 Vermont PBS in cooperation with Orca Media and the Vermont Press Bureau presents Capital Beat, the Week in Review, from the Vermont Statehouse. Here's host, Neil Goswami. Welcome everyone to Capital Beat. We're very pleased to have you join us this week. I'm Neil Goswami with the Vermont Press Bureau. The Vermont House this week passed a resolution that disallows an executive order that Governor Phil Scott was seeking. And that would have merged the Lottery Commission with the Department of Liquor. Joining me today this week to talk about the merger and why it didn't move forward is Jason Gibbs, Governor Scott's Chief of Staff. Welcome. And Representative Helen Head. Thank you so much for being here. Good to be here now. Jason, let's start with you. In January, the Governor proposed three executive orders that dealt with merging different elements of the executive branch. One of those was liquor and lottery. Two elements of state government that are really the only purposes to sort of generate revenue for state government. Maybe you can give us sort of a brief overview of why the Governor wants to bring these two entities together. I think it's important to acknowledge that in addition to being valuable revenue generation tools, entrepreneurial public enterprises, for lack of a better phrase, they also serve an important regulatory purpose. We have a great interest as a state in making sure that alcohol is carefully regulated so that it's not being marketed or sold to children. Similarly, there's an interest in making sure that gambling isn't exceeding what we would consider socially acceptable bounds and that we're not encouraging problem gambling or the abuse of individuals who may not be fully equipped to make the best choices, etc. So there's an important regulatory role that these departments play. They are, to the best of my knowledge, the two smallest departments in state government combined. They would, I think, be the second smallest in state government, but they do generate an enormous amount of revenue. Our reasoning for proposing this particular unification is that, number one, it's been proposed a number of times in the legislature. It's been discussed. It's been studied. Number two, some members of the chairwoman's committee have proposed legislation that's very similar to the concept that we offered, if not identical in some ways. Number three, and this really speaks to the bigger strategic issue, we are looking across the enterprise, the enterprise of state government and looking for opportunities to unlock revenue generation that is not in taxes and fees, opportunities to create efficiency, not just operationally, but efficiency that reduces the value of the products that state government provides in those areas where it's selling something like alcohol, like lottery tickets and so on. So this is just one piece. And frankly, we thought it would be the low hanging fruit, that it would be the easiest of what are always challenging conversations around rethinking reforming state government, making it more modern, making it more entrepreneurial in this case in a publicly responsible way. And so those are the core reasons why the governor offered the idea. When you talk about efficiencies that might be available between liquor and lottery, what are they? You know, I think a lot of viewers probably go to their corner store and maybe buy lottery tickets or they go to the state run liquor store and they get their liquor or perhaps a lottery ticket there too. But you know, they're probably not thinking about merging those two or that they're even separate departments. So what would the average Vermonter get out of this? I think it's important to understand and most Vermonters don't think of this stuff because it's not what they think of. But we have a distribution system that's modeled off of the distribution system that Al Capone crafted during prohibition. I'm not making this up. These are the systems that control states implemented coming out of prohibition because they looked at what the mob was able to do in terms of the yield that it was able to generate and said, well, if we did something similar to that we would be able to regulate the flow of the product and capture our fair share of the revenue and isn't that the best of both worlds. It's a really classic example of how the systems that we're operating in state government are antiquated 20th century systems when there's very significant value captured in them that we could free up if we made them 21st century system. So for example, liquor and lottery both looking at new point of sale systems. We can't bring new lottery vendors on because our point of sale system can't accommodate it. We can't give retailers the flexibility that they need to run promotions that are going to ultimately increase our revenue and yield without actually increasing the total volume sold without a more modern point of sale system. So there's an old warehousing system and this is a subject of a little bit of sensitivity. People are concerned about what it means when we talk about updating our warehousing system. It could mean any range of options from a managerial perspective. But there's a lot of value caught up in the old way of of managing our product. And the reality is is that, you know, I was joking with the governor this morning and I said if the legislature wanted to give us the flexibility that we need to run this as an entrepreneurial public enterprise just like they gave me and the Department of Forest and Parks in 2009 and 10 the flexibility to run the park system from an entrepreneurial perspective. I would be willing to work for zero salary and just a fixed percentage of the net increase in revenue we were able to generate and then I'd have some skin in the game. And my point there is that that's how confident that with the right managerial leadership and the right vision and the right attitude that we could modernize and increase yield. And I don't think and I don't want to monopolize the time. I don't think that there's any disagreement about the opportunity. I think the disagreement is about the pace. And if we have a sense of urgency it's because the liquor and lottery discussion is not happening in a vacuum. It's happening in the context of a broader discussion about state government and about the fact that for 10 years we've been losing. Every day when we wake up we lose six workers from our workforce. We lose three kids from our public education system and there's almost a baby being born addicted to opiates every day. And if we're not looking for ways to change the way government's doing business we're not going to find the solutions that we need to reverse those statistical trends. Okay. State law allows the executive branch which you represent to craft executive orders representative head. You chair the House General Housing and Military Affairs Committee perhaps the longest name of committees. And state law allows the legislative branch to reject some of these executive orders particularly the ones dealing with the reorganization of government. You and your colleagues in the House have chosen to do just that with this particular merger plan. Can you spell out for us the reasons why you didn't think merging liquor and lottery as the administration proposed was the best idea right now? The executive order process is a very prescribed and unyielding in some ways type of process. The legislature has the option to either vote up or down an executive order. We can't amend it, change it in any way. We are very interested in working with the administration on modernization of these departments and believe that merger may be a very good idea. We want to work together with the departments themselves, the administration over the next few weeks to come to a merger plan that would come to the legislature in January for our approval. The executive order was signed in mid January. Had lawmakers done nothing it would have begun to take effect on April 17th, I believe. By passing a resolution essentially disallowing it it stops the clock, it stops the process and now there was a very interesting floor debate in the house as this was voted on or before this was voted on. And there were a lot of different people standing up, particularly Republicans saying that even Democrats have proposed this sort of merger in the past but never acted or followed through on it. So why not allow the executive branch to take a crack at it and see what they come up with? It has been proposed and never fully explored. We think it's very important to do that and we took the step of not only voting down the executive order but proposing a bill that will look at how we examine this over the next few months to try to kick the tires, make sure that we fully understand what the savings are, what the process is for moving forward in terms of the collaboration and eventual merger of these agencies. In your committee as you reviewed the executive order what were the concerns that sort of rose to the top about allowing it to move forward? Were there particular issues or things that you became concerned with? The big issues were that while we saw that there was promise in the idea of these two controlled agencies working together it wasn't yet clear what the savings would be versus the costs of merger and sharing space, how to work on the customer service level, what would be achieved by actually pooling staff. We need more detail about how this would happen before we authorize what could be a costly venture. We need to make reasonably certain that it will succeed. As Jason mentioned these are really important departments. Their combined revenues are about $200 million a year. They were last year with a contribution to our state coffers of about $48.5 million between the ED fund and the general fund. And we have hundreds of businesses that are involved, thousands of remanters and visitors who benefit from them. We need to be ensured that this process moving forward is in everyone's best interests. Jason, those are the legislative concerns that have been brought up again and again. And yes, Wednesday on the floor debate, do you have answers to costs? How much it would cost to do the merger? How much savings there might be through efficiencies? There's no immediate cost. I think it's really a function of leadership. And the way that we look at this is in an ideal world, the legislature would do two things when the executive branch offers an idea other than just to prove them, would look at them in two ways. One is from the point of view of say a board of directors, particularly when we're talking about something entrepreneurial. And it's appropriate and necessary for them to do their due diligence and to feel comfortable. But it's also not appropriate for the legislature to micromanage an executive branch that is ultimately going to accept accountability for the operations of state government. And that accountability is not just political, it's also prescribed in the state constitution. It's one of the reasons that the state constitution calls on the legislature to act together in both bodies in response to a proposal or an action by the executive. And Representative Olson on the floor debate or in the floor debate on Wednesday raised a really interesting question around these executive orders. And that is, what is necessary to complete a statement of the legislature in opposition to a process that the law allows? There's a little bit of really interesting law around it. The law that allows the executive branch to propose the executive orders is really clear. Any one chamber can act to disallow them. However, the state constitution and some Supreme Court cases are in conflict with that law. And so our lawyers are looking at whether or not that's, you know, whether or not maybe we all got the process wrong from one point of view or another. That's not to say that this is going to get forcefully implemented by FIAT, but it is to say that there's some ambiguity in what constitutes a legislative action on an executive order like this. Well, let me ask you, this is an interesting point here because independent Representative Oliver Olson of London Dairy did try to raise constitutional questions with the process used to reject an executive order like this that merges executive branch departments. But the Speaker Mitzi Johnson ruled that it is not the purview of the body to make such determinations. So the issue of being constitutional or not only comes up now if somebody challenges it. Are you indicating that the administration might challenge the process to reject this? Well, where I was going with this was to make the point that we care enough about this idea and we feel confident enough in our ability to execute it. And, you know, it's unfortunate that we were unable to persuade one committee of our 180 board of directors that that's the case. But we feel confident enough in the idea to be looking at whether or not the governor has executive authority, constitutionally prescribed executive authority to move forward with these executive orders in the absence of both chambers taking specific action. It's also worth noting that we've got a few weeks at least left in the legislative session and, you know, there may be an opportunity for us to reconcile the difference of opinion that exists between the Senate on this issue which has signaled its support for the idea and the House which is preferring a slower approach. And maybe there's some middle ground there that we can achieve. Maybe there's something that resembles more of an action plan as opposed to a study where, you know, there's clear milestones along the path and it's not just a typical legislative study. Because, I mean, I think it was just two years ago that there was a study done that addressed some of these issues. It was the basis of the proposal that we put forward. So there's a lot of moving parts. I wouldn't, we certainly don't look at this as being the end of the discussion. We're getting near the end of the legislative session and maybe there's an opportunity to take the concept that's emerging from the House and make it something that everybody can feel good about. I do want to just, I know you want to jump in here, but it sounds like you're making a bit of news here and saying that you are considering challenging a process that has been used all along, as far as I can tell, to reject an administration's executive order. That would be fairly large news if you were to move forward in some type of challenge. What we're doing is we're evaluating the argument that Representative Wilson presented on the floor. We find it to be very compelling to be frank. The initial reaction of our lawyers was, whoa, and we'll see what the case law, what the constitutional analysis ultimately shows. My point in offering that is that we feel very comfortable and confident in our ability to deliver and the politics of this are kind of bewildering because we're inviting accountability. We're saying we know we're proposing to do something differently. We're willing to assign targets to it and we know that if you approve it, you now have all of the political high ground to hold us accountable to do that work and I have no doubt that they would, particularly in an election cycle in Vermont that's every two years. I mean, in fact, I would be shocked if they gave it to us and then next year they weren't like, show us the money, which would be well within their prerogative and authority and responsibility to do. So the dynamics on this one that we thought were the low-hanging fruit really bewildering to be frank. I do want to let you jump in here now because you look a little bewildered yourself here. I am a little bewildered. I understand that executive orders have been used fairly infrequently although there's some question in my mind about the appropriateness of them generally because we work together with the administration, of all administrations, have over the years to effectuate change for Vermonters. In this case, we, my committee has worked hours and hours on modernization of alcohol statutes this year and are looking forward to working with the Senate on some possible changes, not so much to the underlying statute but in some economic development pieces for alcohol. And now we're proposing a way forward to work with the administration over the next few months on coming to grips on this merger. So I think what's really, what I'd like to see us do is roll up our sleeves and get to work on getting this done so that we'll know just what the parameters are, what the opportunities are. So you do plan to move forward with what you termed a companion bill? Yes. So maybe you can explain what that companion bill will do, the timeline it lays out for moving forward on a merger if that is exactly what you intend to do. Well, the companion bill, which follows the resolution that we passed yesterday, and by the way, that resolution is very clear that we support the intention of exploring merger between these departments. We think it's very important and that we will support this companion bill which establishes a working group, not a study, but a group that will actually work toward this concrete goal of merger that would include the director of liquor control, the soon to be hired director of the lottery, an appointee of the governor and a couple of representatives from the House and the Senate to really, over the course of six meetings in the last half of this year, come together with a specific proposal about how to get to merger. And in the process put together legislation that would come before the General Assembly in January to make that change happen. So there are some concerns with that, obviously, as we have this discussion today, there's about three weeks left of the legislative session, at least in terms of the target date that legislative leaders have put out there, and you've all been known to miss from time to time. We're heading for three weeks. So three weeks seems like a pretty tall task to move a bill through the House, through the Senate and send to the governor. That's an ambitious plan. If we all want to work together to achieve the merger of these two departments and ensure that it has a smooth ride, it can happen. So you're confident that the two chambers of the legislature can move this thing through in three weeks or less? It's very possible. Do you share that confidence? I think it's possible. I mean, there are multiple vehicles on which this idea could be included, multiple legislative vehicles. And what path the legislature ultimately chooses to make an effort to resolve this with us is really up to the legislature. It's worth noting that the governor feels very strongly about this is unlikely to support a study that spends money to do something that we know will save money. So, you know, I think the ultimate solution between where we are today and where the governor wants to be tomorrow is probably from a legislative perspective, someplace in the middle. We'll see if over the next three weeks we can get there. I do want to just make the general observation that we, as an executive branch, we feel really strongly that this is a classic example of legislative micromanaging and overreach. We are willing to accept the accountability of the proposal that we're putting on the table. We feel that it's very well thought out. And it is an illustration of a general concern that we have as we approach our modernization work, our efficiency work, our productivity enhancement work, our customer service, our culture of continuous improvement efforts within the executive branch with a tremendous sense of urgency. You know, six, three ones, six fewer workers, three fewer children in our public education system, one baby, nearly one baby being born, addicted to opiates every day. That's what drives me. That's what pulled me back into government service. And one of the things that we're trying to do in as non-adversarial way as possible, and I understand that there are elements of this process that are inherently adversarial, but is to push back against the instinct to be adversarial in those environments and to make it about sharing a sense of urgency. And when we study things that have been studied before, sometimes multiple times, not just in this case, when we delay taking action that we agree in principle the executive branch should be able to carry out, it is policymaking of the past. And it's process of the past. And I feel like just like we need to modernize our delivery of service, our colleagues in the legislature need to be thinking about how to be more nimble in their policymaking in the legislative process. Before I let you respond, you yesterday we had a conversation after the vote and you called it a partisan psychology that they didn't want to advance an idea from the governor. So, I mean, this is some pretty heavy stuff here. Is there a partisan psychology at work here? I don't see it. The structure of government and the broad parameters of operation of departments that serve thousands of remonters is really the parameter of the legislature to look at that. Once that is established through legislation, it is very much the province of the administration to operate that system. And I'm, again, very hopeful and confident that we can work through this issue. One question or point you brought up was the cost of a study. I think we had a conversation with reporters at a conversation with you yesterday about that. And I believe you said $5,000 or so is what it would take to do this. That was the initial suggestion from the Joint Fiscal Office to our Appropriations Committee and they are looking at this issue within the companion bill right now. So, that would be about $5,000 for something that affects a budget of $200 million. Yeah, so that seemed reasonable too. Would that be a reasonable cost to make sure it's done right? I think it's highly unlikely that the governor's gonna sign a piece of legislation that spends money to do something that we know will save money. And we have three or two or three or four weeks, perhaps, to iron out the wrinkles here. And we're really hopeful that we'll be able to get to something that everybody can feel good about. So, this might be an insider-y reporter question, but a law can become a law without the governor's signature. Are we talking letting that happen or a veto? No, I think if a bill comes to him, that is to study this issue and it will not become law. Okay. Again, this is not a study bill. It's a very specific bill that works toward this particular goal. So, perhaps there is room there to find that common ground. All right. We are just about out of time today. So, I want to thank you, Jason Gibbs, for being here and Representative Helen Head as well. And we hope you'll join us again next week for Capital Beat on behalf of Orca Media and Vermont PBS. I'm Neil Goswami with the Vermont Press Bureau.