your email to us, sir, you can can expect that with the numbers.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: Yeah, yeah, yeah. So let's chat about that really quickly. What numbers would you like? Any number if

[Speaker 0]: you just said out loud.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: Okay, great. You can do that.

[Rep. James Masland (Member)]: Any outflow

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: yeah, a little bit. Yeah. Well, the outflow, I'll defer to DCF. But on the revenue side, we can Yeah, share all of yeah. Yeah, no problem.

[Unidentified committee member or staff]: Thanks.

[Speaker 0]: Hello, DCF, CDD, whole team. Thanks for joining us. The floor is yours, however you want to organize yourselves.

[Janet McLaughlin (Deputy Commissioner, DCF Child Development Division)]: Great. So hi, everybody. Good to see you again. Gianna McLaughlin, DCF Deputy Commissioner in charge of the Child Development Division. Grateful to be able to testify remotely today. Thanks for accommodating that. My foot is up because I had surgery on it on Tuesday. And I will pull the pull the slides up while I let Ed and Carolyn introduce themselves if that works.

[Carolyn Long (Director of Operations, DCF Child Development Division)]: I'm Carolyn Long. I'm the director of operations for the development division. Thanks for having us.

[Unidentified committee member or staff]: Thanks for being here.

[Ed (Deputy Director, DCF Business Office)]: And Duane El, Deputy Director in the DCF Business Office. Thanks for having us.

[Rep. Rebecca Holcombe (Member)]: Thanks for being here.

[Janet McLaughlin (Deputy Commissioner, DCF Child Development Division)]: Here we go. Okay, how are the slides looking? Can

[Unidentified committee member or staff]: you see them? Okay, great.

[Janet McLaughlin (Deputy Commissioner, DCF Child Development Division)]: Okay. So we are happy to talk to you about the child care special funding and the uses of it. As you were just hearing, in state fiscal year '25, there was movement of the money from the collection into the special fund where DCF can actually use it was there were a lot of details that we were figuring out at the time, and so DCF didn't have access to about the $60,000,000 of it during state fiscal '25. Again, this was the first year of it being collected and the first year of us standing up some of these programs. The really simple answer to how do we use the special fund is in the ways that we are supposed to, X-seventy six. One is on child care financial assistance, the second is on a quality and capacity incentive program. So those are the two uses for the child care special fund right now. And then for this fiscal year, we're projecting spending about 92,600,000.0 Part of that includes the fact that there was a carryforward built into the budget last year as well, so that's why it's a little bit ahead of what the estimate is that Andrew just offered. So I have more slides, but we can answer questions here if needed.

[Speaker 0]: Yeah, go ahead, Masland. Thank you.

[Rep. James Masland (Member)]: How does the incentive program work?

[Janet McLaughlin (Deputy Commissioner, DCF Child Development Division)]: I have slides on that.

[Speaker 0]: Okay, great. Thank you. Yep. And that's sort of a level of weeds we don't need to go very deep into.

[Janet McLaughlin (Deputy Commissioner, DCF Child Development Division)]: Okay, I'm happy to We're excited about what we put together, so I'm happy to I have one slide on it. Great.

[Rep. Carol Ode (Member)]: Okay. Yes, Representative Ode. So would you think going forward you're going to see projections of the total $80,000,000 in future? Because there was a carry forward last year or what?

[Janet McLaughlin (Deputy Commissioner, DCF Child Development Division)]: We are, yes, closer to that in the future.

[Speaker 0]: Okay, thank you.

[Unidentified committee member or staff]: Back to you. Okay.

[Janet McLaughlin (Deputy Commissioner, DCF Child Development Division)]: As we talk about using the child care special fund, I want to make sure that everybody is aware that this is not the only source of funding for child care financial assistance.

[Speaker 0]: I'm very glad you're covering that, thank you.

[Janet McLaughlin (Deputy Commissioner, DCF Child Development Division)]: Okay, so again, right now, what's in the fiscal year twenty seven Governor's recommended budget is about $172,600,000 in child care financial assistance spending, and so only $80,000,000 of that or so comes from the special fund. There's a big chunk of general funds that go to child care financial assistance. We have federal funding sources. This is the Child Care Development Fund contributes money. There's some other there's CCDF there, but then you'll see some other sources down there because the state is pretty strategic in how it leverages various grant programs and to be able to do things like to be able to draw down additional money, to be able to draw down additional money for children in foster care, that kind of thing. That's that federal money there. There is this funky EITC swap, which again is all about making sure that the state can be really strategic, and I believe that one is to allow us to buy down our work participation rate for some other DCF programs, and then there's a small amount of sort of Medicaid global commitment dollars used as well, and that's typically for children who have a special healthcare need or there may be, there's some other reason that they need that safe, secure, stable care that quality childcare can provide.

[Speaker 0]: Representative Holcombe.

[Rep. Rebecca Holcombe (Member)]: This is so helpful, thank you very much. Is Vermont still using TANF too? And is the general fund, does that include required state match to retain access to federal funds?

[Janet McLaughlin (Deputy Commissioner, DCF Child Development Division)]: I'm gonna let Ed answer that question.

[Ed (Deputy Director, DCF Business Office)]: Yes, some of the general fund is used for match for the federal sources that are listed here, and the EITC is, as Janet was talking about, used to buy down the work participation rate and it's reported on the TANF report.

[Speaker 0]: Any more questions?

[Rep. Rebecca Holcombe (Member)]: I'll just wait until the end. Okay.

[Speaker 0]: No, have one more question. Okay.

[Unidentified committee member]: Just curious with the reductions in Medicaid that are coming, Do you see future funds dwindling? You have an item there for Medicaid Global Fund,

[Rep. James Masland (Member)]: dollars 1,400,000.0.

[Unidentified committee member]: Do you foresee that continuing on into the future or will you be seeing reductions back?

[Janet McLaughlin (Deputy Commissioner, DCF Child Development Division)]: I know we've had a lot of there was a lot of conversations at the of at the AHS level with the Medicaid office around what sorts of global commitment investments, you know, were, might need to be scaled back, and this wasn't one of them that we, that was discussed in terms of,

[Unidentified committee member or staff]: yeah. So

[Janet McLaughlin (Deputy Commissioner, DCF Child Development Division)]: I can I think it would be I'm happy to follow-up with with that team? But

[Unidentified committee member or staff]: Thank you. Back to you. Okay.

[Janet McLaughlin (Deputy Commissioner, DCF Child Development Division)]: So in terms of, again, what are we using the money for then, I do want to make sure folks know that child care financial assistance is supporting many more families than it did before Act 76. The money is getting out the door into communities to be able to support affordable care for more and more families. So December 25 compared to December 22, there's a 76% increase in the number of children receiving childcare financial assistance, and over a 50% increase in the number of families that are benefiting from subsidized childcare.

[Speaker 0]: So I'm going to compare to 2018, 2019, because that feels more reasonable in the grand scheme of COVID life. But you have a sense of how much of a higher percentage of families with eligible children that was, given that I think we have fewer children in 2025 than we did in 2018?

[Janet McLaughlin (Deputy Commissioner, DCF Child Development Division)]: That's like three math operations in my head. If you could let us

[Speaker 0]: know, that would be

[Janet McLaughlin (Deputy Commissioner, DCF Child Development Division)]: Yeah, we can try to figure that out. As you know, it's I I think, right, you know, there's been around 32,000 regulated child care spaces sort of throughout that period of time, so in case that's maybe helpful as a number to have in mind as we think about what the penetration is of this.

[Rep. Rebecca Holcombe (Member)]: Are you collecting data on the impact on families who earn just too much to be subsidized by CFAT are now paying higher market rates and are also paying the payroll tax?

[Janet McLaughlin (Deputy Commissioner, DCF Child Development Division)]: We have a partnership with Child Trends, which is a national research organization that is doing parent and provider surveys. And our next round of family surveys will be and focus groups and family surveys will be this spring. So I think we'll have some additional information at that point.

[Rep. Rebecca Holcombe (Member)]: Guess the question is there's been no modeling on what the impact would be.

[Janet McLaughlin (Deputy Commissioner, DCF Child Development Division)]: Modeling on the impact of family, on how tuition rates for childcare have changed over since the implementation of Act 76. Is that what you're asking?

[Rep. Rebecca Holcombe (Member)]: I think I can figure it out. That's okay. Thank you.

[Speaker 0]: Is that what your question was? No, I mean,

[Rep. Rebecca Holcombe (Member)]: my point is we know what a household income is that would make you ineligible for subsidy. We also can guess what the total payment is on that, related to the payroll tax on that family. And we also know the market rate of childcare is increasing. So I'm just interested again at those great points on the margins. What's the impact of our policy on working families who are not eligible to benefit from single programs? So you're curious about folks

[Speaker 0]: who are paying the payroll tax but are not necessarily eligible for the CCPAF benefit.

[Rep. Rebecca Holcombe (Member)]: Who are also now paying higher market rates. Yes. Think it was just

[Janet McLaughlin (Deputy Commissioner, DCF Child Development Division)]: I mean, we do have some modeling on that. As you get to those highest income levels within child care financial assistance, those families are still paying even if you're eligible, the family shares at that point are still relatively high. They can be as high as $425 a week. If you have more than one child, that can feel like a great deal. You only have one child, it might not. But the system was, as it was implemented in Act 76, it was modeled sort of off of trying the to avoid a cliff with families that had one child, not two. And then I would say the payroll tax is very small, and it really pales in comparison to how much a family pays in child care, I'm not sure that would change the analysis, the fact that they're now paying into a payroll tax. But yeah, you're right, I mean, are families that are still paying a significant percentage of their income on childcare even after X-seventy six.

[Unidentified committee member]: Yeah, go ahead, Rosa.

[Rep. Carol Ode (Member)]: Thank you. So when I look at this slide, it's so nice because there are more children receiving CCPAF and the number of families has risen, but I wonder if you've got a slide coming up that shows the cost of care and if that's risen and where it has risen.

[Janet McLaughlin (Deputy Commissioner, DCF Child Development Division)]: Yeah, I did not include that analysis today, no.

[Speaker 0]: Because that was not at all the analysis that I asked PDB to prepare for today, because today was about just understanding how the money is coming in and how the money is going out. That was sort of the simple ask to them. So you are welcome to know that. The sort of cost of care is more closely in the human services jurisdiction, because it's something they've taken an enormous amount of testimony on over the last few years.

[Rep. Rebecca Holcombe (Member)]: Yes. And I really appreciate that. But in that vein, if we're looking at total money coming in, it would be helpful also to look at some of the federal funding streams and if we could get a breakout in addition at a later date, because obviously that wasn't part of the ask. But for things like the SSBD development grant, the federal CFAP contribution, Head Start is also being used in this sector. Would be interesting to know total money and not just this particular initiative. Because then we can also evaluate the impact.

[Speaker 0]: So a further breakdown of the previous slide?

[Rep. Rebecca Holcombe (Member)]: Yeah, we need additional categories on that slide. It would be helpful to me.

[Speaker 0]: Back to you, Janet.

[Unidentified committee member or staff]: Okay,

[Janet McLaughlin (Deputy Commissioner, DCF Child Development Division)]: so then I want to just point out too, there are two things that are happening in terms of the spending. One is that more families are benefiting from childcare financial assistance as designed. The second piece is that the state is paying more on behalf of those families. And so this slide just really shows that increase in childcare financial assistance spending by the state. So you can see this dramatic increase as the special fund has kicked in, and like I said, that is driven by both more families participating and also by paying early childhood education and after school providers at higher rates, which again was a big part of the discussion and the design, so that those programs could be sustainable and could begin to start paying fairer wages and broader compensation to their workers. So I like this slide just because I think it really shows just how dramatic the change is.

[Unidentified committee member]: Thank you.

[Janet McLaughlin (Deputy Commissioner, DCF Child Development Division)]: Okay. So that's, I think what we had to say about Chagra financial assistance spending here. And then the second, the other major bucket here was the quality and capacity incentive program. As part of the changes associated with, you know, considered during the year that Act 76 was passed and then built into Act 76, we did change how we wanted to incent, how the state wants to incent quality amongst early childhood education and after school providers in regulated childcare settings. And so instead of building quality differentials into the childcare financial assistance payments, the choice was to set those payments at a level that would support programs in offering high quality care, and then to incent folks to take specific action related to quality, through a specific quality and capacity incentive program. We have and it tasked CDD with designing that program, and so we have sort of a three part program that we're implementing. Again, this is all relatively new, so we rolled it out, started rolling it out in October '20, well, that would have been October '24, and sort of completed the, so we're, you know, into our second year of implementing all of this. So one piece of it is really is achievement bonuses, and these are payments to this includes payments for improving or renewing your STARS level, which is our quality recognition improvement system for regular child care programs, for earning a specialized child care status, and being a specialized child care program means that you've done additional training and have additional supports in place to support children who may have additional needs to be safely included in care, and that can include children who are in protective services or children who have special healthcare need. So we really do want programs to have that specialized childcare status so they can work with caseworkers, they can work with families, and can provide that extra assistance that those children need. And then another piece was around achieving individual credentials or level certificates. And again, these are financial incentives for people that have taken the steps to get that degree, get that next credential. And we want to recognize and we wanted to recognize and incent that because we know that is associated with higher quality. Second piece, go ahead.

[Speaker 0]: Have a question for you. So child care financial assistance is essentially an entitlement, and we have sort of this revenue source of the payroll tax. And right now, it seems like your numbers are working out. But you have all those other revenue sources that are also covering. So where are you adjusting when adjusting is needed? Are you reducing spending in the quality and capacity incentive program? Are you increasing your general fund, ask? Where's your wiggle?

[Janet McLaughlin (Deputy Commissioner, DCF Child Development Division)]: Yeah, we definitely try to spend down maybe I'll let Ed. Ed and Carolyn are the experts on this because they really manage the flow from one bucket to the next. But I know we try to obviously spend down our special fund is usually first in line. Carolyn, yeah, you wanna Yeah. We have a

[Carolyn Long (Director of Operations, DCF Child Development Division)]: high this is Carolyn Long, director of operations for the child development division. We have a hierarchy of spending. So we first spend our federal funds as much as possible. And then the last resort is a hard general fund. And we draw down each quarter, and that's kind of Ed's bailiwick for what we're spending. And then actually right after this meeting, we have a talk about spending and what we call filling our spending buckets, you know, when we need to.

[Unidentified committee member]: So if requests

[Speaker 0]: for child care financial assistance went up, what would you do?

[Carolyn Long (Director of Operations, DCF Child Development Division)]: We we do have some flexibility, with funds and how we fund them and trying to match and draw down. So we first looked there to see if we can kind of, like, play with the money a little bit and put some here, you know, draw some down from over here. We haven't had to ask for that, so I guess we really haven't encountered that issue just yet. With what we've had, we've been able to make it all work.

[Unidentified committee member or staff]: Can if

[Janet McLaughlin (Deputy Commissioner, DCF Child Development Division)]: I just I think in the FY '27 budget, you'll see that because the special fund estimate got was reduced from what was an, you know, what it was a year ago when based on what Andrew just talked about relative to the economist predictions, you'll see that this year in our FY '27 budget, we do have we a reduction in special fund and we have an increase in general fund in what we put into the budget.

[Speaker 0]: Okay, thank you. That is helpful. Just

[Rep. Charles “Charlie” Kimbell (Ranking Member)]: to follow-up on that, and maybe we answered that in what you just answered, but you draw down the special fund first, and so those other four categories, let's say there was a surplus, what happens to that? Account does that go into?

[Janet McLaughlin (Deputy Commissioner, DCF Child Development Division)]: I think that this is a new thing that we're just working out, and that is something that I think that finance and management and tax are trying, and then the AHS central office are working on figuring out. So we can get back to you on that piece of it, but again, last year, that's why they're working on that piece of it, because last year we realized just because it's been collected by tax doesn't mean that DCF has access to it, and so how do we want to reconcile that on our budget is one of those questions. And we'll just be getting to that for the first time this year. So I agree with you. That's an open question.

[Speaker 0]: Thank you. Thanks so much for your time today. Really appreciate it. Okay. Great. I'm sure we'll see you all soon when we go deeper into pre k.

[Janet McLaughlin (Deputy Commissioner, DCF Child Development Division)]: Sorry.

[Unidentified committee member or staff]: Take care.

[Janet McLaughlin (Deputy Commissioner, DCF Child Development Division)]: Okay. Thanks, guys. Bye bye.

[Speaker 0]: Andrew, if you would like to rejoin us.

[Rep. James Masland (Member)]: Yeah. No.

[Speaker 0]: Take your time. Oh, and while we're all waiting for a moment, does anyone need printed documents for the Agency of Education presentation, you probably won't have time to stop at a printer on your bag. That's everyone except for Mark, Bridget. Can you hear Charlie? Is that right?

[Rep. James Masland (Member)]: So, Chittenden, may answer by your questions. Yes. There you go.

[Rep. Charles “Charlie” Kimbell (Ranking Member)]: Just a stupid process question. So when tax collects the money, it doesn't necessarily mean that DCF can spend the money.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: Well, that's what Alex. I think what she's It looks like that particular image looks like something from a 1990s Mac, like an eight bit, highly pixelated version of the state seal. Pretty awesome. Our new commissioner, who's very detail oriented when it comes to these things.

[Rep. Charles “Charlie” Kimbell (Ranking Member)]: We have a few whales trails in the chamber.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: Certainly, that's what those are. So Andrew Stein, chief operating officer of taxes, back here again. We just wrapped up the child care contribution conversation. But the question I think what Janet was referencing is we get the money in via payments, but until we get those returns, we can't transfer the money over. So for example, in the fourth quarter, we should have had just about all of the money that came in on withholding, but it wasn't until July 25, after the end of the fiscal year, after the end of the reconciliation period for the fiscal year, that those returns came in with the necessary data to shift the money to the correct fund. Gotcha. So I think that's what she's referencing is like, oh, they have the money, but it's not available to us because we don't have the data to shift. The second that data comes in, our our system is automated. It's programmed. It go it moves automatically. Now there can be amended returns. There can be audits that these things change over time, but in general, that's that's what's happening. So a big I'm optimistic that a couple years from now, we won't have to do this end of fiscal year $20,000,000 rigmarole. There might still be a little bit of an estimate that the joint fiscal office and our analysts work on at the end of the year to make sure that one or two million is accurately in the rate fund. But this $20,000,000 $22,000,000 issue that we encountered at the end of the fiscal year, I'm optimistic that two years from now we can reduce that considerably. And what we're planning to do, we're at the outset of a version upgrade of our integrated tax system. And the platform we're on, it's two platforms ago. So the same platform is being used by the Department of Labor for their new system, by DMV for their new system. And version that we have is what's called version 12. So you've got 4.21, which came out in 2021, which is what DMV runs on. And then you've got 4.26, which is the platform that the Department of Labor's new system is going to run And we're updating to Store 26, which is going to be the most up to date version. When we do that, as part of some other changes that we had to make, we overhauled our system's payment structure last year, like this time last year, in anticipation of this version upgrade. One of the things that we're able to do once we implement the version upgrade, and I've asked for it to be a part of the version upgrade implementation, is we can make it so that when withholding taxpayers make payments to us, they can delineate. There will be a line for withholding and a line for the childcare contribution. So they can break that out. That'll probably roll out around this time next year, and then we're going to have to do a big outreach and education campaign. So that's why I say we're probably two fiscal years away from actually being there on this front. And at the end of the day, it's going to require voluntary compliance from taxpayers to do this as part of their payment, And the return is ultimately the guiding legal document when it comes to your tax liabilities. So it's possible that somebody might overlook something on their it's essentially like an electronic payment voucher on that electronic payment voucher. And then when they file their return, things will get trued up. And that'll happen automatically in our system. But the idea is to get the money in there sooner rather than later so that DCF has the money to administer these important programs. Is that helpful? Awesome. Great. Yeah. In terms of time, do you want me to wrap up in the next forty minutes still? I just want to make sure. That's totally doable. If there are particular elements that you all are interested for me to hit on, let me know. I'll go through some slides a little quicker that you all have seen before, and then we can spend a bit more time on some other slides. In terms of the format, it's going to look pretty similar to what you all have seen in the past, because a lot of what we were already doing was part of what the appropriations committee asked for. We just added additional slides based on those requests, so I can highlight those for you. So I pretty much always begin the budget presentation with an overview of our mission, our goals, and our core values. You all are quite familiar with this at this point, so I'm not going to spend a bunch of time on this, but we really do seek to have strong alignment at the department, making sure that we're all aligned around what's our mission, what are our goals, what are our values. It's very, very helpful.

[Speaker 0]: I'm having a wave of missing Craig Folio

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: Yeah, he crutches

[Speaker 0]: this. When he covered that slide.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: Yeah. Do you want me to go? Do you want to really excited about that.

[Unidentified committee member]: Exactly. Like millions of Yeah.

[Speaker 0]: So Craig in this moment. Great. We're doing a great job.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: He and I have a call Monday morning, actually. So I'll tell him. I'll say that along. Yeah, he's wonderful. We miss him. Our new commissioner is wonderful too. Different, but wonderful. Actually, thing I should probably just pause and say, shout out to Commissioner Schuldice for coming in. It's not easy to come in when your predecessor has been so beloved and such an extremely high performing commissioner. And Bill, I'm just gonna call him Bill because that's what I call him, instead of being a vicious commissioner shoulder. Bill has a ton of experience, thirty plus years, he's a very successful executive, and he came in, and it has been really helpful to bring an outside perspective in terms of some ideas that we have for this next year around opportunities to enhance service levels. He's got a lot of great ideas, especially coming from the retail sector about how to improve things and improve user experience. That's great

[Janet McLaughlin (Deputy Commissioner, DCF Child Development Division)]: to hear.

[Speaker 0]: And I did not mean to say any of you that great his service. I just imagined Craig and how he would have that excitement. And I also don't want to spend very much time on these slides. Now we have, so I'm

[Rep. James Masland (Member)]: going to ask you to continue on.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: Representative Masland, I saw your hand on

[Rep. James Masland (Member)]: the side.

[Speaker 0]: Yeah. So I I call him the people you know.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: Oh, okay. Alright.

[Rep. Rebecca Holcombe (Member)]: Representative Masland.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: I call him Bill too. I've known him for a

[Unidentified committee member]: long time.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: And one

[Rep. James Masland (Member)]: of the things that I've admired about him, and I've told him this, is that he consistently hires people who have different skills than he has. Some people fall in the trap of hiring people that are just like themselves, and they end up with the same strength and the same weaknesses. Bill does the opposite, which is really a tad vulnerable leadership.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: Yeah, certainly, I totally agree. Thank you. You're welcome. Yeah, so our core values, just want to emphasize, we use these for decision making purposes all the time. We were using them yesterday when we were looking at the version upgrades and key decisions. Oftentimes, there can be tension between service and integrity. If you're trying to really safeguard something that can impact your service levels. At the same time, if you're trying to improve efficiencies, that can create small risks here and there that we need to identify and mitigate. Sometimes we have opportunities to improve both service and integrity, and that's a great opportunity. So we take that when we can. We keep going. Okay, so this is high level view of our budget. We like to break it up into major categories. Salaries and benefits and IT account for 90% of our budget. That is really where our money is going. We pair talented employees with effective software and we get great results. That's our MO. That said, IT is an ever evolving process. There's always opportunities for improvement there. Our integrated tax system is a huge success. We just completed a new scanning system, huge success. I'll go through our current initiatives here, but on the IT front, you've probably heard a little bit about our new property tax system. It's not at the level of success that we'd like to see it right now. So we're working through that situation. We have a vendor who's working with us, and we'll keep at it.

[Speaker 0]: And Jill Remick actually said that ADS have been incredibly helpful in of improving some of those negotiations.

[Rep. Charles “Charlie” Kimbell (Ranking Member)]: Can you talk in particular about the VT VT yeah. Thanks.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: Yeah, you're welcome. And so then the rest of our budget, we have very little wiggle room in our budget, right? Salaries and benefits, those are what they are, so long as you maintain your workforce, which we want to maintain our workforce. IT, we don't have a lot of wiggle room there. Rent and building services, not a lot of wiggle room there. Postage and printing, internal services, that's our state audit revolving fund and finance and management payments, HR payments. I put ADS under IT, just so you all know. And that is a big expense for us. And other are a range of things from other personal services. I will write it out here somewhere of everything that I put in the other category, but furniture, things like that. So current initiatives, implement new policies, a lot of personal income tax updates this year related to tax credit and exemption updates, which you all, I'm sure, are very familiar with, everything from the child tax credit to the earned income tax credit to retirement income exemptions, veterans credit, etcetera. Maintain high service levels this tax season. I'll get into what our service levels looked like last year. And one thing I want to call out is you're not going to see, we don't have a slide. I think in the future, we're working probably on an update of our KPIs, our key performance indicators. And a number of the ones that you'll see here are still KPIs, this is later in the presentation for us. But a key one is how we're doing on phones. And we handled 115,000 calls in calendar year 2025, and the average call wait time was one minute and five seconds, and that's down a little over twenty seconds from the prior year. I'm not aware of any Department of Tax revenue in the country that has such low call wait times, So we're proud of that. Continue to modernize the property tax system and current use. So current use shifted into our integrated tax system in December. We're very excited about that. Vermont, VT Pie, we're still working on that, making gains here and there. And yeah, that's an evolving issue. I also think, and you'll talk with Jill Remick much more about this and Deputy Commissioner Samroth, but also thinking on the policy fronts about ways that we can modernize the property tax system. Something that I think we should all be aware of is that building an IT system to support a really, an administrative system that's not more consolidated, that's not more consistent, that's not more standard, is much more difficult. Building a complex system for one administrative entity is way easier to do than doing it for two fifty administrative entities that have different demands, different timelines, different preferences around what bills look like, different ways that they do x, y, and z. And that is going to be a challenge on any property tax property. Complete the new scanning system. We've done that. We're excited. It's great. Tons of efficiencies there. When I first came to the tax department, well, when I came back to the tax department about five years ago, Craig told me one of my top five priorities was figuring out what to do with a scanning system that had fallen off schedule and was essentially mothballed. And what we ended up doing was going out, redeveloping our business requirements. We went back out to RFP, and we found a vendor that's been wonderful to work with. And the team in our finance division has absolutely crushed this project. So we also created it's something I've spotlighted in the past a division called the Business Improvement and Implementation division, which was really modeled after it was modeled after the model that we used at VTACS. So when we implemented VTACS, we had a vendor side project manager. We had an IT side project manager, Tom Bonomo, who's still with the state and was the AHS IT director for a while. And then we had a business side project manager, which that's really, really important, the business side project manager. And that was something that was missing from this scanning system project the first time around. And so the initial VTACS project managers were Doug Farnam was the initial one for a year and a half, two years, which some of you probably know, Chief Recovery Officer for the state. And then the second one was a guy named Craig Bolio, who hit it out of the park and then became our deputy and then became commissioner. And the guy who followed behind Craig, this guy Aaron Cagle, is an absolute talent. We're super lucky to have him, super grateful. And when I came to the department about five years ago, one thing Craig and I were talking about is how do we replicate the success that we had on that project? And the structure that we had in place for supporting our VTAC system was very similar to the implementation and not necessarily what we needed for maintenance support and continuous improvement. So it was very clear to me that the demand, and Aaron and Craig, that the demand for services in that space of our organization far exceeded our supply. And so what we did was we created a division to essentially replicate that work. And it's really helpful. It's been really successful. I'm proud of that team. They're doing an awesome job. Really talented folks there. So that was a key to success on the new scanning system. Fee tax version upgrade, explain that to you all. Emphasis on employee growth. That's an area as part of the employee engagement survey. We received input from employees this year. This is the main area that we've identified we can improve upon. So we're creating an education and organizational development team. We're taking our comms director who has experience in this space, and we're going to have the comms team on one side, and then we're going to have a two person education and organizational development team that's going to work with directors, work with employees, we're going to work more on career advancement, but also we have a lot of ideas for educational opportunities. We're also looking to create a cross training program similar to what Massachusetts and some other states have. And we're looking to create a mentorship program with that team as well. So that's for next fiscal year. And we're using existing positions, in part due to some of the efficiencies that we've realized in recent years from other projects. When we have vacancies, we look at them and say, what's the highest and best use of these positions? And in this case, we decided we're going to be reclassifying two positions. Expanding taxpayer feedback and service opportunities. This is something that we're looking to do more of this year. We're piloting a phone survey. So after you call the department, there will be two, three flash streams that you can respond to. Yeah, you don't have to, it's opt in. It's opt in, it's opt in. So you can say, no, I don't. That's

[Janet McLaughlin (Deputy Commissioner, DCF Child Development Division)]: I understand why

[Speaker 0]: it would be useful to you. I'm sorry for my

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: No, it's fine. It's fine. That's something that we've received the past two years from employees on the employee engagement surveys. They'd like more feedback from the folks that we serve about how they're doing. So complete a new COOP space, A and R and BGS and COOP stands for continuity of operations plan. And Charlie and I were chatting about this yesterday when the floods came in and kind of wiped out 01/1933. Didn't really wipe it out, but we couldn't use 01/1933 for a period of time. We had to set up new headquarters. And in the past, we used to have what we call a coop space. That's an emergency secondary space. We used to have it up at Williston. We realized that wasn't ideal for a number of reasons, one of which is most of the time it's just vacant space that taxpayers are paying for. So what we did was we worked with ANR, we worked with BGS and identified space that ANR uses regularly, but that we could build a secure area in that's open to ANR, so they're going to use it most of the time, and construction's beginning on this now. And the general plan is if we need to, we could then pivot into that space. National Life could adjust the security requirements, so just our folks are in there. It meets state and federal safeguard requirements, security requirements for space for handling individual tax information. We have an MOU with ANR. We'll pay for the space if we're in there then, and they're going to move out in the case of an emergency. So essentially, ANR uses that space normally. We use it if we need to. So I'm pleased with that cross departmental agency collaboration on this. Secretary Moore has been great. Chief Operating Officer, Kim Greenwood, A and R, terrific.

[Speaker 0]: When your building was rehabbed post blood, What was the Is it going to be better next turn?

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: Yeah, I mean, I think the team crushed it, but what it did require was standing up a space kind of like that and getting some others to move out of that space a little.

[Speaker 0]: I mean, if the actual building, is it more flood resilient than it was before the flood?

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: So I would defer to BGS on that. I know BGS wants to

[Rep. James Masland (Member)]: You moved build some

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: of your

[Speaker 0]: stuff further upstairs, though, yeah.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: I don't know all of what has actually been moved upstairs. A lot of it is sitting in the parking lot right now. The plan is to move a lot of it to

[Rep. James Masland (Member)]: the roof.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: Again, I defer to BGS on this. I do know they want to fill in the basement. We can't use the basement at all. There are plans in place to make it like for example, the DMV building, the enhancements that were made there, they were able to reopen in about a week, whereas we were shuttered for five, six months, which frankly was not that long.

[Unidentified committee member or staff]: Thanks.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: And then advanced tax season review and continuous improvement exercise. This is something that our bid team is doing with frontline employees after the tax season to receive solicit and receive feedback about opportunities for improvement, and then turn those into recommendations for our leadership team.

[Unidentified committee member]: Doctor. Lamoille? I just want to mention that on that last one, I personally hear a lot of concerns about that. Which one? The tax season review and continuous improvement exercise.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: Yeah, but what can you tell me?

[Unidentified committee member]: I can bring you a bunch of specifics if you want.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: Sure.

[Unidentified committee member]: Simple things like not getting a phone call back or saying, yes, a mistake has been corrected. And then in the next month, the client comes back and hasn't been corrected. Things like that are Frustrating for not only the accountant, but the client, the taxpayer. If you want some more specific complaints, I can get

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: them. I

[Unidentified committee member]: think that whole area probably needs special attention. Well, this time of year is a lot of stress for everybody. But the frustration with the health department is a years long complaint that I've heard.

[Speaker 0]: Representative, what I'd encourage you to do is because experienced a lot of responsiveness when I've sent complaints, is to really, when they come into you, send them along to Andrew or Rebecca so that they're able to engage with continuous improvement instead of adding

[Unidentified committee member]: them to Andrew or Rebecca. I don't think they contact those people. I think there are other people they

[Speaker 0]: Well, for you to collect them and send them along.

[Unidentified committee member]: Oh, Okay.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: I think that's a great way. What I typically do when somebody I know reaches out to me, I often just give them the number or email address of that area in our department, I say, Hey, reach out because we have a directory that, depending on what tax type they're having an issue with, reach out. And then if you don't get good service or you don't get a resolution on this issue, let me know. Circle back then. And I don't think I've ever had anybody circle back to me So in that if there is somebody who's struggling, yeah, either reach out to me, Rebecca, our tax commissioner inbox, and just ultimately, we can't talk with you about another taxpayer issue. But if there is a problem and they reach out to you, it's good for us to know about it. Can you

[Rep. Rebecca Holcombe (Member)]: talk with the account?

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: Only if they've signed the necessary forms to represent their client. But yes, we do that all the time. We work with tax preparers all the time.

[Rep. Rebecca Holcombe (Member)]: That's what I can

[Speaker 0]: Rising you have 76 slides.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: Yeah, we're not going through 76 slides.

[Speaker 0]: Okay. Also happy be back.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: Yeah, there's things like org charts and what have you. And also, if you all can wade through this and then if you want to bring me back, check-in on anything, let me know. Okay, I'm going to breeze through some other things, but I put the meat at the front for you all. This is a summary of the ups and downs. You'll see a more detailed version of this, but really salaries and wages, we have an up. The way this is broken out is general fund special, and we have several different special funds and interdepartmental transfer, which the only thing we're doing an interdepartmental transfer for is the joint fiscal office helps pay for some of the Cambridge microsimulation software. This just gives us the authority to pay, to make payment from that transfer. So salaries and wages, that's our biggest up. That's the biggest part of our budget. Not a surprise there. Health insurance, and biggest up by total dollar value. We're talking about a 2.4% increase year over year across all of these funds. So a little under 3%. 221,000, that's health insurance. We've got retirement. Other benefits and workers' comp. I remember exactly why this, frankly, this is probably related to one or two specific personnel situations as to why this is

[Unidentified committee member]: How did

[Speaker 0]: you put it below three percent?

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: We wait on that until the next slide? And I can put a spotlight on that. So actually, can do this now. Decrease in contractual services is the big thing. And the big thing is on IT. Because we just wrapped up a few things, this is our annual operating budget. We do have one appropriation outside of this annual operating budget that's almost gone, which is a multi year appropriation from our computer modernization fund. And there's about $3,200,000 on that. I put an overview of that in the November overview to the joint fiscal committee on that fund. And we've held onto that for a number of years. About three or four years ago, we shifted for our Computer Modernization Fund, which we've had since 2007 and it's helped pay for a range of updates at the department. We shifted from a multi year appropriation, we'd receive like five to ten year appropriations of like $10,000,000 We shifted from that to bring it into the annual budget process. And that was for a number of reasons. Probably most importantly, it's just transparency, you have these discussions year after year. But another important element was Craig and I realized he and I understood how that worked a lot better than anybody else, and we realized we're not going to be at the tax department for forever, so we wanted to make sure that it was part of an annual process where other people understood.

[Rep. Rebecca Holcombe (Member)]: Where are going?

[Speaker 0]: I'm just kidding.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: I'm not going anywhere right now.

[Rep. Rebecca Holcombe (Member)]: Tell me what percent increase you budgeted for in total insurance.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: This is it, here. So what is it year over year?

[Rep. Rebecca Holcombe (Member)]: What percent are you expecting your health insurance cost increase over last

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: It may suck.

[Rep. James Masland (Member)]: You have a copy. Scribble on.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: No, no, no. I have to go into another file.

[Speaker 0]: You just want to make sure we're not looking inside his entire computer. Yeah. It's a reasonable terror when sharing your screen.

[Rep. Charles “Charlie” Kimbell (Ranking Member)]: You got it. So nice.

[Rep. Rebecca Holcombe (Member)]: See you. I'm assuming there's a standard rate for I need

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: to look at that. So we have so health insurance. So I have health insurance or have a number of rows here, so give me a second. Calculating it for you. Just give me one sec. And, you know, in a in a department of our size too, it can vary significantly just based on

[Speaker 0]: to keep on speaking, having different family arrangements?

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: Yes, exactly. Totally. So say we have five people who retire who have family plans, and we have five people come in who are single, the difference there can be $100,000 That I'm is looking at about 6%, which is not super high for this. And how this all gets how this component of it gets calculated, I'd have to circle my view on. Yeah. We have some downs, in some areas. Yeah. Okay. So let's go back to decrease in contractual services. That's pretty much all IT. So we're coming up I was I was sharing we have this for our version upgrade. We're not paying for that out of this year or next year's operating budget. We're paying for that out of the end of a multiyear appropriation that we had. And we saved it for that purpose, knowing it's going be like $2,500,000 to bring in six additional developers from Fast for that project. And so we've been saving that for years, planning for that for years. And so what this is, we're coming off a scanning implementation, VTPI implementation. And then we also have a down for part of the multistate tax commissions joint audit committee on corporate income tax. And initially when we joined that, we were given a quote as to what it would cost us when we came up. It was phased in over three years. And California joined and that greatly reduced our annual basis. So thank you, California. Essentially, the more scale you have, the more affordable it is for us. And that I think Rebecca and Will presented on that, but essentially that allows us to team up with a bunch of other states, multi state, we're a member of the Multi State Tax Commission. And the Joint Audit Committee is a group of auditors that audit really big corporations, really complex corporations on behalf of, I don't know, now it's like 30 different states. So they break up the different states into similar tax structures so that they can do audits. So Vermont it's part of a portfolio.

[Speaker 0]: It's a really helpful piece, especially given that the IRS's capacity is going down.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: Huge. Yeah, huge. And there's other things going on. The Federation of Tax Administrators, wonky, I know. Have an operation

[Speaker 0]: I tried to one of conferences and they wouldn't let me come.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: We have an operations leaders.

[Rep. James Masland (Member)]: Really? There are We can talk about another.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: I was gonna say there's legislative professionals, but there might not be legislators out there. Yeah, okay. Anyways, we do have an operations leaders group that is sharing a lot of information and talking about ways that the states can work together for as well. So, okay, so increases. Increase in accessibility costs for interpreters. So in the past couple of years, we've really ramped up our translation and interpretation offerings to assist folks whose first language is not English. And last year, we spent about a little over $22,000 on interpreters. We're anticipating spending more. We used to not budget anything.

[Speaker 0]: I think that started from some statutory changes that we made a couple of years ago.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: Yeah, well, was part of it. We also

[Speaker 0]: You can also take credit.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: I'll take a little bit of credit for this. So my partner is a language teacher and interpreter, and I was aware of a number of situations related to folks not getting the services that they need in this space, and it was something that our deputy, Rebecca Sameroff, was also really concerned about. She was aware of some situations. And when we started to look at this about three years ago, we were like, we need to start doing a better job. So that did dovetail in at a time when I think the state at large was starting to realize we need to do a better job on this front. When I came to this role about five years ago, what our department had was a list of people who could speak some other languages. And I was asked, oh, would you I speak Chinese. How

[Rep. Charles “Charlie” Kimbell (Ranking Member)]: would

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: you feel about getting on the phone and interpreting Chinese? And I'm like, that's an awful Number one, I don't have the time for this. Number two, we need somebody who's an independent interpreter who's representing these people on the phone. And we don't want to be in a situation where somebody at the tax department has misinterpreted something for a taxpayer. That's not a good situation to be in for anybody. So we do not do that anymore. Increase in education and training contracts. Really, this is an area, like I mentioned before, that we want to place a heavy emphasis on. I put in education and training contracts. I'm looking at the budget, we'll have a budget for education, training, conferences, those types of things in general. And it might be that maybe we'd spend a little more from this line item and a little less from some of the other line items. But in general, this is heavily budgeted. And this is in response to both employees and managers saying we can do a better job in terms of helping our workforce grow, evolving with the times, developing technical soft skills. Increasing service of papers, I had to put this here because I had nowhere else to put it and I wanted everything to line up. This is just for years. This line item's been a little low, and these are expenses for process servers or sheriff's departments for serving legal documents like summons, complaints, that type of thing. And then net operating expenses, that includes fee for space, ADS charges, other internal service funds, education supplies, conference and travel, general liability insurance, office equipment, those types of things. Any questions on this?

[Rep. Rebecca Holcombe (Member)]: Just a quick question. How many total net FTEs are you adding?

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: We're not adding any.

[Rep. Rebecca Holcombe (Member)]: Not adding any? No. Okay. Taking away any or just

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: 167.

[Rep. James Masland (Member)]: Okay.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: Yep. We're just shifting for education. Regularly, when vacancies come up, we're saying, do we need to fill this, or could we use this elsewhere? What makes the most sense for the department or for a division? And so we're constantly, they're called RFRs, requests for reclassifications, where regularly when we have vacancies reclassifying positions. Hope that's helpful. But yeah, no additions in terms of FTEs. So ups and downs, this is by major category. You can see that reduction in IT expenses, a little over 200,000. That's coming off of three implementations. And that one is really going to be subject to some big ups and some big lows, depending on what implementations are. If we're in a steady maintenance and support phase with all of our systems, great. But every we're in a good position as far as Vermont state government goes with regard to our tech stack. That said, we did need to implement a new system in two, three years, you'd see that one going up a bit. That's helpful. So performance. Want to put a spotlight on success with regard to employee engagement. This is a big one for us. From my perspective, everything flows from this. If you don't have a talented team that understands the relevance of the work, that feels valued, that feels seen as people, that can measure their success, we're not going to do good work for Vermonters. So want to spotlight some of this. 96.7% understand the work goals and mission of the department, which is 4% above state average. 96.7% think the work that they perform is linked to the department meeting its goals. Again, that's 4.4% above state average. 91.8% think my job allows a good balance between work and my personal life. That's about 21% above state average. 89.3% say in my department, people are treated with respect to dignity. That's 15% above state average. 83% agree it's not difficult to You

[Speaker 0]: need to read a

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: slide. You

[Speaker 0]: guys are doing a great job.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: Thank you. Want me to continue?

[Speaker 0]: You have one more slide left available time wise.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: What do you want me to touch on?

[Speaker 0]: Need to pick the eleventh slide. You can pick whatever slide you want, and

[Rep. James Masland (Member)]: then we'll have you back.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: Yeah, no, that's fine. Is there a question? Is there something that you all want to know?

[Speaker 0]: I think we want to know lots of things, so I'm going to let you pick your last.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: Charlie, was there something you asked about yesterday that I said I could hit on today?

[Rep. Charles “Charlie” Kimbell (Ranking Member)]: We talked about the cost of administering different programs. One of the things that we didn't get to talk about was, I think it was the cost of administering the local options tax, whether or not it was sufficient, the fee that is paid per return, if that actually covers your administrative costs.

[Janet McLaughlin (Deputy Commissioner, DCF Child Development Division)]: And I

[Speaker 0]: think we're probably going to have you fax and talk about that because of other things. Sure.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: Yeah. Yeah. So that was one

[Rep. Charles “Charlie” Kimbell (Ranking Member)]: of the things. I think the other thing we talked about, also the cost of administering the Veggie program, again, something we can talk about later. And then there was no, because we touched on a $2,000,000 increase in the renter credit from 9,500,000.0 to $11,500,000 that you

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: pay out. Yeah, and that's when I came to chat about the BAA, that's the same reason there. We're adjusting for inflation, so the eligibility limits. And there's a reduction in federal subsidies this year, which puts pressure on that record.

[Rep. Charles “Charlie” Kimbell (Ranking Member)]: One thing I'm mindful of, we talked about vacancy savings yesterday and the amount of openings you have. If you could touch on that, I think that would be very helpful.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: Sure. Yeah. So that's in here. And this is where we are in terms of legislative mandates. And we focused on just last year. And if you want to know about others, you can go to that link on our website. So vacancy FY '25, this is based on a twelve month average. We took a snapshot each month. We were at 12.3%. Frankly, I'm not satisfied with this. I'm not thrilled about this. This is the highest it's been in a while. When I shifted over to this role in early twenty twenty one, sometime around that summer, the vacancy rate was quite high. It was around 20%. And we formed a cross departmental recruitment team. And we were able to get this number down to 5% to 6.5% for a number of years. And the main driver last year and this year of our vacancy rate has been our compliance division. And it's for a number of reasons. One of the reasons is we lost three or four supervisors over the course of a year. And so when that happens, you don't have the people to serve as hiring managers for recruitment. We have a new audit manager who came to us from the IRS. She's formerly the head of corporate and business audit for the Northeast under the IRS. We're thrilled that she came to work with us. And she's making headway on this. This team's making headway on this. Is a tough one, though. Compliance is a difficult area to recruit for, for every department and agency around the country. We do not pay what other states pay in this area.

[Speaker 0]: And it's an area that you could make an enormous amount of money if you were in the private sector.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: Yes.

[Rep. James Masland (Member)]: Asset wise.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: Yes. And I worked at the auditor's office. I was the deputy there before this role. And we had a market factor adjustment for some of our positions. DFR is a market factor adjustment. Frankly, I'll say this very openly. Classification system is deeply, deeply broken. The fact that it doesn't account for the market and that you need to have this market factor adjustment, I think is highly problematic. That's for a whole other

[Speaker 0]: And I think there's a really interesting conversation to be had some other time, and probably not this committee, about how the departments that do have market factor adjustments and the types of employees that are eligible for those and not eligible for those, and how that plays out across class and education and gender would be a super fun conversation to have in other rooms sometimes.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: It creates a lot of influence in state government and even within departments.

[Speaker 0]: Absolutely. Yeah. Thank you. We're going to wrap, and we'll have you back. Really appreciate it. Encourage folks to do a deep dive on all those slides so we can get our questions answered next time around.

[Andrew Stein (Chief Operating Officer, VT Department of Taxes)]: You, everyone.

[Rep. James Masland (Member)]: Thank

[Speaker 0]: you. We're going to go downstairs right now.