 Okay, we are getting ready to shift to a new topic. Are you ready to speak to us? Okay, great. I just want to leave it to Amanda because I want to see if we have the folks from the agency here as well. We are shifting and shifting to S100, our meals bill. Currently a breakfast program has passed the Senate but we are looking at the cost of what it would be if we were moving this to lunch as well. So, welcome. Thank you for joining us. Isn't it a breakfast program and a study? Which was very good. So that's the study that that's the report. That's what I was confused about. That's this report and it's really worth taking. I've read it. I've read it. I'm speaking to everyone that especially I think when you look at some of the recommendations that come out of this report as we're thinking that some of the work has been done. I would recommend folks that really look at it, you know, at a minimum. Those 10 recommendations. Okay, welcome. Thank you first council for joining us. You've been working on what this would cost, which I understand is not a straight line. Yeah, so good morning members of the committee. And Chair Webb, my name is Julia Richter and I'm with the joint fiscal office fighting to testify with you folks in person today. So, as you all are probably aware, JFO has already done some work on this last year in terms of estimating the range, which we estimated to be approximately 24 to 40 million. And before I get into our specific costs, I do want to reiterate that the cost is really dependent on two factors. The percentage of students eligible for free and reduced lunch. So the fewer students who qualify for free and reduced lunch from the federal government, the higher the cost to the state. And the other major cost driver is the average participation rate of students. How many students are actually eating school, the higher the participation rate, the higher the cost. So we have two estimates really today for FY 23, the estimated fiscal impact would be about 28 million. And this comes from the idea that, you know, over time, the culture may shift to more students eating in schools, but this might not be the culture in FY 23 next year, as well as the enrollment rate, which we've worked with our colleagues at ALE to try to figure out how many students will be eligible for free and reduced lunch. So that's in FY 23, we estimate 28 million, but over time we anticipate that the long-term cost will be closer to 35 million per year. And this assumes that over time there may be a reduction in enrollment and a cultural shift towards higher participation rates. But of course, these cost drivers, we don't have the best, we don't have all of the data to say exactly how students and families will respond. So this could change if there were changes in cost drivers. So I'll pause there. That's really what I've prepared, but I'm happy to answer any questions the committee may have. So I would start with one. If you look at the 28 million, that's using the current way that we determine poverty. It's not looking at the, that's using the free and reduced lunch in another way that we count poverty. Yeah, so that assumes 30% enrollment. I don't want to speak too much to the enrollment data because that is more ALE's camp, which Rosie Kruger has been incredibly helpful. We've worked with a number of different stakeholders including Rosie at ALE to use that. You have Rosie and Brad James in the room. Can you clarify? It assumes 30% enrollment, 30% of kids eating meals or 30% enrollment free and reduced. Free and reduced. Overall as a statewide average. Yes. This was breakfast. Thank you. Thank you, Madam Chair. This is breakfast and lunch. Correct. So the cost, thank you so much. These costs are for breakfast and lunch universal. Were you able to break it out in terms of breakfast and lunch? We could do that. The major challenge when looking into breakfast and lunch versus just breakfast is if there's universal breakfast and not universal lunch, the culture of submitting the applications for free and reduced meals may differ. So families will have a higher incentive to fill out those forms if they are filling out those forms for the free to reduce lunch as compared. So we are thinking that breakfast, the range is 6 to 10 million, but that's harder to sort of, well, both estimates are more of a range, I guess, instead of a specific number. But we've chosen these specific numbers. So at least the committee has something to wrap their heads around in terms of costs. Other questions? Excuse me. Thank you. I just had a quick question. This may be also a question for Rosie when we talked about how we were estimating our participation rates going forward. Is it is it somewhat safe to assume that we're sort of at a peak of participation now since we do have universal free lunch now. We're also facing, you know, a pretty high level of food insecurity in Vermont. So are we sort of at the peak of universal participation now or do we expect that it would go up in the future? I'm seeing Rosie Kruger in the room and I think this is probably her. She's the person after this. Yes, great. Thank you. Welcome Rosie Kruger. Thanks so much for joining us and Brad James is in the room as well. Yeah. Thank you. So Rosie Kruger, State Director of Child Lentrition Programs at the Agency of Education. So in terms of participation, this year has been definitely an experiment in what participation for universal meals would look like. However, there's a big caveat there, which is that this year because of COVID restrictions, we're not necessarily seeing, you know, all students attending school every day and meals in the cafeteria every day. The schools are still doing meals in the classroom. And because of that, the meal quality or the variety of offerings might be restricted. So it might be restricted to a cold meal. The students may not have access to, you know, the salad bar, all the options that they normally would receive in the cafeteria. So, you know, we have a sense that, you know, participants that uptake would be, you know, the households appreciated that there would be good uptake, but we don't have a sense of what it would look like in a normal school year where the kids are all there every day and eating in the cafeteria and they have lots of options to choose from. And so that would really be something that we would start to see with the first year of implementation as we kind of return from the COVID restrictions. There's also the question as we're looking at these numbers, whether it's which system of assuming free and reduced lunch is being used and looking at these numbers, how does this shift when we're using the universal income form? So I don't think that the universal income form impacts the free and reduced percentage. So that's sort of the use for all the other non-child nutrition programs. But what I can speak to is we'd still need to collect free and reduced applications for the child nutrition use in certain years. So when folks are doing provision two, when schools are doing provision two, you need to collect free and reduced forms every four years. So the first year, so if we move to universal meals next year and everybody who wasn't eligible for CEP did provision two, all schools would need to collect free and reduced applications next year. And that's going to be year three of households not having to pay for meals. And one thing, kind of a new piece of information that I wanted to bring to your attention today and one of the reasons that we advised JFO to take a little bit more of a conservative stance when looking at the free and reduced projected free and reduced enrollment is that over the last couple of years our return rates for free and reduced applications have fallen. Every year we publish the free and reduced eligibility report, which is based on free and reduced enrollment as of October 31st. And so, you know, those reports are posted on our website. And statewide in school year 1920, so October 2019 before the pandemic when we were still charging for meals, our free and reduced rate statewide was 38.32%. And that had been falling a little bit every year as we came out of the 2008 recession, so just a very long slow decline as the economy recovered. This year, we are seeing a free and reduced rate of 37.42%. So we've fallen just a little less than a percentage point over two years. And that's really surprising. One, because we know that economic circumstances have really changed for households during the pandemic and we have lots of other statistics showing people are facing food insecurity and economic hardship. So we wouldn't expect to see if that rate was really reflective of income issues on the ground, we wouldn't expect to see it fall. The other thing that's really surprising about this is that we've had flexibility from USDA for the past couple of years during COVID to allow us to carry over the free and reduced status of each child who's still enrolled from the prior year. So everybody who was free and reduced eligible in 2019-2020 that school year, their eligibility carried over to the following school year and carried over again to the following school year. At the same time, schools were still collecting applications. So if households had their economic circumstances changed during COVID and they suddenly qualified, they were invited to submit new applications. And so that should have been meant that over this period of time, we actually ended up with kind of a cumulative higher number of students than would be eligible in a normal year because you, you know, households have economic changes all the time. And so year to year, some households who were eligible last year would no longer be eligible this year, and we'd kind of expect to see that fluctuation. But during COVID we've been able to carry over every student who's still enrolled and just add new students as they become eligible. And we have had some incentives for households to submit applications. The PEBT benefit is dependent on free and reduced eligibility. And so we have done big application pushes around when PEBT became available in each of the last couple of years. So, you know, we would expect that if households were returning applications at the same rate that they were returning pre COVID, that we would currently today have a higher free and reduced rate than we had prior to the pandemic. And we're not seeing that we're seeing, like I said, a lower rate. We're also hearing anecdotally from schools that this is really because the incoming students, the, the kindergartners and the students who've never been enrolled in their schools before those households are not submitting applications. And that's because they don't need to to get the free meals. It's not part of kind of the, you know, what you do in order to get the resources for your child. So as high school students are, you know, graduating students are leaving the system, we're kind of losing their enrollment status as a free or reduced child. And the new students coming in don't have a free and reduced status associated with them because their households aren't submitting applications because the meals are free. So prior to COVID, we didn't have a sense of what, you know, switching to universal meals would do to the free and reduced application return rate. So we didn't have a really good sense of, you know, what we should advise you in terms of what enrollment rate to assume after we move to universal meals. So this data here is kind of giving us a sense that we should assume that households are gradually going to stop returning applications. And we really need to be relying more on just that direct certification data, which we have from other sources other than households, which would give us if we just received direct certification data that would give us a free and reduced percentage of about 24%. So the 30% that Julia is using assumes that some households are still going to return applications. We also right now have a little bit of an unknown where it's possible that USDA will let us carry over eligibility for current free and reduced students for another year. They're looking into whether they have the authority to do that or not. And so if they do, you know, we'd see something maybe around 35%, continuing to see a small decline, but being able to continue to carry over some students. If they don't, then I'm betting we're going to see, you know, closer to 24%. So I think that 30% gets a nice, you know, hedges your bets a little bit. But that's that's kind of what's what's changed in our knowledge of what free and reduced percentages might might look like. Yeah. Representative Brady have a lot of questions. First super clarifying question. If we move to so just to make sure I heard this right if we move to the universal income declaration form, which we very well may because of the waiting study. Even if we do that we still have to collect free and reduced lunch forms. So we still need to collect them every four years for the schools that do provision to so USDA won't allow allow us to use the household income form for their programs. It's a really great thing to use for everything else. So it takes care of the problem that this decrease in free and reduced percentages or return rates might impact everybody else. It's definitely a really good reason to do it. But those schools that are doing provision to instead of CEP, they still need to collect free and reduced applications every four years. So next year would be the first year of their cycle and they need to collect those. And then, you know, four years from there, we need to do another collection. So we're sort of anticipating that each time we do that collection, the return of those applications is less and less part of the culture people don't really know what they're why they're doing this. There's not an incentive and so you, you might see a lower and lower return rate each time. And so, you know, it's obviously it's hypothetical, but maybe in four years the federal process is different. And there's some other questions. I just really think, oh, thank you. Rosie, I just, I wanted to make sure my notes are accurate on something you just said. So I were you saying that if they continue community carry over, you know, from this point moving forward, you think that our eligibility rates might look like 35%. Is that what you were testifying to I just want to make sure I'm clear on that point. So, so based on how it's fallen over the last couple of years during COVID as students have aged out and the new students coming in or not submitting applications, I would expect to see that our rate next year is a little bit lower than this year. Maybe 35% is too low, maybe, maybe 36%. But that would only be if USDA allowed us to carry over eligibility from prior years into next year. And they, they're looking into whether they have the authority to do that or not. If they don't, then we'd be in a situation where we'd be having to collect all new applications from everybody. And I think that would be very, it would be very difficult to convince households to do that. Certainly we can, we can do our best, we can do statewide campaign, we can really push to help people, you know, this is for kind of the good of the state, you know, to help us do this. But I would imagine it will, based on what we've seen, it will be difficult to get households to return applications. And so kind of the lowest percentage that you'll get would be what we get through direct certification and that's a 24%. Great. So, somewhere in that range, and that you know it's hard to say where it would be. What if you could help me understand where this is in play with the Ed fund and the general fund in terms of the cost of the program, a little bit mixed up on where the Ed fund and the general fund are in play here. So I guess I can, I can feel that question Rosie feel free to jump in if you have something more you'd like to add. I guess it really comes down to what the funding source would be. It depends on if, if you and other the rest of the legislature decided to fund it out of the Education Fund, then it would depending on if you were to go for a new revenue source within the Education Fund, or if you were to use existing revenue sources. It would, it would of course affect tax rates in different ways. If you were to go to the general fund. That would be another question. I guess it really comes down to which, which fund you would choose. And then within that fund, how you would approach that funding. There are two colleagues of mine, Graham Campbell and Pat Titterton who I think are supposed to testify later today who have been looking into this a lot more. I'm happy to answer any questions on the Education Fund, but I would defer to my colleagues for the general fund. In terms of the way the money flows at this point. So we have federal funds coming in. How does that money flow. The dollars flow. Maybe that's to Rosie. Yeah, I can speak to that a little bit. So right now, you know, the schools submit a claim for reimbursement to the state for every meal that they serve. And we turn around and submit that to the feds. And the feds, you know, pay us directly for for every meal served and then we provide that reimbursement out to the schools. There are specific federal regulations around provision to NCEP that states that the paid student share of the meals so the cost difference, the feds reimburse the paid meals at a small amount, but the rest of that funding is supposed to come from the the household. And the federal regulations around the provision to NCEP state that the paid student share of the meals has to come from a non federal source of funds. And this has been really the struggle because you know we do have a lot of federal funds around right now because of COVID relief funding. But because those, they don't just say it can't be USDA funds they say it's got to be non federal funds. We can't use those, those various federal COVID relief funding streams for the paid student share of meals. That's not true in a non pricing program. So in a non pricing program, there aren't restrictions that it has to be non federal funds. So we have advised schools that they could potentially use their answer funds to do a non pricing breakfast program. That's that's not non pricing breakfast is the one that's the most flexible. So we've kind of put that information out there. Some of them, you know, have kind of used up all their answer funds so this isn't really an option. Some of them are looking at that with lunch. So you really have folks doing non pricing lunch and that's because under a non pricing lunch program you have to collect applications every single year so you don't get that at the advantage of provision to where you only have to collect applications every fourth year. And you still have to collect applications you couldn't use a household income form. You know, every year you'd be trying to convince households to submit applications and really kind of at their mercy in terms of who decides to submit and maybe just down to your direct cert rate. So it's not really, we wouldn't really be pushing folks to do a non pricing lunch program, but there are fewer restrictions about using federal funds for non pricing lunch. There is a restriction on lunch where you cannot use funds from a nonprofit school food service account. There's a something called paid lunch equity for lunch where you can't do that. Looking at your table source of funds to provide school lunch and pricing program. You divided up, you know, for free reduced and paid. So I'm looking at this. So the average for a family that's paid is a 3,031 cents USDA contributes about 40 cents federal funds are 40 cents or no, there are no state funds there but when I go to the reduced price. I see that there's 40 cents coming from the state of Vermont. Yeah, so it's the category is called reduced price this is children or households between 130 and 185% of the federal poverty level. But the state covers the student share of those meals already. So that's where that 40 cents is coming from. And those funds come from the general fund. That's general fund. Yeah, and that's less than $500,000 a year, but that's costing the state. And that goes through through agency education or is it human services and through through AOE, and we pay that out monthly. I think that the statute requires it to be quarterly or something, but we pay it out monthly with the rest of the claim. And it's about 500,000 less than 500,000. per year, per year, per year. In the report, it talks about the expansion of using Medicaid data for direct certification and a pilot project and it says that you AOE and mental or Department of Health we're talking about, can you give us a little more info on that is that happening what would that do to numbers. Yeah, so we're moving forward with working with the Department of Vermont health access on this. So they have information about all the households that qualify for Medicaid. Obviously there are income restrictions on Medicaid. And so this is a pilot that USDA is allowing states to apply for a number of other states have applied for this in the past. And so I believe eight states have already done this. And so we have some some data from them about what they saw. In terms of where we're at with it right now, we are planning to apply this fall. And then next school year so school year 2223 would be an implementation year where we get all the technology in place to be able to get the information from diva and communicate it to the schools. And then we would have the data starting in school year. 2324. So this isn't something that helps us next year but it could certainly help our direct cert rates for the following year and it could make more schools eligible for CEP. The interesting thing about this data is that it gives us data direct certification data on both the free category so students under 130% of federal poverty, and also the reduced category so students between 130% and 185% of federal poverty. And we don't have any other source of direct cert data for this reduced category so that's sort of an interesting piece where we'd be picking up a lot more directly certified students. And that could really help with that, you know, right now I'm saying our direct cert rate is 24%, but that could really increase that so that could mean that we wouldn't take as big a hit by not collecting applications. We don't know how many of the students who would be directly certified through Medicaid are already accounted for in the direct cert data we have from Three Squares Vermont and ReachUp. So it's likely that there's a good amount of overlap. So we don't have, you know, particularly accurate numbers about how many additional students would be directly certified. But other states that have done this they've seen their direct certification rates increased by about 30% or by 30%. Yeah. So, I think I did some math for you on what that would look like. I didn't actually write that down in my notes. Oh, that would be that would get us to a free and reduced percentage of 31%. It's very, you know, hypothetical, taking what other states have seen and applying it to us. But, you know, it, it hopefully won't be insignificant, it'll hopefully be helpful. But it wouldn't be until school year 2324 that we'd actually see see that data. We are moving forward. It's, you know, we're, we're, we've been meeting monthly with diva to get the application together. Looks like we're going to be able to do it. It's just a lot of work on data sharing and getting the technology in place and figuring all that out. The report recommends funding three positions at the agency of education. And this is really all about getting people to fill out forms. I guess my question really is, you know, without those three positions. Can we really just not move forward with a universal income form or, or, you know, I guess, can that responsibility be shifted to the locals who probably have better access to parents anyway. So the report actually recommends a total of six positions, three dealing with data sharing so supporting that Medicaid pilot and kind of making some of the direct certification data sharing better, and that process better and more accurate. And then an additional three related to household income forms. And the household income forms. This is really not about making the universal meals part successful. It's about making sure that you don't have an impact on everybody else who relies on our data currently. So from a child nutrition perspective, I don't need more staff working on child nutrition stuff, but everyone else in the agency who relies on our free and reduced information needs another source of of that information. So those three positions are about collecting that household income form. And we the three positions assumes that you want to do verification of the household income form. So right now, there is a verification process of 3% of free and reduced applications, but there is no verification process for household income forms, and that would be a new thing for folks to do. And so schools would still be collecting free and reduced applications every four years, and having to do verification every four years for those. But then they're also collecting these household income forms to get you that other metric of student poverty. And if you want a verification and process process in place to see if that data is any good. And that would take some additional work. You know, you could put it on the school level. But that is an additional piece of work that they're not currently doing because you're still asking them to do that verification for provision to We thought writing the report that it would be more efficient to have that happen at the state level, rather than having lots of people in all of the different schools around the state having to conduct verification that that could happen at the state level. That also assumes that you would like to have a statewide electronic household income form. And that's something that we currently have right now, when we don't currently have an electronic free and reduced application statewide that that is something that's available from private vendors and a lot of schools purchase. But to my knowledge, there isn't an electronic household income form available from private vendors, and to ensure the best return rate, you would probably want to put that into place. And then that would take management at the state level to manage that process. Go ahead. How does the positions in that are in this report relate to the positions in the waiting belt. I believe they're the same positions. It's not we're not asking for additional positions it's it's kind of the same work that we're talking about. So if you don't want to do those things if you didn't want to do verification and you didn't want to do an electronic household income form, and you just wanted to do a paper form and have somebody at the state level to train people on how to do that form and kind of write that form and distribute it etc. That would be just one position. But if you want to do this kind of in the best way possible. Then you, we'd recommend three positions to manage all that additional work for verification and electronic form. Thank you. We have some other people ready to testify as well. I'd love it if you could stay with us may or may not be able to but we are looking at some potential sources of funding. Okay. Yes. I'm just going to. So the finance couldn't just have another piece of software that could do this at all right. That's that's the finance currently doesn't have software that meets people's needs. Right. I'm just like this. I know I just thought. So, um, just to clarify, 31% of Moncho brand, who are eligible for free and reduced lunch will continue to get federal funding, whether we put in universal lunches or not. That's the question is what is that number. So, right now our free and reduced percentage is 37.42%. So if everybody who had been submitting applications continued to submit applications, you know, that would be what our percentage was. We're assuming that that won't be the case. If nobody submitted any applications, then we would be we'd have to base that percentage on just direct certification information. So when we find out that a child is eligible through other sources other than the application. And that would mean that our free and reduced rate was 24%. If we are successful in the Medicaid pilot, and it produces the results that other states have seen, then that 24% would bump up, maybe to 31%, but that's really hypothetical. So, the JFO estimate is assuming 30%, just trying to kind of pick a number in the middle assuming maybe some households will continue to submit applications will, you know, be successful in some of that Medicaid direct cert collection. But it's it's going to be arranged somewhere in there and that has of course a huge impact on the cost, but you are correct that we will continue to draw down the federal funds for whatever percentage we're at. So, whatever children are identified as free and reduced status, going forward, we'll continue to get those those federal funds for their meals. And we'll continue to get the 42 cents in federal funding for the paid student meals as well. It's just that we've got to come up with with the additional funds for them. Do we have any data on or any numbers that would show the impact on staffing at schools. If we went from if we did free and reduced lunch versus, you know, emails versus running the cash register. Do we do we have anything on those costs. I don't have anything. I think kind of it shifts. So, in general, you expect to see higher participation so you're serving more meals. So, you know, you have more staff in the kitchen preparing meals, you still do have to take a point of service meal counts you still have to have somebody at the end of the line counting the meals. But you're not having to, you know, record who the student is or charge the students account. The big savings is that for three out of the four years you're not having to collect free and reduced meal applications. And that's generally something that's taken on either by the food service director or the administrative staff at the school and that's very front loaded to the front of the school year so in September or August and September, there's a lot of work around that. And then that really trickles down the rest of the school year so it's not usually like a full time position, but it is a lot of work across a number of positions early in the school year. And that's I think where we think we'd see the most savings and then bill collection is the other place where, you know, we wouldn't have to be doing work anymore. And I don't have a, you know, I couldn't tell you how much time is spent on that. Last question and then I would like to bring in the folks. Yeah. So 30% free and reduced lunch 70% that's where the funding, that's the funding we're looking for right in terms of universal meals. What is the income. It can help a, in terms of the income where it breaks for eligibility between free and reduced lunch. It's not eligible. It's at 185% of the federal poverty level by household size. What's that income. You know what that income depends on the household size. So it, but I can look up real quick to tell you what a family. Just say a family of four. Thank you very much. They probably would be helpful for us to have information on the poverty rates. So that's a monthly gross income of $4,086 for a family of four. $4,086. Thank you. Gross. We'll get those numbers so gross. That would be really helpful. Yeah. Thank you. Okay. Good question. Thank you for that one. I would like to appreciate that you're all doing here. This is a complex topic. It's turning out to be Patrick. No, no, okay. Oh, Patrick, he's over there. We've invited some folks in to give us an idea on what might be some potential sources of funding some potential revenue sources. I'm currently being tapped. And I believe we have Grand Campbell and Patrick Titterton from JFO to help us with this. I'm not sure who wanted to speak first. I appreciate having you here. Sure. So for the record, Patrick, I would be happy to go first. So I don't think I've met any of you, but great to be in here. I'm glad to be working with you all more. So the first revenue source that we were asked about was the potential for imposing attacks on sugar sweetened beverages. And so we did do an estimate for that. But before I tell you the estimate, I will give you a bunch of background on that so you can sort of understand what we're talking about here. In 2013, I believe it was, there was a bill that passed, I believe out of the house, but it never actually was implemented. So we, we based our estimate on that bill that has already been, you know, in the legislature before. And what that was, was it was an excise tax on every distributor. And when I say distributor, I mean any person, which includes manufacturers or wholesale dealers who receive and store bottles or distribute sweetened beverages for sale by retailers. So it's a, it's essentially a tax on the wholesaler. So what that means is, you know, when you go to the gas station, you buy a can of Coke. The tax on that can has already been collected. So that there's no tax on your purchase. The tax would have occurred between the retailer and the wholesaler. So what the tax in that bill was, it was a one cent per ounce per fluid ounce tax on, you know, sweetened beverages. So can of Coke 12 ounces, there was a 12 cent excise tax collected on that can of Coke. That also includes so before we go any further, why don't we just define on what we're talking about as to what a sweetened beverage is. It includes any non-alcoholic beverage, whether it's carbonated or non-carbonated, which is intended for human consumption, and contains any added sweetener. So that covers things like soft drinks, fruit beverages that have added sugar, sports drinks ready to drink tea, energy drinks ready to drink coffee, some things that would not be considered diet soft drinks, ready to drink diet tea flavored water like a seltzer. There are some exemptions so things that do have sugar added, but would be exempt in this case. And that includes things like any juices that contain 100% natural fruit or vegetable juice with no added sweetener milk with, even if it has added sweeteners, which could include, you know, soy or rice or oat milk. And then also infant formula. So I'll stop there, because I think I just threw a lot at you to see if there are any questions. Great. We are not a tax committee. So just to clarify, this is not a sales tax that's that the customer is paying at the counter. This is an excise tax that's already been collected. It's not going to show up as a specific tax to the purchase that's already built into the price that the consumer sees. That's right. So the taxes being collected by the wholesalers and then remitted from there to the tax department. We do not tax, we do not tax food at this point in time, but we're soft drinks. Do we have a sales tax on soft drinks? I think we have a sales tax, didn't we? Yes, that's included in the sales tax. Oh, and I go and I want to buy my 64 ounce Coke. I will say I have never done and do have no plan on doing whether we have a tax on it or not. I, if there's an excise tax, I wouldn't see the 64 cents added to it, but I would pay a sales tax on the price. That's right. Okay. If we had an excise tax on my 64 ounce, I don't even know if that exists. Then I, then I wouldn't see the 64 cents. I don't see it sort of explicitly, but the retailer is going to bake that was likely into the, they're going to pass along the costs. Thanks, Madam Chair. Do we have an estimate on how much this would raise? We do. Okay. Yes. We did come to an estimate, you know, we had to pull from several different sources because, you know, we don't have data on how much soda or sugar sweet beverages are purchased in the state. So we were able to pull something together using some academic literature experiences of both Philadelphia and Berkeley, which have a similar type of tax. And then there's actually a cool Yukon through Yukon, they have a sugar sweet beverage tax calculator that you can use, but we did adjust that a little bit based on some other research we did. That's all to say that we are estimating that in fiscal year 23, you'd be able to raise about $17.2 million. Thank you. How long have we had the sales tax on sugar sweetened beverages and do we know how much that raises per year? I can jump in on that one. Yeah. So I'm Graham County from the Joint Disclosures. I can't quite remember when that was put into place. So just as a background, the way sales taxes work and why we have a sales tax on soda is because prior to the change that the legislature made, I think it was in 2015 or so. It's my time here but not by much. The way it works is that we do not tax groceries under the sales tax and the definition for groceries in law prior to 2015 counted soda as a grocery and so it was the facto exam. The legislature amended the statute again around 2015 to say that soda was not considered a grocery and therefore it was subject to the sales tax. So the question about how much we think we raise, we don't have, we don't collect data on, you know, the amount of sales tax collected from any good. So it's not just soda, but at the time we estimated it was going to raise sales tax reviews by $1 to $2 million. Thank you. Okay. Can I have a clarifying question? Yeah. So the current sales tax is on soda but not all sugar sweetened beverages. There are distinctions. There's a distinction between what Pat is talking about sugar sweetened beverages and what the sales tax applies to soda has a specific definition within our statute. And this is getting a little bit further into tax. We are part of a, a agreement of states called the streamlined sales tax agreement which creates a list of product definitions. And one of those definitions for ease of compliance for businesses is a definition of soda and that's soda definition, you know, generally is close is somewhat close to the sugar sweetened beverage tax, but it's not the exact same thing. I don't know if you've submitted this, but if you have something that could define. To us related to what the definitions are. Yeah, absolutely. We'll be asked many, many times. So this might be, but I think my committee expects this to be a strange question, but family, a family of four who is not eligible for free and reduced lunch, I think would earn around $49,000 a year. That's kind of the lie. If they didn't have to pay for breakfast or lunch, or let's see, say those two children, I'm figuring it'd be about 1400 a little over per year savings for those families per child. They wouldn't have to buy food for breakfast or lunch for their, yeah, lunch for their children would be provided by the state. Well, I'm just wondering if it's possible to figure out how much savings that would at some point how much savings that would be for a family and where they would possibly spend that savings. It might be roses, I think might have that. I know that's kind of, but I'm just trying to see, you know, here we're helping parents, you know, with, with their income in terms of not having to spend money on that food for their children. It provides a savings for them. And how much would that savings fee for them and then where would they spend that with that possibly go back into our economy. What is it $5 a day. It sounds like for breakfast and lunch. So I had calculated this at one point and I don't have the calculation at my fingertips. It's $24 and 75 cents per week per child. And I'm trying to remember how many weeks of school we usually use as our benchmark I think we will go back to school days. I'm sorry doing math right here. I think $891. We do 180 school days. For child. Yep. Sound right. Yep. And you have another tax you're going to be talking to us about I believe is that correct. What did you look at? Yeah, so I believe we were asked to come to the community and talk about the sales tax on candy and also the sales tax on what is what is sort of colloquially called the cloud. Prewritten. I'm sorry just realized I had one another another question on sugar sweetened beverages. Yeah, I just so I just want to clarify on the juice category. So like just pull it up ocean spray cranberry juice. 28 grams of added sugar. So that's going to be included in this tax. Yes. And it would be taxed based on the number of ounces in the, the jug. So one cent per per ounce. And I don't think so does that run into anything funky if some of these are things that can be purchased using like three squares or. Is there any weird collision of problems there other than it just might cost a little more right if you're buying. I'm not super familiar with the parameters around that program I don't know. Yeah, I think it's a good question I don't. The initial gut and I'll confirm this for the committee is I don't think there is anything related so with the sales tax. Items that are purchased with three squares Vermont are exempt from the sales tax. But I don't know if that would be applicable to this tax, unless it's specifically written out in the language I would, I would guess not. There would be a higher price that the individual would see in the, in the grocery store wherever they're buying these things. But it's unclear whether the full tax we passed along or whether the whole the retailer will absorb some of the cost. But again, absent any specific language exempting. You know, three people paying using or three scares Vermont recipients from the tax I would be surprised if they were eligible for an exemption there's no sort of. No, there's no blanket exemption from retail based taxes for three squares or month there is in statute for sales for sales tax yes. Thank you. So I do remember when we had this discussion whenever it was that there was quite a discussion about whether artificial sweetener diet so does should be included do you remember what what the reason was and not choosing. Yeah, this, this discussion about sugar sweetened beverages precedes my time at the legislature and fortunately I don't, I don't know that that's when we can follow up on some of the folks away. Okay, let's look at the other potential sources of income. So I'll be taking the next two. The only thing I would add is that there are funding considerations here so the sugar sweetened beverage tax, I believe was just dedicated general fund revenue at the time. Whereas the other two taxes that we're talking about here are statutorily required to go into the Education Fund regardless, unless the legislature would were to write something differently. Next slide. And next slide. Let me just to clarify, because we have the money committee sell it to the excise tax you say that goes to the general fund. Is that what I just understood you said. That's my understanding. Okay, yeah, as it currently stands. Okay. Well, again, this is where Pat and I worked on from the template of the 2013 bill. And so I'll just add in the context of that particular bill. There was one revenue raised was split up into ways. One of which was going to the, it was the Office of Healthcare Reform, and then the other half was going to a special fund that was meant to sort of promote healthy living. That was how it was written in that particular bill. But, you know, that's just the template. It passed it in the house and it died in the Senate. That's what your memory was. Okay, thank you. Okay, so I'll be talking about the sales tax on candy and the sales tax on cloud. So beginning first with candy candy is very similar to as it's described with soda. And now we exempt sales of food from the sales tax and sales of food generally means groceries. And right now candy is considered a grocery unless it is otherwise specified. And so that's right now under current law we are not taxing candy, because it is broken under the grocery exemption. We estimate that if you were to remove candy from the grocery exemption it would generate about $3.3 million in sales tax revenue all that money would be generated for the education fund because 100% of sales tax revenues are dedicated to the education fund. So additional information that is I think relevant and this gets a little bit more into the tax weeds but they're currently about 919 states that apply the sale their sales tax to candy about 29 that do not. And another consideration for the legislature is, I mentioned earlier we are a member of this agreement among states called the streamline sales tax agreement and what that means is, we make it easier for businesses to comply with sales tax by sort of using the definitions of a long list of products. And so, and more sort of layman's way of putting that is, if you want to tax say soft drinks, let me go back to that example you want to tax soft drinks, and you are in this agreement with other states then you have to use the definition of soft drinks that is written out in the agreement and soft drinks, I think, off of memory is generally considered stuff with added sweeteners involved that are not natural sweeteners that are added. But it's the same same sort of deal for candy so if the legislature decided to tax to put candy into the sales tax. And that means that what would be tax would be, and I can send this definition to the committee is it would be it's a preparation of sugar, honey, and other natural artificial sweeteners combined with chocolate fruit nuts, or other ingredients. Candy shall not include preparation containing flour or shall require no and shall require no refrigeration. So, whenever I present this to the tax committee, I generally tell them that it's, it's most candy bars that things like Twix right because it has flour would not be, you know, considered a candy for this definition so for a lot of people, it's a confusing line about what candy is but I think that speaks to sort of the complexity of products available and the complexity of sales tax law that you have to draw the line somewhere. And if we were to pack candy. This is where the line would be drawn is using the streamline sales tax definition. It's going to be that complicated because we have the streamline tax. Yeah, I mean I think in theory the streamline sales tax agreement does make compliance for businesses easier, but that's not to say that retailers would, you know, it's not like they have an understanding of the streamline sales tax definition of candy. You could find 10 retailers that know that definition but so you would likely and I think the ways and means committee has her testimony from groups talking about some complexity of defining what the heck candy would be all I'm sort of putting into the committee right now is that there is a, if, if the legislature decided to tax candy. It's not as if we could pick and choose which candies we want to be taxing we have to use this definition for candy. We couldn't say we want to tax Snickers but not Twix or, you know, say we want to tax nerds but not Skittles, you know, it has to be all of these types of has to fit within this definition rather. I know that I remember hearing long conversations from people about the difference between twizzlers and I know that if we do pass this will have to hear that on the floor. But as a, let's say I'm a by the convenience store owner and this tax goes in how does it change my life. If you're so if you're a retail owner and you're selling candy, the sales tax is collected at the final point of sale and remitted by the retailer. So as a, you know, a store owner that sells candy, you would be responsible for collecting the sales tax from those sales and then I think it depends on the business. Some businesses have software that they use to calculate sales taxes. Others, you know, are much more simple and require the employees to sort of have an understanding of basic sales tax law. To know whether they should apply the 6% or not. How many of those still exist. I don't know how many exist but they certainly do. I mean representative answer told me stories about the maple corner store. In our district, she works at she has to determine, you know, sometimes what is taxable what's not a grocery what's not what is a grocery. So, it definitely happened out in the real tool retail world but there's not just software that tells you, you know, what, what would be applied what you should be applying the sales tax to or not and to be completely clear. There's sort of a an acceptance of in the system that you know not everyone's going to know exactly what the sales tax law is to a T. But the Department of Taxes in the state sort of put the trust into the retailer to correctly collect and remit the sales tax now of course there are some audits after the fact that discover that you know sales tax was collected or being over collected. But in general, we, I think there's a an acknowledgement within sort of the tax community department of taxes and not just within Vermont but everywhere that, you know, businesses do the best they can on sales tax given the law. And we kind of accept the consequences and that's sort of an argument in tax policy for keeping the sales tax base as broad as possible, with as few exemptions as possible, particularly if those exemptions are used based. So like it depends rather than being the product being what is being what the product being used for because it creates a lot of complexity for businesses to comply with that. Which I have heard people even argue for the fact that this making the sales tax on all food, having a very low sales tax. I not recommending we do that that is not particularly popular. But but there is the question of just broader. Oh, any questions on candy. Oh, sorry. Please. Assuming we tax both the left and the right Twix. If you leave out the left side of the Twix, it's only a couple hundred thousand dollars. Anything else on the sales tax on candy question. Okay, the second item that we were asked to talk about is the, the sales tax on cloud software. This is an extremely complex area of the world and I'm not going to even attempt to explain it completely in detail for this committee. I've given numerous presentations to the tax committees on this and it's still somewhat unclear. We passed this out of the house as I remember twice. Twice is that right. We passed it out at least twice. But it's in slightly different forms. So let me, I guess, bring the committee back for just a quick history lesson and a basic education of how the sales tax works. The sales tax applies to what is called tangible personal property. This is, if you think about it in layman's terms, it's things that you can hold and touch, and you can buy it a store and you walk away with it in your hand. So the general sort of base for the sales tax is the retail sales of tangible personal property. So today, before we had, you know, as robust of an internet as we have now, you used to go to the store and buy software. So if you want, you go to the store and you would buy things like Microsoft Office, you would go buy Turbo tax in a disk, you would buy Adobe Photoshop in a box, and you would go to the cashier and you buy it and you would pay sales tax on them. So those software packages have increasingly migrated to sort of a remote system. So rather than buying the disk, you are accessing it via sort of a subscription over the internet, over the cloud. And so nowadays you don't buy Turbo tax on a disk, although you still can, but you access it over the cloud, but you're paying to access that software. Right now under current sales tax law, if you go buy software in a disk, it is taxed under the sales tax. If you are buying, if you're accessing that same software remotely over the internet, it is not considered tangible personal property, and therefore not subject to the sales tax. And the reason that is, is because the legislature put a session law exemption in that said that sales of that software access remotely are not considered tangible personal property. So that's sort of the history of this and that exemption was put into place in I think 2015. And ever since that the house has sort of taken cracks at repealing that exemption. And the sort of historical way of doing it was repealing, essentially striking that language for the exemption and what that meant was that things that are what we call software as a service would become taxable under the sales tax so software as a service is, you know, thinking about products like TurboTax, Microsoft Office, Adobe Photoshop, things that you used to be able to buy in a box, software that you cannot customize yourself, you just, you know, you access the software and you use it. That type of thing will become taxable just by striking that exemption. The house passed that version, that type of sales tax, you know, that change, at least twice, once in 2017, McDonnell I think in 2019. But what passed the house, most recently is a much broader taxing of software that is accessed over the internet. So the bill is S53 passed as a Senate came to the house, the house amended it, and in response to a lot of concerns from the business community about how it would be very hard to determine what exactly is, you know, software as a service and what is a different type of software, the house expanded the definition of what would become taxable to include based more or less any type of software that is not customizable that is accessed remotely. So to break this out in the categories, the type of thing that would become taxed under S53 as passed the house would be first the things like Adobe Photoshop, Microsoft Office, TurboTax, the stuff that you could use to buy on a CD that you can now access remotely. That would become taxable. The second thing that would become taxable would be what's called platform as a service type software that's accessed remotely. So think about stuff like Squarespace that is a type of software that you access remotely. The user does a fair amount of, you know, building on their end. So it's not as sort of pre written as something like TurboTax or Microsoft Office where you really don't customize the software that much. Squarespace is a little bit more customizable, it's more of a platform. That would become taxable as well under S53 as passed the house. And then it goes even further and says that, you know, hosting services accessed and remotely so you what's called infrastructure as a service, which is stuff like Amazon Web Services where someone might design an app or a piece of software and then have those hosting services host it, you know, on an app store, or the like, that type of purchase will become taxable under S53. So it's a much broader exemption. And the idea behind that was that, you know, the lines between these types of categories are relatively fuzzy. And so by roping everything in, it makes it in theory should make it easier for businesses to comply. In general, we think this will raise last year for S53 we thought this would raise $10.9 million in sales tax revenue for the first year of implementation, growing to $12 million the year after. Again, this is sales tax revenue we're talking about. So it goes to the Education Fund. So you might hear something called the cloud tax. This is not a different tax. It is the sales tax is just being applied to something that is currently not considered part of the sales tax base or broadening the basis in S53. So I'll pause there and take any questions that can provide materials to the committee that I prepared for the tax committee that go a little bit deeper into what exactly this is. Thank you. That would be very helpful. Representative Brady. So we know that revenues were up more than we expected, and we have this surplus in the Ed fund. We know what parts of the sales tax in particular we're driving that increase. Yeah, so I guess I'll segment that into two parts. So overall revenues, particularly on the non property tax side were where came in higher than expected in fiscal year 22. But that's not just the sales tax that's the meals and rooms tax, the quarter of the meals and rooms tax, and a third of the purchase and use tax, which is basically the sales tax on vehicles and cars. The sales tax, definitely overperformed. And the reason we think that is is sort of two fold the first is an explosion of online sales. A lot of people were accessing e commerce e commerce sales went from what we think we're about 10% of sales tax revenue to almost a third of sales tax revenue during the pandemic. And the second is just a broader across the population higher level of disposable income, and people were just buying a lot of stuff. So, because of stuff, the federal government support through you know stimulus checks, advanced child tax credit, enhanced unemployment insurance. And the support that were given from the federal government. What we saw is essentially this huge wave of money being dumped into the economy and a lot of consumers use that to buy taxable goods, because things like services which are not tax, we're not really an option during the pandemic, a lot of people weren't traveling for instance they weren't buying or going to sporting events are going to concerts, which those things are taxable they were using the money to buy goods and they were buying expensive big purchases things like appliances, home improvements, materials, computers. Now we didn't we don't track individual purchases. What I have been told from our comments you have information on taxpayer data for the sales taxes that you see very large increases the amount of sales tax remitted from retailers that are in the home the electronics, the appliance businesses boats was another big one that saw a big pop and sales tax revenue so not exactly what caused the over performance but the sort of drivers of really strong sales tax revenue are more or less online sales, large purchases of durable goods and driven by a huge amount of disposable income from at being dumped in from the federal government. This effect on reducing the need from property tax. In effect yes I mean so the, the House of Waste Means Committee has passed a yield bill, which does use some of the surplus towards reducing property tax rates in fiscal year 23 but it also reserves some of that additional surplus for other items. Yeah, Graham thank you. Is it fair to say that FY 24 will look very different than what we have now in terms of we had fun and then resources that funded. For the education fund. I, I can only really speak right now to the non property tax revenue. So right now the non property tax revenue. The biggest ones are the sales tax, the meals and rooms tax and the purchase and use tax, the sales tax forecast beyond 23 is expected to remain elevated, but the growth in that number is expected to slow down, if that makes sense. And so we've received sort of this big level shift up and sales tax collection since the pandemic, and that's not expected to come down according to the forecast but it, the growth rate is expected to slow. And that kind of goes for the purchase and use tax as well the purchase and use taxes sort of right now so we received a big pop during the pandemic. Right now it's sort of being constrained by the vehicle market so there are a lot of inventories available. I mean, I don't know if anyone here try to buy a new car recently but it's, you know, pretty close to impossible. You're very limited in the amount of inventory you can have same with use cars. That's constraining it, the ability to sell more cars and so the forecast kind of has a relatively slow growth rate for purchase and use tax, but at an elevated base. So the meals and late during the pandemic that that number for fiscal year 23 is just about where it was pre pandemic, but that number is expected to recover to sort of pre pandemic level growth rates. And as of, you know, this year as we're tracking revenue meals rooms taxes doing modestly better than we're expected. So, generally what we're seeing in meals rooms taxes that it's sort of recovering to pre pandemic levels, whereas the other two are at much higher than pre pandemic levels, but their growth rates are expected to slow down a little bit. I'm going to bring this part to a close. I'm going to have one more from from representative Brown, but without one or do I notice, I know that we have Susie Glowski and Jane Nichols in the room. I wondering if you could wait until 11 will start with you in your response to this bill, and then we'll really move to us 283. So I'm going to have one more from representative Brown, then we'll take a little break from back at 11. Mass break. Thanks. And this is actually a detailed question that maybe could wait but just really quickly I was curious if you could just give a couple more examples of that third category of software you said hosting services access to remotely like a purchase on the app store is just just looking to get a little bit more clarity on what that category looks like. Yeah. So it is very difficult but I would, I would first say that a purchase on the app store right now should be subject to the sale tax already. So we're not talking about purchases in the app store. We're talking about suppose a business or an individual wants to design a piece of software. They might write the code out for it, but they will need either a platform or a company like Amazon or Google to essentially host that that piece of software to sort of make it run. And they till pay those businesses. I can't remember the Google equivalent but there are others out there that sort of essentially all they do is they help make the service of developers designing make it sort of real for lack of a better word. And they developers will pay to have access to that service. And that is what will become taxable is that payment to those companies for hosting those that new software that's being developed. And this goes to the 6% sales tax is the way it was designed. That's correct. Okay, and the subject to the local option tax like other two. Yeah, so that's another piece. So for any, any kind that has a local option sales tax, if this were to pass and be enacted would be eligible to collect the local option sales tax on these types of purchases be it or cloud based software access remotely. We are not finished with this topic. We'll definitely be coming back to it, but I want to thank everybody is that going to work for you okay soon and just come back in five, five to 10 minutes. That's fine. Okay, thank you. Okay, we'll take a now for a sec.