Vermont Legislature SmartTranscripts:

[Ann Cummings (Chair)]: We are live, this is Senate Finance. And for those that have been wondering where we've been for the last two hours, this is, the first half of the session is winding down, bills are making their way out and we were on the floor a lot longer than anticipated. We've been there for less than a half an hour. It was two hours plus today, so we are behind. But we will try and make that up. We have canceled. We're actually gonna do our first walk through two seventy four, which is sales and use tax exception for fuels in a residence for domestic use. I think I know what the tax department's gonna tell us about that one, but we have canceled them. They were here at 01:30. So we are on to a continued discussion for two eighty two, and we had asked, I think the last estimate was, and I'm not even sure which configuration, but we were raising like 80,000,000 depending on where we draw lines, But wondering, the bill puts that money into a school construction fund. And just, it's been a long time since we've done any school construction in this building. My first year, we stopped doing school construction, and that was a long time ago. So my question is, that isn't a lot of money in the scope of school construction. I think we've heard 600,000,000 plus for Burlington. Know. Know. 600,000,000? I've got them this That was for 200. No. Our bond was for 165,000,000. Okay. What was the total cost?

[Scott Beck (Vermont State Treasurer’s Office)]: Well, the

[Ann Cummings (Chair)]: total cost was $2.11. Yeah. Okay. So, that goes into a fund, assume it would be in the treasurer's office and we can't commit to you know, we can't put the full faith and credit of the state behind this. You've been clear. And my understanding is we would help buy down debt service as money became available. So that 80,000,000 would go to fly down debt service in one year? Would it be spread across? Would it be first come, first served, and then the next year the school district would be on the hook again? I guess, how is that structured?

[Scott Beck (Vermont State Treasurer’s Office)]: All right, so Scott Beck with the treasurer's office. David Shearer, Deputy Treasurer, should be here soon. He was here. He was here, I know. Yeah, sorry. So our understanding was we have a basic overview of bonding, it has to be in the state, how it works. Some of it relates to potential school construction bonding, the task force and that. Can go through that

[Ann Cummings (Chair)]: or not, or Okay, yeah, I think if you go through it, we've got a lot of visitors in the room, so while we're waiting for David, that might help.

[Scott Beck (Vermont State Treasurer’s Office)]: Refresh all of our members. Do have hard copies here.

[Ann Cummings (Chair)]: Okay, do we have

[Scott Beck (Vermont State Treasurer’s Office)]: Yeah. David was also going to share a So we're to share a we gotta work on because you do you do have it It

[Ann Cummings (Chair)]: is on our website.

[Scott Beck (Vermont State Treasurer’s Office)]: Yep. Charlotte,

[Ann Cummings (Chair)]: can you share that screen for the website? Is that possible? I'm not supposed to check. You're not supposed to? Okay. Won't get you to the office once a year. Sure. Sure. Yeah. Wait. I'm good. Thank you. And for anyone that has a computer with them, it's under

[Scott Beck (Vermont State Treasurer’s Office)]: It's under my name, sorry.

[Ann Cummings (Chair)]: The legislative website. If you go to committees and hit Senate Finance, it will become ours. Okay.

[Scott Beck (Vermont State Treasurer’s Office)]: So, I'll go quickly since some of you state checks, but stop me if you have anything

[Ann Cummings (Chair)]: You're safe.

[David Shearer (Deputy State Treasurer)]: Sorry about that.

[Ann Cummings (Chair)]: We understand you have the PowerPoint.

[David Shearer (Deputy State Treasurer)]: I do have

[Ann Cummings (Chair)]: it right now. Power of the PowerPoint. Yes. Pull up a chair. Then you could introduce yourself for the record.

[David Shearer (Deputy State Treasurer)]: For the record, David Chair, deputy treasurer, and I apologize for being up too many play here.

[Ann Cummings (Chair)]: No. We apologize. We are we are now on legislative time.

[Scott Beck (Vermont State Treasurer’s Office)]: I I understand. Alright.

[David Shearer (Deputy State Treasurer)]: I'm just gonna pull up the PowerPoint and stack and proceed.

[Scott Beck (Vermont State Treasurer’s Office)]: Just one second here.

[Ann Cummings (Chair)]: While we're waiting, that's a question. What is what are we what are we trying to determine here in

[Maria Royle (Legislative Counsel)]: terms of the bill that we have in front of

[Ann Cummings (Chair)]: us and then this? Well, I think as I just said, this will do an $82,000 look at just how this bonding work, but my question was what kind of impact will this money have? Is it and are we committing to covering somebody's bonded indebtedness for ten years, or are we just saying, we'll give you whatever comes in and I don't know how will it get divided up. I mean, will it end up being a thousand dollars a school, which won't help a whole lot, or how how that system works. If you just make a blanket payment, this is the state's bonded indebtedness, won't buy it down or they don't go raise. We need another piece of legislation to actually disperse the funds? And I believe that we will go through it. Act 73 has about 20 pages governing this fund, which was skipped over every time it was discussed because we knew we had no money. But there is a law right now that governs how this money, if and when we find it, will be governed. So it is in there. Floor is yours. Okay. Thank

[Scott Beck (Vermont State Treasurer’s Office)]: you. So the amount of debt that the state issues, it all starts with the Debt Affordability Advisory Committee. That's made up of the state treasurer, secretary of administration, the executive director of the municipal bond bank, two governor appointees, a treasurer's appointee, and there are two non voting members, the state auditor and the legislative economist. They meet annually. CDAC was created in statute in 1989. They annually look at number of debt metrics. They issue a report by September 30 to the governor and state legislature about how much debt may prudently be issued each year. They look at a lot of debt metrics, specifically debt per capita, debt service as a percent of revenues, and debt outstanding as a percentage of personal income. They're also looking at other long term liabilities like pension and OPEB liabilities. That's more the focus of the rating agencies these days. Although their recommendation is advisory, the governor and legislature have always abided by that number. That's something that the rating agencies have put a lot of faith in, give us a lot of credit for having that independent committee of the legislature following that. This tells me some of the things that they consider, the amount of net tax supported debt outstanding. They look at the, they do ten year rejections. They look at these debt metrics pending results. They look at debt service requirements, other criteria that the rating agencies use, the impact of capital spending, other things that are more of obligation, which we'll talk about a little bit later, those types of things. The next slide shows, so Vermont's bond ratings were rated by three rating agencies, Moody's, S and P and Fitch were rated the second highest off by top three rating agencies. AAA is the highest you can receive. We're AA1 by Moody's, AA plus, AA plus by Fitch and S and P. And this is important because? The higher ratings result in lower interest costs when we go out to bondage, not only for the state's debt, but any agency that relies on the moral obligation of the state, the bond bank, VSAV, VHFA, UVM when they go on the bond. And when you're doing x percent over a twenty year bond, it's a lot of money. It makes a difference. Right. And, yeah, we have a debt service schedule in here that will show you how much interest it actually costs us. So whenever we go out and do a bond issue, we go through the rating agency, we meet with them, go through all that. We also meet with them annually in times that we're not bonding. We did go out with an issue in December 2025, so we met with them in November. All three agencies affirmed our second highest rating, which was important. This next slide shows where we are. You see the Vermont in green. It shows that we are the second highest rated, second highest rating by all three rating agencies. The first set of columns, those are all the AAA rated agencies. There are actually, right now, states that have at least two AAA ratings. When CDAC looks at all the debt metrics, we benchmark ourselves against the other AAA rated states. Even though we are not AAA at this point, at times we've had a AAA rating, is where we we would like to be, where we would get the lowest cost of funds.

[Ann Cummings (Chair)]: So that's why we The treasurer was really focused.

[Scott Beck (Vermont State Treasurer’s Office)]: That's true, true. Although, you know, when we do go out, because Vermont's a small state, we do not have a lot of issuers within the state. There is a lot of demand for our bonds, and we often price as if we're a triple rated state.

[Ann Cummings (Chair)]: Okay, So demand means people buy them. Correct. And the other users, there's the state of Vermont, if we build a building, and then municipalities go through the municipal bond bank, right, And schools go through the municipal bond bank, and they are all tied to the state's rating as a whole?

[Scott Beck (Vermont State Treasurer’s Office)]: Yes, correct. The majority of the debt that the bond bank has has the moral obligation of the state. Also has, there's a state intercept in place that we put into this several years ago. Whereas if there were a municipality or school district that did not make their payments, all of their payments, the Trader's Office could actually intercept any state payments directed to that municipality and it should send it to the bond bank to cover that shortfall.

[Ann Cummings (Chair)]: And I'm doing some of this because we have an audience. Please. Full faith and credit of the state means the state is obligated. Basically, we have the ability to raise taxes, to raise revenue, and we are guaranteeing that we will get the revenue to pay the bond. Moral obligation means we think it's a good deal, but we aren't legally obligated. We're kind of morally obligated. We wouldn't get a good Bot rating if we didn't. But it it's a degree of legal responsibility, really, to pay those Bots. Right.

[Scott Beck (Vermont State Treasurer’s Office)]: Correct. If one of those agencies that hasn't fallen back by the law of the state, they would come to the legislature and ask to cover that debt service payment. You're correct, it's a moral obligation. It would not be a good idea to not get there. We wouldn't be in the bond market very long. This slide shows the other AAA rated states. Again, any state that has at least two AAA ratings, benchmark against. These are the 17 states we compare to. So this slide shows our debt per capita. One of the metrics that we look at in comparison to our peer group of AAA rated states, and you can see where, what, the sixth highest debt per capita among those states. Partly, you know, we're a small state, the population is small. Is, out of all the debt metrics that we look at, this is probably the least important that the rating agencies look at. And again, because we're small, we don't always look at, abide by our guidelines. I'll show you our guidelines in a moment. The next slide shows where we get as a percentage of personal income, particularly how much the affordability for each person, for taxpayers in the state, how much debt it costs to have. And you can see we're not the highest or a little bit below the middle the Again, this is just the AAA rated states. The next slide will show where we are among all 50 states. And you can see this is the ranking higher is better. Right now we're 25, so we're right in the middle, debt per capita and debt as a percent of personal income among the 50 states. But you see back in 2011, 'twelve, were ranked higher. Other states have had issued less debt in the last several years. And so our ranking's fallen a little bit, but we're still kind of right in

[Ann Cummings (Chair)]: the of the different things. And we were doing some pay go. I remember that term being thrown around. We were trying to avoid doing bonding for a while and using cash because with the COVID money, we had some cash. I remember doing think we built the Springfield Prison once. There was one other time we had a lot of cash, and we built things rather than buying, than going into debt if we had the cash. But so it can if we start to fall, we try and take corrective measures. Should have.

[Unidentified Committee Member]: Just a clarification, is this, I'm looking at this right here, Stick it down. The chat, but yeah. Is that just state borrowing or would that be inclusive of VSAC or municipalities sort of?

[Scott Beck (Vermont State Treasurer’s Office)]: This is just the state. Just state. Okay. Yeah.

[Maria Royle (Legislative Counsel)]: All

[Scott Beck (Vermont State Treasurer’s Office)]: right. Thank you. Yeah. There are a few things that go into it. We'll get to that. Okay. Yeah, basically just the debt of the state. It doesn't include more law. Okay. Okay, so the next slide shows the three basic debt metrics that CDAC looks at. The first column, debt per capita, see the top half of the charts, the last ten years history, and the bottom shows ten year projections going out. See that assumes that we issue the same amount of debt each year for the next ten years. And we have state guidelines. You can see debt per capita set a state guideline of the five year average of the other AAA rated states, and we try to keep within that. It's shaded because we are out of compliance with the state guideline and debt per capita. And as I mentioned, this is probably the least important metric that we look at. The other two, debt as a percent of personal income and debt as a percentage of state revenues. They set the guidelines, those are kind of volatile when you look at the other states and kind of bounce around. We set CDX sets a guideline at 1.8% personal income and 4% for debt as a percent of revenues. And you can see we've been in compliance with that guideline for the last ten years and ten year projections show that we're still in compliance with that. So, as we've talked about, so when Vermont issues debt, anything in the capital bill that we bond for, we issue general obligation bonds. And again, that's the full faith and credit of the state, and it's payable from any cash or revenues that the state has. We issue twenty year bonds that's in statute, and they are twenty year maturities in equal or diminishing maturities for twenty years. So if we issued a $100,000,000 bond, we would have 5,000,000 maturing each year for twenty three years. We have issued special obligation bonds in the past. We had the transportation infrastructure bonds. We issued those in 2010, 'twelve, and 'thirteen. Those were three small issues totaling $36,000,000 and they went basically to the transportation fund. Statute's a little bit different. They allow for thirty year bonds than that, although we issued only twenty year bonds for those. And those were, they're called special obligation bonds because there was a gas tax assessment. 2% tacked onto a gallon of gas or 3¢ per diesel, only the revenues from those collections were pledged if only

[Ann Cummings (Chair)]: That I know didn't go through this committee. Senator Massa said they needed it.

[Scott Beck (Vermont State Treasurer’s Office)]: Yes. Anyways, I wanted to mention those, as we're talking about smoke construction bonds, some of it that you could potentially be a step along the Asian bond. Give me one. That's because that's

[Ann Cummings (Chair)]: one of We did pay

[Scott Beck (Vermont State Treasurer’s Office)]: off all the tips back in 2022. They had been maturing. We had cash a few years ago. We directed some cash that gave those off. So this chart shows the state's net tax supported debt and moral obligation debt. So included in the state's net tax supported debt that the rating agencies look at, we have our general obligation bonds, about $550,000,000 outstanding. Back in 2018, we had a housing bond. It was about 50,000,000 back then. The HFA actually issued it, but the first $2,500,000 of property transfer tax receipts every year get sent to the BHFA to pay the debt service on that. At the time, were trying to avoid putting it on the state's books as net tax supported debt. We went through a lot of iterations. In the end, the rating agencies are including it because it's a transfer of actual property insurance for tax receipts. So that is included in their net tax supported debt. They also include any leases for SBIT and basically signing IT. I think for

[Ann Cummings (Chair)]: offices, that is debt. Okay.

[Scott Beck (Vermont State Treasurer’s Office)]: Right. So even though our GEO debt is only $550,000,000 there's about $663,000,000 that are on our books for the net tax withholding debt. The bottom shows the agencies that are able to use the moral obligation of the state. There's a maximum in statute that they can use. Not all of it's being used at this point. You can see there's about $890,000,000 outstanding debt. And the way the moral law works, it's a little bit different. It's basically, it was pledged to reimburse the debt service reserve fund. So if there was a debt service payment due that the bond bank couldn't cover, they would tap their reserve fund and pay that year's debt service and ask the state to reimburse, to replenish the debt service fund. So it wouldn't be the full amount of the bond, just the amount of the debt service for that year. So this chart shows the amount of debt authorization going back for the last twenty years. And again, this is the CDAC recommendation. Starting in 2012, we went to a biennium recommendation. So that just shows, we just split that in half. So the twenty twenty six, twenty twenty seven recommendation was for 100,000,000 or $50,000,000 per year. And you can see the amount of debt authorization has been fine for the past several years. And this is not

[Unidentified Committee Member]: adjusted for inflation. This is just raw. Correct. Okay. Right.

[Scott Beck (Vermont State Treasurer’s Office)]: Right. And this is just the amount of authorization, not necessarily the amount we issued.

[David Shearer (Deputy State Treasurer)]: Okay.

[Scott Beck (Vermont State Treasurer’s Office)]: We have quite a bit of authorized but unissued debt. Anything that goes in the capital bill, those projects are authorized to spend, but we won't go out and bond until that money is going to be spent. We go out and ask all the departments through the year saying So

[Ann Cummings (Chair)]: you don't bond until it's been through permitting and yeah.

[Scott Beck (Vermont State Treasurer’s Office)]: Correct, right.

[Ann Cummings (Chair)]: It's shovel ready before you like

[Scott Beck (Vermont State Treasurer’s Office)]: the bond. First, we don't want to bond and pay interest for not using it. Secondly, there are a lot of tax laws that you can't just go out and issue tax exempt bonds and sit on the money and reinvest it at a higher Oh, yes. Tom. Okay. So this slide, it's at the end of it, but you can see it on the screen. The green bars show the actual amount of authorized but unissued debt. And one of the reasons that SEAC has not been, has had fairly low authorizations the last few years is we're just not spending the money. Part of it during COVID, there were supply chain issues, couldn't find people to go out and build the capital projects. And a lot of the projects just are several year projects. So even though we only have $550,000,000 of outstanding GEO debt, there's $192,000,000 of authorized If every project was being built now, we would be bonding

[Ann Cummings (Chair)]: with the benefits. So we've authorized a lot more than we've actually spent. All right.

[Scott Beck (Vermont State Treasurer’s Office)]: Right. So I mentioned before that historically, they've looked at the, CDEC has looked at the debt metrics, basically just the outstanding debt. The rating agency is now focusing on the long term liabilities, basically the net pension and old debt liabilities. And the amount of debt is small compared to the amount of long term liabilities on our books. So this shows where we rank among the 50 states. And the, the low number is bad. You don't want to be one, because that's number one. But that shows adjusted net pension liability as a percent of personal income and revenues and per capita, and then adjusted net pension liability as own source revenue. Own source revenue is basically all of our receipts minus your federal funding. So it's

[Ann Cummings (Chair)]: that's why it's so important to keep the pension fund paid up and to be

[Scott Beck (Vermont State Treasurer’s Office)]: Correct, right.

[Ann Cummings (Chair)]: Filling it for the years that we did not behave well.

[Scott Beck (Vermont State Treasurer’s Office)]: Right. And ANOL is suggesting that OPEB liability. Okay. And it's adjusted because when the rating agencies look at this, all states use a different assumed discount rate and all. So they look at all pension funds, put everybody at the same assumed rate of return, they adjust it, just so they can compare apples to apples for all of the states. This is just, again, shows where we rank among our peers. You can see we're like third highest among the peers. The bottom shows where we rank among the 50. We're still like, you know, seven, eight, nine. So still fairly high. You can see that on the next chart. This shows liabilities as a percent of our own source revenue for all the states. You can see the color coding, the blue where it shows the top, that's our debt. You can see that's a small portion to our pension and OPEB liabilities. So that's where.

[Ann Cummings (Chair)]: I think, because we're filling up with the next two things, if we manage to raise 80,000,000, a $100,000,000 for school construction. How well, is that just being money that you sit on until a school or school's bonds, and then will that money be parceled out year by year or will it That's, I think, the question. What happens to How does that money get dealt with in there?

[Scott Beck (Vermont State Treasurer’s Office)]: Yeah, I mean, when you do an issue, there is a size does matter. You don't want to have a lot of small issues that, you know, the bond investors want big blocks of bonds. This shows a $100,000,000 issue, how much it would cost.

[Ann Cummings (Chair)]: Now that's probably not a school roof, so.

[Scott Beck (Vermont State Treasurer’s Office)]: This is just the hypothetical kind of current rates. See, whenever we issue, investors generally want higher coupon, higher interest rates on the bond that they buy. So we, a lot of times we'll issue at 5% interest rates. Because we're paying 5% interest, the bond investors are going to pay us more. If they're buying a million dollar bond, they're gonna pay us more than a million dollars because we're gonna give them higher interest rate. So we always, so we raise what's called a bond premium. And that premium goes towards projects. So to get a $100,000,000 of project proceeds, which show we only have to issue about $89,700,000 of bonds. The difference is the premium. So, because we're paying higher interest, we get that difference upfront. So it's $100,000,000 of proceeds, even though they're $89,000,000 of bonds, but we end up paying $47,000,000 of interest over the twenty years. So 100,000,000 costs us an extra 36, almost $37,000,000 in interest payments over the $100,000,000 And again, there are tax laws, so you can't just issue and sit on the money. So if, you know, we, if we were going to issue for that, I mean, it's a If bit

[Ann Cummings (Chair)]: the owns a 100,000,000 to do whatever, they're they're gonna need the money to pay the contractor to do the roof for the roof, whatever it is. You will let that $100,000,000 bond go. We raise 80,000,000 a year. Does that 80,000,000 pay down the debt in one year? And I'm I'm wondering how how how would you deal because my understanding last year was you you can't use full faith and credit to bond, so we're into the moral obligation world. If we raise x million, once you've got a whole bunch of schools maybe raising or maybe we build a new school, will that what will happen to that 80,000,000? Will it go in as a one time payment? Will to buy down the total package of bonds? Will it be parsed out on a per now how because I we were told when we will help you with the debt service as we as we find money or as money becomes available? So how would that work?

[Scott Beck (Vermont State Treasurer’s Office)]: Let's jump to, guess. So, well, when we do a bond issue, if we were doing a GEO issue, which we may not wanna do that, but when we do, when we issue, we will bond to reimburse what we've already spent. So even if we haven't bonded, funds that are appropriated in the capital bill, finance and management can give them the money, pay for the projects. This is a school, so Okay, right. So whenever we bond, some of it's for reimbursement, some of it's for projected spending. Oh, so

[Ann Cummings (Chair)]: the school's already spent money to get design and, yeah. So

[Scott Beck (Vermont State Treasurer’s Office)]: you wouldn't have to bond upfront, basically So what I'm maybe you can talk about it right away. Okay. When school construction task force met, they put out a report back in February 2024. One of the models they looked at was the way Rhode Island bonds for school construction. And they bond through the Rhode Island Health and Educational Building, or RIBAC. RIBAC would be similar to the bond bank, and I think that's the model that, you know, the partner worked very well. So instead of the state issuing bonds, actually have the bond Even municipal bond bank. And the way the bond bank that currently works, they loan to municipalities and school districts. So all those municipalities will come to them with their loan request. Bond Bank pools them, issues one bond, and then they lease it up and makes loans to those school municipalities or school districts. The important thing about the Rhode Island model is it's not counted as net tax or debt for the state it's through RIVEC and the state does offer subsidies, but it's important that, so it's a, the loans that are made are geo pledges from schools and municipalities in those schools. And there's also an intercept in place. Similar to what we have with the bond bank, where they, the treasurer can intercept payments.

[Ann Cummings (Chair)]: Payment, they They pay it off,

[Scott Beck (Vermont State Treasurer’s Office)]: have an intercept place in Rhode Island, Minnesota. That's kind of the preferred model.

[Maria Royle (Legislative Counsel)]: Thank you, Madam Chair. So, if we were to go with a model similar to Rhode Island's, then if we raised funds through some mechanism that was yet to be determined, though that money would be used to help pay the subsidy amount so that the school district would have be able to borrow at a low at lower cost to the school district. Is that is that correct?

[Scott Beck (Vermont State Treasurer’s Office)]: Yes, correct. As Madam Chair talked about earlier, there was a school construction program in place until 2007. There was money in the capital bill every year, was about 10,000,000 a year. I know That's about a 21% of the important things about the Rhode Island model also, and what we would recommend, because to avoid it being that tax supported debt, to have an annual appropriation to pay the debt service, not a pledge upfront to cover all of our debt service, but it would be an annual appropriation. Out of whatever? Right, not

[Ann Cummings (Chair)]: But instead, so that would be, I assume, decided by the appropriations Committee somewhere in the budget that they'll be made based on how much money he is in fund.

[Scott Beck (Vermont State Treasurer’s Office)]: Right. Okay. Just to give you an idea, go back a couple slides. That was standard debt. Yeah. This came from the bond bank. So the bond bank has the majority of school debt other than Burlington and Winooski, kind of did it on their own. The rest of this debt of school districts belongs to the bond bank. So there's about $480,000,000 we believe. A lot of them, right. There may be some private loans out there, but I think this pretty much covers it. So this is, in Vermont, this is the outstanding debt in Vermont. Next slide shows that debt service would be on all, again, this is the legacy debt right now. This is what's outstanding.

[Ann Cummings (Chair)]: This is what's still left out, like 2,007, right? No, this is Or anything

[Scott Beck (Vermont State Treasurer’s Office)]: that's And about again, most of this is a bonded age right now, not what we've entered the capital. So you see the first year of 2020, total of debt payments is $61,000,000 that goes down from May and February. So I know there's discussion about what to do about legacy debt and then what to do with debt going forward? So just, this gives you an idea of what is that ability.

[Unidentified Committee Member]: In the Rhode Island model, does, are the local school districts, are they, I mean, are they reliant on the Rhode Island legislature appropriating an amount of money every year to to subsidize their payment, or do they enter into a contract with r r a r I h b e c or somebody else?

[Scott Beck (Vermont State Treasurer’s Office)]: Oh, I think they're relying on the annual

[Unidentified Committee Member]: On the annual appropriations. Because it would seem to me like if they were reliant on the annual appropriation, they're probably paying a higher interest rate than they would, versus if it was a contract.

[Scott Beck (Vermont State Treasurer’s Office)]: Well, it doesn't have the GO pledge of municipalities behind it. So it's a pretty strong rating. It's, and and again, if we similar to the bond bank, the moral law, it's about one notch below their state rating. So it's still pretty high. Still pretty high, though. Yeah. Yeah. When we did the TEDS, there were special obligation bonds that weren't you. They were basically a notch below our state ratings. So they were still, you know, double A, double A, A, A, so.

[Unidentified Committee Member]: So there's good demand for them.

[Ann Cummings (Chair)]: Yeah. Towns, states can raise taxes to raise Sure, When Harrisburg, Pennsylvania declared bankruptcy, that sent shock waves through the insurance industry. I was, at that point, going to Eddy Boyle regularly, and that disrupted that whole they aren't totally reliable, that they go at least this one went bankrupt. I don't think anyone's gone bankrupt since for many sides, for that. But that I remember being there when that got declared and not they were very upset. Okay. I mean, Senator Chittenden, see the hand motion.

[Thomas Chittenden (Vice Chair)]: Yeah. Yeah. So I think we're gonna ask a question here. Now what I hear from this and from the chair's question that we would use these revenues to subsidize the loads through a type model. My question is, if we just did restored or reinstituted what some other states still do and what we used to do and use general obligation debt, pledging the whole faith and credit of the great state of Vermont with the school debt, would that not just get a lower interest rate without having to

[Scott Beck (Vermont State Treasurer’s Office)]: come up with that subsidy to get them? Yeah, would be higher rated. Again, it's gonna show up on the state's books as they're tax

[Ann Cummings (Chair)]: credit.

[Scott Beck (Vermont State Treasurer’s Office)]: Which, depending on how much it is, well, saw that the pension and OPEB liabilities are what's driving the, you know, what the rate you're So looking some amount of debt probably wouldn't you know, hurt our ratings. You never know.

[Thomas Chittenden (Vice Chair)]: I'm just one of 180 legislators, but I would say to me, I wanna see more schools build in the state, and I would like that to be cheaper. And so I support reinstating that program to get those better rates so that we're not just raising the taxes over here to subsidize back down to those rates. I think the state of Vermont should pledge our our full fledged credit towards these That goes We're gonna back the bonds.

[Ann Cummings (Chair)]: That goes up. It affects all of those other things, the debt, tax debt, and so the balance you're trying to keep is if we go from triple A or double A to A to b, it's not cheaper, and that so that's

[Thomas Chittenden (Vice Chair)]: Working hard for that really good rate, so I want to

[Unidentified Committee Member]: use that really good rate to build schools at a cheaper rate,

[Thomas Chittenden (Vice Chair)]: but I hear you can't just take down all debt that we can do, but in a metered, reasonable way over time.

[Ann Cummings (Chair)]: Well, how different is the rate for the municipal Yeah.

[Scott Beck (Vermont State Treasurer’s Office)]: It'd be

[Unidentified Committee Member]: one it's something this rate

[Maria Royle (Legislative Counsel)]: would be.

[Ann Cummings (Chair)]: Yeah. But how different is the rate going through the municipal bank? It's You said it's a small amount. The interest rates? Yeah.

[Scott Beck (Vermont State Treasurer’s Office)]: Yeah, I mean, they're highly rated.

[Ann Cummings (Chair)]: Yeah, it's also highly rated.

[Scott Beck (Vermont State Treasurer’s Office)]: Yeah, it's, you know, it's a little bit different credit. Yeah. It's, you know, the credit of the municipalities behind it, but, I mean, they have taxing power and still very high degree. The task force report that came out in 2024 has some scenarios of different subsidy amounts. Know, dollars 100,000,000 issue if we subsidize the 20% or 40%, and it kind of gives you those scenarios.

[Ann Cummings (Chair)]: We had that report last year. We will refresh our minds and find the copy now that we're seriously in a place where we'll look at it.

[David Shearer (Deputy State Treasurer)]: Yeah. And the only other thing I noticed, the treasurer is asking some advisors that we use to run some of these scenarios and do some consulting for us to update some of those studies using additional information and numbers and inquiries that we've heard to try to get more information. We'll be happy to pass that along as that comes into us.

[Ann Cummings (Chair)]: Okay, other questions? Thank you. Thank you for being patient. And we Maria should be she's in the hall. We're going to we've got S204, which is an act relating to electric repair, it's a utility, and no, we aren't gonna get that one out today because that's the one that speak the one and that's the the one

[Thomas Chittenden (Vice Chair)]: that's one

[Ann Cummings (Chair)]: the Okay. In the hot seat, everything's ready. Alrighty, sir. And we have had a request from to testify. I told them what we were thinking of doing. Okay. But Andrea Cohen isn't available this afternoon, we'll put her on hold as soon as we get back. And then I hope we're going to vote this one out.

[Maria Royle (Legislative Counsel)]: Do you wanna start with that? That's 204. Let's do 204.

[Ann Cummings (Chair)]: I think that's the simple. Nice to have something simple.

[Maria Royle (Legislative Counsel)]: Famous last words.

[Ann Cummings (Chair)]: I know. Never say it the simple little bill. But we just did bonding capacity. So anything after that would be simple. That's normal.

[Maria Royle (Legislative Counsel)]: So Maria Royal with Council. And what you're looking at is a proposed strike all amendment to SB204 concerning the connections of utility service. And all the proposal is is an amendment to section two zero nine of title 30, which is the scope of jurisdiction of the Public Utility Commission. They have rulemaking authority as noted there on Subdivision 1. And so the proposal here is, I need Subdivision 2 basically specifying that PUC shall amend rule three point three hundred concerning disconnection of residential gas, electric, and water service to include residential customer protections related to utility service disconnections and reconnections during periods of extreme heat as defined by the commission.

[Ann Cummings (Chair)]: And this was the bill that had us setting up a ratepayer utility fund that had us do it. And the PUC came in and said, we already did a report on that. They required that they do a report on all of these things. They said, we sent it to you December 1, And our recommendations was that we pretty much got it covered, that people are not getting randomly cut off. And I've talked to the proposer of the bill, and she told me that the person that had asked her to do it, it was actually she was paying her utilities and her rent, and her landlord pay the utility bills. So there's probably nothing we can do to help, and the big loss was the food in the refrigerator in the summer. And we were told there are protocols, we don't shut it off when it's cold, we don't shut it off if you're on any kind of a medical required device or if you're handicapped, and they said in the summer they were just calling the utilities when it hit very hot in Vermont, that's probably 85, but said they just asked the utilities, and the utilities just, they they don't shut it off. Nobody wants to have somebody's grandmother die because they shut down their air conditioning. But so we do nothing. It's probably covered. This is kind of belts and suspenders that said, so write a rule for what you're already doing. Thick. So that's how we got to this point. Any questions? Any concerns? So once we hear from Vasa, if they don't raise any concerns, and we'll invite the other utilities in. We have we'll invite probably Beps and Green Mountain Power in, and just wanted to The co ops? The co well, the co ops are. No.

[Maria Royle (Legislative Counsel)]: No. Andrea Cohen? Yeah. She's the from an electric op. She's one of the co ops.

[Ann Cummings (Chair)]: Okay. That's our municipals. Okay. That's who I wanted. So we'll get Andrea. We'll get Vepsa, and- Can I ask Maria a question?

[Maria Royle (Legislative Counsel)]: Have you, the three point three hundred, does it include this yet? No. It does not. It's just what their practice apparently. Understand. Yeah. Yeah.

[Ann Cummings (Chair)]: Yeah. This puts into statute what they say they already do. Codifies current practice. That's right. Makes us feel better. But also says somebody else comes in, decides to change the practice. Right. They can't. Okay. That was easy. Alright. And Maria, I know captive insurance was in. I was tied up in the pro tem's office, but and it's an H bill, but we've been through it. So I thought if you could just walk us- Do those quick refresher? Yeah, if you have a section by section, we can go through it and- Yeah. Really fast.

[Maria Royle (Legislative Counsel)]: I do, and I do have a section by section summary, which I can also send to you, or you Okay. Can put

[Ann Cummings (Chair)]: then your chitin is going to be short. Yep.

[Maria Royle (Legislative Counsel)]: Yep. So, very quickly, it's not very long. The first two sections, not this one, but you'll have another DFR bill to make. This

[Ann Cummings (Chair)]: is only happening. You're always that thick.

[Maria Royle (Legislative Counsel)]: That's why

[Ann Cummings (Chair)]: it's here. Wow. We must be a maturing industry. Yeah.

[Maria Royle (Legislative Counsel)]: This just concerns, the first section concerns risk retention groups. These are entities that are formed to kind of manage their liability risks. They're owned by their members. Did we already walk through this? Yeah. But I don't think Senator Cummings was there, so we're just doing

[Ann Cummings (Chair)]: I think we're just after I I wanted to just a quick overview so that we knew what we were voting on and then

[Maria Royle (Legislative Counsel)]: we voted out. Sure. And so what this does is basically specify that no risk retention group shall make a loan to or investment in its member or affiliates of its members. So just ensuring that the reserves are there, so I record claims, that it's not being let out. Okay, I'm all the

[Ann Cummings (Chair)]: way down to Yep. Somebody on the notes.

[Maria Royle (Legislative Counsel)]: Which is an odd, common occurrence apparently, that requires the commissioner's approval. And if I remember correctly, I think

[Ann Cummings (Chair)]: there's only maybe one outstanding loan.

[Maria Royle (Legislative Counsel)]: So section two also concerns risk retention groups. And it's a little bit longer, but actually the substance the changes are pretty much conform with existing practices. So under current law, you'll see these are annual reports, financial statements that are required for all types of captive entities. There's a carve out that says risk retention groups. You report like all insurance companies, general insurance companies do. So, the proposal here is to strike that and now include their reporting requirements in the statute, which we'll look at. So, part of it's just moving the requirements. And then also, just so I don't forget, you'll see there's some stricken language there, but it's actually moved to a different subsection, which concerns confidentiality provisions. It stays the same. Risk retention groups are not subject to confidentiality as our other captives are not, and that's just a

[Scott Beck (Vermont State Treasurer’s Office)]: federal law requirement.

[Maria Royle (Legislative Counsel)]: All you'll see in subsections E and F are essentially, I think it pretty much conforms with their current reporting requirements, the annual reports, the form that they must be submitted in to the commissioner and to the NAIC, the National Association of Insurance Commissioners, and then greater specificity in subsection F with their quarterly report filings, when they need to be made by, but again, this is what they're doing with reporting, gives the authority in subsection G for the commissioner to adopt rules, the commissioner thinks additional filing requirements are necessary, Then, that subsection I is the moved confidentiality provision, same as existing law. Okay. Then the last section pertains to sponsored captive insurance companies and their protected cells. That's higher carbon filters. Yes, it is. So this is basically just saying that when the protected cells submit their business plans for what they wanna do, they have to specify a certain amount of reserves that they have to hold, etcetera. And this is just a filing. After they commence business, they basically need to affirm with the commissioner that they did what they were supposed to do. And that is a statement that's filed and it has to be signed by, it's an unincorporated cell, then the sponsored insurance company officers, if it's an incorporated protected cell, the president, secretary, and if it's an LLC, two individuals on the National Recovering Board.

[Ann Cummings (Chair)]: Okay. This last year, the captive insurance came in and the DFR housekeeping, but it wasn't overly extensive. So this does seem to be maturing. Wow. Because every year for how many years we've had different forms and different kinds and different so, yeah, this is for captive insurance, a pretty simple bill committee. Any questions on this one? It also never gets questions. Alright. This one, we could vote out. I'll make a motion to vote on draft number 1.1 of h six forty nine of 01/1326. Okay. Let's send the deal with this. What's approved? That we approve the the active insurance bill draft 1.1 of age 49, dated onethirteentwenty six at 03:10PM. Is there any discussions? Are there any amendments?

[Thomas Chittenden (Vice Chair)]: Just concurring.

[Ann Cummings (Chair)]: We're just concurring. Alright. Is that your motion, Senator? That is my motion. Alright. Senator, it's a really mild move that we could curve. So if we're just concurring, I'm going to say, all those in favor, say aye. Aye. All those opposed, say nay. I'm hearing that as seven zero zero, and the secretary is standing behind you, so please run quickly. He showed up. He showed up. Just This woman is.

[Scott Beck (Vermont State Treasurer’s Office)]: I think we give what you were doing today.

[Ann Cummings (Chair)]: He showed up. Okay. That's the film. We did occur. It's an easy one. We can hear it and we voted on. And we voted on.

[Scott Beck (Vermont State Treasurer’s Office)]: Perfect. Okay.

[Ann Cummings (Chair)]: So I think you need to just sign that and they can take it up. That, believe it or not, is it for today, but we did