 Okay. Welcome to Senate Finance. We are going to take a look at the deficit. Mark is going to share that good news with us one more time about what we're looking at. And then I talked to Mark and Steve and the Treasurer last week about, so if we can't fill that hole, what are our options? Because before we go home, we've got a set of tax rate. And so we're going to go over that today just so we know what the options are. It doesn't look like we're going to do broadband on Thursday because the commissioner is not available, but they are supposed to release to the public their telecom plan today. I'm assuming, I hope it's the same plan they gave to us this week, but faith will send us all the link to that when it comes out. And then there is some discussion going on about trying to hire some expertise for us quickly. I just talked to Representative Brighlin so that we can sort through these plans. I spent this morning doing telemedicine and some connectivity issues. But just to figure out, because we still have like a six month window to get this money in and spent or committed. And so I think we're going to seems to be both in appropriations and with leadership, some feeling that we do need somebody to help us sort it through. So that's being discussed probably at higher levels than me, but it's in the happening. So this Thursday, we're not, we're going to, we've slated to have a joint meeting with the House Committee. They're going to wait, they haven't had the presentation on the plan. So we'll probably schedule them for next Tuesday when we've all seen the plan. And then this Thursday, Senator Sorotkin, you had a couple bills that you sent over to us the last day. And you said you would like to get them out. I think they were housing bills. But we can, since we may be able to start moving into those, we can take a look at them. I know that house ways and means is we'll be voting out a miscellaneous tax bill shortly. The yield bill is not ready, surprise yet. And then they are working on a short term borrowing bill to get to us to deal with the possibility of the state, the towns having to borrow to pay all the property tax and then the state either covering or helping to cover some of that borrowing costs. So they're working on that. And those two bills will be over. The short term borrowers will have to be pretty fast because we are, the towns have a June 1st deadline. So as soon as that's headed our way, and I know the treasurer is prepared to kind of give us her presentation on that today. So that's the long-range planning as far as it goes. I think it's through next Tuesday. But anything else, any of you would like to get on the agenda, just let me know or anybody you'd like to hear from, let me know and we'll get it done. We also were scheduled Thursday, Senator Campion, to hear from the gentleman at the public service department who's been doing all the technical support for the CUDs. The house has heard from them and we haven't, and Faith sent us all a link to kind of listen, we can listen to their testimony, kind of saving their time. So we'll get that. That makes sense. Yeah, rather than tie them all up. I have a feeling some of them are part-time, work in other places. Yeah, good point. So we'll just get an overview. Anything I've heard says other than EC fiber, which is a world unto itself, nobody is really ready to start stringing poles and wires with federal money at this point, unless CB fiber was the farthest down the road, and I think they were working with EC fiber to do Roxbury. That might be the only exception out there, but that seems to be at Senator Pearson. Thanks, Madam Chair. The other day, Maria said something about exploring the concept of whether or not we can hold some of this money in escrow, and the idea that she was working on a strategy to help us with the timing. And I just wonder, I don't want to let that drop. Maybe for staff that's on the line, do we understand that to be an ongoing project? It surely applies in more than just the area of telecom, but I just figured it was worth mentioning and see if we could make sure not to lose that thread. Yeah, no. My understanding is that that's on joint fiscal's radar. I think you all got copies. More and more guidance comes out of Washington, but that is still one of the big questions. What do they mean by dispersed, which is probably one of the things we need some help on. Figuring out, I think for right now, we need to at least have it committed in six months somehow. So that's probably the safest road to go until we hear something else. Okay. Madam Chair. Yes. I think ought to be on our agenda is how we respond to the broadband expansion. And even though we may not know the details of how the money will come, under what circumstances, under what restrictions, it's not too late for us to at least begin trying to understand a strategic framework around how this broadband expansion under this bill fits into our overall strategy, if any, to extend broadband throughout Vermont. Although we've heard from the department, and I know the department has provided some more detailed response to Senator Sorokin's questions, it nonetheless is a real concern to me that I don't see an overall strategy. I've spoken to Representative Sibelio, the head of the Joint IT Oversight Committee, I know she's spoken to Representative Briglin on her committee in the House. And again, between us, it seems to me we ought to be driving from a legislative perspective of how we want this thing to roll out and under what circumstances will all of us be comfortable. Right. And I think, I don't know if you were on the call, but apparently I just, I heard a rumble last week and it got presented to moneychairs today that Senate leadership has recognized that moving this quickly, we really don't seem to have the in, in Senate, you know, we don't have our own voice to help us figure out how we move forward in the, you know, without doing harm. And their Joint Fiscal is working to see if they can't get us some expertise as quickly as possible. And I just talked to Representative Briglin about that. So I think we, yeah, we've got lots of proposals, but I don't know enough to know if they're good. I mean, I don't, I need my own expert, like we can with Joint Fiscal and say, what is this tax, you know, is this a good tax plan? Is it a bad tax plan? Senator McDonald, see you. Madam Chair, Senator Brock's asking the right question. Once again, we're not talking, when we talk about broadband, we're not using numbers. Right. So when some people talk, they think it's 25-3, our committee's made a policy, we're not going to encourage or support anything that isn't symmetrical and higher. So when we seek information, we need to keep it in that framework. And as someone who represents EC fiber territory, I'm not making this argument for EC fiber who already has its ducks in a row. I'm speaking on behalf of the other areas that are unserved that may, we may somehow be unwittingly put in a position of supporting more 25-3 broadband and thereby making the eventual symmetrical broadband more expensive for everyone else. Okay. Okay. Thank you. All right. No, we have set our principles down. I think they're clear. We'll see if we can live by them. Okay. Mark, off we go. Back to the good news. Okay. So Faith, are you able to put up the balance sheet that I sent you earlier today? Yeah, I will in just a minute. Okay. Okay. There it is. Okay. So what I have to present to you this afternoon is an education fund outlook that includes a new revenue forecast as of April 27th. I can't remember when I was last in to call over this, so I'm going to assume that this is all new to you, although it might not be. So FY19 is there for reference. FY20 is where we now think we're going to end the current fiscal year. It's not shown in the sheet, but you'll remember, I think from an earlier presentation that we initially thought that in FY20 we were going to close the year with a full stabilization reserve plus about a $12.9 million surplus. Since that time, since the COVID-19 related impacts on the consumption taxes have been forecasted, we are now in a very different position. Faith, can you scroll down to the bottom of the sheet? So there was an approximately $54 million reduction in the non-property tax revenue forecast that we had in place in January that's back up on top on the sources line, but the impact of it you can see right here, which is instead of having right here, instead of having down on line 31 a $12.9 million surplus, it's now empty and instead of having a $36.4 million stabilization reserve, we now have an empty stabilization reserve and actually a $3.7 million deficit that will be carried forward into FY21 if everything we're expecting to happen comes through. I want to reiterate that this is in many ways it's a best case scenario because we're assuming that all the education property tax money that's due to the fund comes in on time and all we also assume at about $20 million in deferred taxes from the sales and use tax and the meals and rooms tax that businesses would normally be remitting to the state come in by the end of July and are accounted for for FY 2020. So best case scenario is we're heading forward into FY21 with a $3.7 million deficit and an empty stabilization reserve. So Faith, can you page back up to the top again? So that's definitely looking better though. It did. It's improved over time and that's why I said I couldn't remember when I came in last. It was initially forecasted at $89 million shortfall and property tax monies then $69 and now $54. That now is a consensus number with the administration but that's only true for FY20. The numbers I'm going to show you for FY21 have a revenue update in them but they're not yet consensus. The administration is wanting to wait till mid-May in order to do that because they think we'll have a better idea at that anyways. So the deficit for this year is 54 or 3.7? There's a $3.7 million deficit in the education fund that reflects loss of $54 million in non-profit properties. Okay, everybody clear? That's clear. We lost $54 million so we went through all our reserves and we ended up with $3.7 uncovered. Yep, $36 million reserve and a $13 million share plus all gone plus a little bit more. Okay, question. Yes, it's going to be done. How are the 19 budgets yet to be voted on counted in this forecast? Well, now you're talking about FY21 not 2020, right? So I haven't gotten there yet but I withdraw my question. Thank you. I can answer it. The answer is that they're in there at the board approved budget levels and they will be adjusted when the legislation that's currently working its way through house instead of education gets dealt with but it won't move the needle very much on these numbers in any case. I was premature my apology. Okay, no problem. So FY21, I don't really know what to include in here so I'm going to explain to you what I've used for assumptions and you can see what it does to the bottom line. So first of all up here, I keep thinking you can see my cursor but on lines A, B and C, those property tax parameters are the ones that were put in place or recommended by the tax commissioner back in January. So I have nothing else to go on at this point so I use those. I assume those were going to be the rates. Then down on lines 4, 5, 6 and 7, those lines reflect an additional $113 million reduction in non-property tax monies coming into the education fund in FY21. So then faith that you can page down all the way down to the bottom again. You can see here that there's $111.2 million operating shortfall as a result of that and that necessitates, oh again sorry, if we fill a reserve which is on line 27 back to the $38 million that we require to get to 5% so fill a reserve, deal with the non-property tax revenue shortfall and address the $74 million increase in education spending that's been approved by voters already and you can drop all the way down to the bottom line here and the bad news is down here on line 31 or about $153 million short of balancing the education fund under those assumptions. Okay and the most we could do is we could do a notwithstanding and not fill up the reserves that wouldn't, I'm sure the treasurer would say Wall Street wouldn't be happy. Correct. That would drop us down to $111 million. Yes, yeah that would mean yeah that would mean you'd be pushing that forward forward to next year and I don't know what that would do to the state's ability to borrow money to deal with this problem and we have no idea what next year will look like. That's right and this is effective you know if there's been a number of proposals that have been addressed and ways and means started to look at them but the rug kind of got pulled out from under them this morning when we got the new guidelines from the treasury on how you can use the CRF money the one and a quarter billion dollars we have ways ways and means was looking at a number of proposals that we're hoping we could use some of that money to solve this problem the guidance that came out yesterday seems to preclude that as a possibility I think Abby may be on this call if you want to talk more about that but right now I don't know one of the one of the things we were going to talk about is options for addressing this problem and a couple of them at least have gone out the window I think with the with the new guidance that came out this morning so okay so any questions for mark at this point Madam chair I have a question while we're talking about the reserves and I think if the treasure is still on the line is there we've been talking about it as we leave it at zero or we go to the full 38 million and I guess I wonder for the treasure or mark is there there has to be some in between ground if we if we set it up on a three-year you know restabilization to do the credit agencies I assume that's better than leaving it at zero and but is that a fair assumption so if I madam chair if I could yes I think that leaving it at zero versus having a having a plan to to fill it over time is obviously better second option is better I think what what I think from conversations and with other states as well as our financial advisor is that rating agencies as a whole there's some differences as they're looking at it are looking through the crisis to the other side what is it going to look like so they're allowing folks some time to to to get back to where they need to be I would say that if you take a look at the fiscal year 20 deficit I you know and again I this is this is conjecture on my part you know there's a little bit of you know that's that's a that's a short-term look the concern that I have is that the long-term look into the next couple of years in terms of the structural issues with the ed fund are a little bit more concerning to me right now I think the emphasis is on liquidity emphasis is getting through this and using the correct measures I think that there's some expectation that that there would be some use of reserves although later we get to the discussion of a cruel versus reserves I'd like to be heard on that but I can't think to say but I don't know if that answers your question or not okay yeah I think that does and I think one of the problems that we're having I know the economists are is if you're in a recession there's patterns to recessions and so you can predict where you think you're going to go and how quickly you're going to move out this one is subject to a virus and they still have no way of knowing if we're going to you know how this virus pattern is going to run so to say we're going to be out of it next year and we might find out it researches and we're shut down longer next year it's that's what's making this so hard we can't there's just no reliable data to put in the computer to get a reliable answer of prediction out so we are all seeing how we deal with indefinance yeah all right um so brad anything you can help us with and what's the agency thinking um about the deficit I know you've had a couple weeks to think about it um um thanks um what what I've what I've been trying to do is get a handle on what we know is going to be the the cost of the ed fund next year so I've been working with Chloe and Mark a little bit getting information on the on some of the budgets that we haven't heard about that that actually passed there were probably about 15 to 20 that passed that did not give us preliminary information so I have most of those data at the moment we have rough ideas of where people are going to be based on for the for the 19 that don't have budgets for getting the pending legislation we have rough idea of where they we think they're going to come in so what I'm trying to do right now is pull all that together and get that over to Chloe and Mark so that they can they can look at the ed fund a little more clearly in terms of FY 21 what the school district would be expecting the only thing that that I can think of that has really come up as as a possible not solution by any means but um to offset this a little bit is to allow people reserves and surplus they have it may be sitting their current language I think I've mentioned this to you guys before current language says that um use of any reserves requires voter approval if it's not for the intended purpose um so I've had several business managers ask me if that could be way for one two possibly three years and the second piece of that is if they happen to be ending a year with a surplus maybe maybe not this year but if they happen to be ending the year with a surplus um generally speaking the process for that is any surplus generated in FY 20 is audited in FY 21 and is then available for use in FY 22 and they were they were thinking they've managed their money well they had a rough idea of what would be in FY 21 or what the the the manuscript would be for FY 20 if they could if they would be allowed to use that without being an audited amount so those are a couple things that came from the business managers okay but we still have to collect to the budgeted amount so this might help them out has anyone talked about the I think it's 27 million dollars the schools are getting a portion of yep um that that's still it's I can't remember what the number it's like it's around 28.1 million something like that I don't remember what's on my head we haven't gotten the money yet um but we know pretty much what it is um it it is again we're still waiting for guidance from the federal folks as to what it can really be used for there's been discussions both in your committee and other committees as to ways to treat that money I don't know as we've come out as an agency with any anything specific that we're recommending I do know that Secretary French has been very concerned with when he's talking to superintendents very concerned with the cost of special education uh there will be compensatory um costs coming in compensatory services coming coming up that where where kids are not being served properly right now that will help you made up for there's possible um more work in the end of the school year um then there's also there's also a concern that um that mental health care costs are going to go up too so he's he's very concerned with those two areas specifically he would also to recommend people looking to the future that this may not be unusual anymore and looking to build up if you guys are talking about more broadband and how to get that working to some more serious infrastructure okay yeah and mental health seems to be one that they seem to feel does well over telecom okay so no magic bullets huh no magic bullets at the moment it looks like they may be planning to use that money and given the federal guidelines today using it to offset state payments to the schools might be off the table and it looks like they may be using it for increased special ed um and health care service counseling okay any questions for brad at this point all right i do have a question ma'am chair brad um can you can i i'm not sure you're the appropriate person but what about meal service there's a lot of concern that that gets clicked off and halted sometime in june and and uh given the poverty and an income uh drastic changes people have for income there's some hope that uh maybe we could extend it or be a little more aggressive in our summer meals program is that something we should talk to somebody else about or do you have any sense of the agency's direction on that front i understand it well the first the first part is i pass that question off with rosie cruger and i i can get in touch with her but i my understand is that the school districts are gearing up to to really keep this going through the um through the summer that that's that's what i've been hearing anecdotally i will get in touch with rosie and get some more information from you'd probably a better person to talk to about than i am since that's what she does okay okay any other questions at this point committee it's just just about deficits about a chair uh yep deficits well i just i had a question about the 19 school districts and um that hadn't voted yet and i i formulated a proposal that maybe mark um corral could um put into print but i can share that committee now or or i the briefing we got i think it was chairs meeting i'm looking to senator ballot to see yeah is that senate you you can do drive-through you can do mail-in ballot this you know you you can still hold an election that the senate is looking at and he said they are unanimous that you can use last year's budget um and run your school with that and and that's if you don't get your budget voted by is it july 1st june 1st i think it's july but you can hold an election anytime but going forward it would be last year's budget and no you wouldn't have to borrow it it would get paid through the ed fund the house is looking or planning on the last year plus the four percent since that's what the average amount other budgets went up um i believe negotiations are in the future but those are the two proposals that are on the floor that i know of is the four the four percent which is the average set the average of additional spending or the average of um spending per pupil uh brad he's got his hand up yes i i do um it would be for education spending not spending per pupil um and i would just jump back the most recent draft i just read madam chair on the house's proposal it's not quite the f y 20 plus a percent plus uh an inflator and okay what it what it says is more that um the agency will be able to be given the authority to authorize a budget that would be equal to the f y 21 proposed educations but not a parliamentary phrase that would be authorized to allow education spending not a budget education spending equivalent to what what they what um the board approved given the fair call right i think even for the ones that failed the school boards have to come back with a have a vote for a budget that is less than than what they initially came in because the voters already said no to that one so it's a it's a little bit less straightforward i think than the f y 20 plus four percent four and a half percent but that's that's kind of where it stands right now and i think i think madam chair is correct there will be discussion between the two sides so santa mcdonald's that keep your framework of what's out there uh sort of but if you're one of the 19 towns what can you expect i you can expect the ability to continue voting um you can expect that if you don't pass a a budget that but you have put a budget out there that that the agency will be given the authority to say that is what your education spending will be and then you're you're you would be able to spend any of the money it's coming like federal money special ed etc but the education spending amount going into the end so just madam chair fundamentally anybody who is voting on a budget after today is voting in a different universe than all those folks who vote and i would hope that we would find a way to make the 19 that are unvoted to put them at the same status of those who have already voted with an amount of money that puts them in that ballpark whether it's percentage of spending or percentage of spending per pupil or merging those two and finding the middle ground and give them the provision that that's their budget for next year unless they hold and call for a special meeting to reduce if we simply authorize them to go out and spend more money in this different universe it it's not going to come out with with a it's going to come out disproportionately for those school districts and the students in them so i would hope we would keep that in mind and i may ask mark to draft something that would outline how to achieve something like that for this senate finance and education to recommend or reject yeah i would encourage you to talk to education um because they they're working on it senator pierce and rad does the administration have a position on the two proposals the house senate or or you could you make that clear for us not that i've heard of this is all still bubbling in the background as far as i believe the agency is concerned except for me i'm not sure if secretary french is aware of these i'll bring it back to his attention so i think i think he knows what's going on but i'm not sure we have a chance to talk about what what these his thoughts are okay all right anything else okay at this point we're going to go to treasurer pierce welcome beth you're here you're on the phone yeah okay so thank you there you go you've got your attention i'm jumping ahead of you my apology so for the record best pierce estate treasurer and i don't have any silver bullets as well so we're going to have to you know muddle through this and work together and my my experiences that when we work together we find solutions but let me get to a couple of things what i understood and i and uh from from the previous presentation is that in order to get to that that 3.7 million dollar deficit in 20 you're assuming two things one that you'll be able to approve the sales tax and secondly that you will receive the the money that is coming to the to the uh ed fund on june 1st with respect to the first one the accrual i i believe that that's a way to handle this and there's some advantages to doing that first if you don't do it what happens is that in 2020 that the the financial statements are going to look very very very well thin and then the next year when you not that we're going to have a good year in 21 but you'll have twice the collection or some portion of that one and a half or whatever that might be in 2021 and then it reverts back to um to to something that's closer to normal but obviously we're going to normal is not going to happen for some time in 22 and what that does is you've got a a low a high and then then a middle ground and for comparability purposes i don't think that that uh is what you would want in a in a budgetary statement so i think that making that adjustment from accrual um seems to to be something i'm not the accountant i'm not the state comptroller or the budget office yes no someone just that's fine okay um but uh you know i had some conversations i'm a chair of um the president of nasaq the national association of auditory control within treasurers and we've convened a group of um six comptrollers across the country and six treasurers including myself and we're working through some of these issues and we hope to have a little bit more clarity on this particular issue in the next couple of days we've got a weekly meeting that uh that uh we'll have tomorrow but i think that that just from a you know comparing one year to the next that makes sense uh good gap accounting and i'm looking over at senator brock's faces on the youtube as i'm saying this gap accounting you you do do you know for accrual of that budget is up to the up to the states some states use a cash basis some use monetary to cruel some use a hybrid and you know the the ability to to make changes to that is up to the state you know going from one to the next going all over the place in a normal circumstance would not be recommended but i think that during these unusual times that might be something you would consider i think i would defer to wedge council into uh to um joint fiscal but you may need some type of statutory language if you're going to do that in terms of you know a budgetary presentation again i would defer to those folks but that's something that gets you a little closer uh the the other piece in terms of the the idea that we will receive it's roughly 88 million dollars uh brad had the exact number in his in his head uh that we will be receiving on june 1st the bills i believe have gone out and our expectation is that we will receive that there's still the the penalty if you do not receive it if they're not turned over to us but we have and we'll get to that in just a minute the the powerpoint that we have and for me i kept it under i i'm not sure if it's 10 or 12 slides which is a little unusual for me but i'm working on that but by virtue of having a borrowing mechanism for the for the municipalities i think that we we have a better um likelihood of collecting those dollars on june 1st and we we do have a a proposal that that house wins the means is looking at uh to um to reimburse communities for the cost of interest in that borrowing and i think that's a pretty good middle ground uh something that we feel pretty uh feel comfortable recommending and was in the powerpoint we'll deal with that momentarily but i think that gets you to that 3.7 million dollar deficit using your reserves in a in a in a in a normal year if there's something called normal anymore you would having a deficit in a major fund such as the education fund would not be something that would be looked on favorably by the rating agencies and i still can't guarantee what what what the end result will be with with these issues but again what we're seeing is that the the the literature that's going out there in the commentaries are that they're looking through the crisis onto the other side so i'm looking at this shorter term issue in 2020 i think that there's some understanding that there may be some use of reserves and some of the other issues i'm more concerned frankly about the longer term deficit um and and what that's going to look like in terms of uh of our process and i know that you're talking through some ideas on that we'd be happy to try to assist but i think you know between mark and brad you've got them the the real experts there right now uh but again uh that uh that would be a a concern one of the things that might provide some relief on the municipal level and i'm going to go back to that and then walk through something uh that also is in our presentation called the community disaster alone program it's a program by FEMA we've never utilized it in this state although with legislation state statute going back to i think 1975 um that allows you to use it in a in a in a disaster um but it's designed to provide a smoothing of those revenues again that's not for the state but for municipalities smoothing of those revenues over losses over a period of time so if you have a certain level of reduction in your revenues you can get a five-year financing through this program to kind of smooth that out and an additional five years is an option and there's also some some forgiveness in fuller in part if if you have end up with a three-year cumulative deficit so it might be something that intertwines with how you're looking at the ed fund and how the municipalities may have an opportunity now as i say that i also want to put out a word of caution usually you have a you have a a natural disaster that hits one part of the country you know sandy hit uh you know new york and new jersey you know we we were adversely impacted by iran north dakota had some floods there was an article in governing magazine that referred to this as the hurricane that hit across the country so the the capacity of fema to to address these things is going to be strained and so there may be some additional issues in terms of both capacity and time frame i did see that they seem to be gearing up somewhat we're still trying to work out the mechanics of this but it may be of some help and and as i'm looking through my notes here i would say that that borrowing for instance that you said well let's borrow you know in in the education fund borrowing does not solve the problem again you know you would have cash but you would also have a a liability to pay back that borrowing so again for the for the accountants in the room debit to cash and a credit to a liability so your net impact on your bottom line financial statement would not change so the borrowing does help to pay the bills if we were to do that we would go through our our typical line of options starting with our pooled cash through our into fund in our in our letters of credit and long-term borrowing and that's going to bring me to the slides in just a second but i did want to point out that borrowing is not something that necessarily is again if you if you have a cash need that needs to be addressed but having those reserves our cash position is relatively strong we believe that we will get through this this first year without having to do an external borrowing but when we had less reserves that was not the case in the early 1990s Vermont was issuing someplace between a hundred and fifty five and a hundred and ninety two million in short term debt obligations annually to to get through the the peaks and well not the peaks but the valleys in our cash flow and they also had a fifty five million dollar deficit notes that were out there from us from the uh the um the problems and i presume 1990 and 1991 i don't have the the dates of where that began but again there was a deficit borrowing that took some time to um to to um to pay back so um with that um i guess i'll stop for a minute and answer any questions and then um if that's okay with you again madam chair and then get into that presentation that hits on some of these issues okay uh yep i think any questions committee i am looking i there it comes i lost my video something popped up for an app um any questions i'm not seeing any okay i think madam chair we can get to the slides there we go so if you put up the slides um uh face that would be helpful and i'm gonna walk through it here and uh when i say next page that's what you'd uh you'd make the uh the change hopefully i'll remember to do that uh that's not my best skill set but we'll go through that so so this is our title municipal borrowing education fund discussion and it's dated May 5th and uh i don't know do you have that up and available to you folks it's up and it's on our website there you go out on the screen yeah so let's go through the page two um is the uh state borrowing the potential back stops and uh one that's not on here is pooled cash we we pool our dollars together so the ed fund the um the um the general fund the transportation fund as well as others are in what's called pooled cash uh that uh that permit you to pay the bills uh we talked a little bit about that the last time i testified in front of you folks um beyond that is the inter fund borrowing that allows us to borrow against um um uh um what's called restricted funds funds that have specific purposes that are segregated though some work is comp funds for instance some um uh the state a state medical fund those those would be examples but you have to pay them back but it allows you to take care of those um um uh valleys and you're and you're in your as i said you when you look at our cash flow it's um uh i always refer to it with a very technical term it's lumpy so you have peaks and you have valleys in the in the process um the line of credit would be the next next thing that you would do going out to a bank uh to get a line of credit for instance um and then issuing um um issuing uh short term debt uh there is something that people are talking a lot about uh what's called a municipal liquidity facility with the federal reserve it is not a good option for vermont and i'll talk about that um a little bit further down if we were looking at you know the education fund and and the ability to pay pay the bills with that particular um um shortfalls in those years we would go through this process we would use inter fund pool cash then we'd use inter fund borrowing um and and essentially use that bucket first and if that bucket is uh full you move on to the line of credit and if that bucket is full you would you would take a look at other types of short or long term borrowing my hope is in my in our estimates are that you know we're we're still in good shape we're not looking for external borrowing um but we're going to have to take um uh the numbers from mark and brad and put those into our to our long term cash flows and take a look at what that uh what that does but we'll continue to look at that um if you go to the next slide this is um municipal options and they're similar but yet different as i say um sometimes some larger towns might have some um some pooled cash um accounts similar to ours and some inter fund borrowing that's probably not the case uh most most of the way through um when when towns need to uh when they have those peaks and um excuse me when they have those valleys uh they typically go through a process to um to do a short term borrowing a line of credit or a what's a revenue anticipation note or something along that line tax anticipation notes in uh in anticipation of property taxes through their local banks and this happens on a on a regular basis um and uh so many towns have relationships already with their banks uh the banks of that a history is stepping up when we've had problems in Irene uh they offered very low cost um uh financing arrangements lines of credit uh two towns why they were waiting for their um FEMA funds to come in for the natural disasters i frequently talk about for instance the town of Halifax at the time i think their population was roughly about 400 their budget was under a million dollars i think it's someplace in that area or possibly more now and their damage was over four million dollars so uh having some ability to uh to do those lines of credit with their banks uh the uh their bank of record was very important um the bond bank really isn't an option for for them because of the bond bank really deals with physical infrastructure projects not short-term revenue related and as i mentioned earlier we'll talk again about the community disaster loans there's some options there that would be a takeout so once you've done the short-term borrowers dealing with some of your longer-term problems uh you you might have the ability to use these these uh community disaster loans and we'll continue to look at other options to go to the next page so page four getting back to education cash flows we uh we remitted on time the the payments x68 payments to the excuse me we we did the x68 payments were made by the state on april 30th it totaled 163.4 million we the next payments are scheduled for september 10th and december 10th what we're counting on at this point is the money coming in on on june 1st that's approximately 88.76 million and the next due date so that is december 1st uh many municipalities are experiencing cash flow impacts due to the delays or deferrals of receipt of property taxes and uh we wanted to come up with a solution that provided some assistance to uh to those municipalities uh the next chart page five is just a compilation and this was on your website uh so i um and uh mark to probably explain this a little bit more but right now it says outstanding due after 315 and that would be tax data after 315 uh might and again i'll take uh correction from brad or mark but my understanding would be that that's that's the the larger number that there will be some collections uh that you have escrow accounts uh so that hopefully that number won't be quite as large as as we're working through this but on page six we um i i just want to usually i don't put into a presentation something that we're not going to do but there was so much publicity about this uh and the federal government uh said we're going to come through and create this municipal liquidity facility uh and state-level issuers can use these proceeds uh they first said that uh states can do this uh but uh with respect to um municipalities doing this or counties doing this which isn't a factor in vermont you had to have a million residents they since lowered that to 500 000 and cities had to have a 500 000 they've lowered that to 250 that's still not an answer for for vermont um states could excuse me states could do a uh support for those uh but uh for for the respective counties and cities that created a whole host of other issues uh in the program bottom line for me is the is right down at the bottom it says interest rate pricing the federal reserve um does not see this as uh something that uh further regulations when they're doing this type of facility they see themselves as the lender of last resort and there would be a penalty rate which is essentially a premium uh to the market rate uh if we and also my understanding is they would be looking for you to have exhausted your other resources such as bank lines of credit or your own borrowing so we do not see this program as as a option for vermont but it's been out there quite a bit so i wanted to let you know uh because you're going to hear that quite a bit as uh as folks are looking at options uh our recommendation is on page seven and it's to create uh is to to to uh encourage short-term municipal borrowing to local banks you know through established networks banks do have um um relationships with the municipalities and those municipalities have done just some types of um of borrowings and short-term lines over the years and we would encourage folks to look at that we've had many conversations with the vermont bankers association and the banks stand ready to assist in that to help defray some of the cost of doing this we would uh we would recommend that interest payments be reimbursed by the state to manage the cash flow effects of these delays with a couple of caveats our hope is that going down to a bullet that's a little further down that the state would be able to recover the short-term borrowing costs through the coronavirus relief fund the tears act in order to do that we wanted to stay in compliance with the the general parameters so we would so going back to bullet two in the indent their short-term borrowing costs would have to be not included in the municipality's budget that was enacted before or on or before March 27th that's per the cares act that the period is of eligible borrowing is from March 1st 2020 to December 30th never knowing why they didn't use December 31st but hey um and expenses must be consistent with the uh the cares act uh so our intent with this would be cost for related to covid because of the delay um in receipt of those monies you cannot you cannot under the covid guidance um replenish that you can't provide money for revenue um shortfalls but you can in our interpretation and based on a conversation um and some notes that I saw from the NGA National Governance Association and NASBO the National Association of State Budget Officers I believe that's the right name for that acronym that with the treasury that that short-term borrowing expenses would be appropriate we don't have a guarantee of that but our our thought would be you know to appropriate the dollars and to the extent possible reimburse those so that the Relief Fund or any subsequent amendment to the to the Relief Fund or the or any subsequent act by Congress and then as I said explore using the community disaster loan program for for for longer term needs I'm going to move to page eight which again it just happens to be the state's optimizing language we won't go through that now this is for the community disaster loan and again that gives a little bit of leeway and and assistance to towns as they're as they're dealing with those revenue losses and as you see that was added in 1975 even though we have not used it so this program's been around for a while it's still there folks and really that's and I noticed that several um um employee um um platforms or recruitment platforms and by the way I'm not looking for another job I was checking them out for this purpose the FEMA is is is apparently gearing up for this program so that's a good sign um the page nine you see the the the general parameters of this program so that a municipal government could borrow up to five million the term again is five years may be extended and they do have some forgiveness which is always a good thing and uh we would encourage folks to take a look at this we will be working with the administration if you go to page 10 you see that uh it references a um a person uh it's an item number four on the flow chart the governor's authorized representative and we've been in contact with the administration to try to figure out who would be that authorized representative right now we're taking the lead having those initial discussions but it would seem to us that some type of handoff would be appropriate although it is required that the state approve or review the loan applications and we would certainly want to take a look at the the finances of that as part of our office so I've gone rather fast through the the charts I apologize I know that I can speak quickly um but um I will leave it at that and answer any questions that you might have but I think this does provide some help for municipalities how that interacts with the with the education fund there's some some some um linkages there and be happy to talk further about those issues and work with this committee it is important that this bill and going back to what the chair said earlier that uh would June 1st coming along we'd like to give municipalities some certainty in terms of that reimbursement of of the interest expense and so um as as everything is in this particular moment of crisis as soon as possible is it divisible and with that I will stop um and take any questions okay so in summary the towns would borrow as they do now assuming for a larger amount the state would use cares COVID money um and reimburse the towns for the eligible expense so they have budgeted regularly borrowing for property you know for standard tax flow cash flow that amount wouldn't be counted but anything additional caused by this COVID virus would be and then we would look to the municipal disaster loans or steer towns in that direction for more um severe revenue losses or for their revenue losses due to non-payment of property tax or um whatever other issues um that come up but probably loss of revenue so committee any questions none uh just to clarify sure I'll jump in um ma'am treasurer you're saying that the the COVID dollars would be used to reimburse municipalities for the interest charges on the loans do I have that that that's all in terms of state spending of the CARES Act that that would be the expense is that right that is correct okay and how do we um and you said we need to basically try to figure this out this month if we can how do we begin to estimate what that would cost I mean is the project to survey municipalities and try to get them to give us a range of estimates is in your opinion well I think that we would work with the league and have some conversations with them going back to that chart that was earlier in the presentation I'm going to go back to uh hold on I'll get to the right page here um and again I'm going to defer to Brad and company but 132 um 132 million about standing again I think the number is actually considerably less than that but if you if you want to take a look at uh if that is a starting point if it was in fact 132 million it would um it would uh and and that's say the interest rate was two percent and you did this for a half a year that would be about 1.3 million dollars if you said we're going to collect 75% of that um you would um you you you'd have a um a different number in there um I'm going to quickly do that um you would you'd have about 99 million dollars of of of um shortfall that's about 1.9 1.2 just under 2 million dollars for the year and about 990 000 for a half a year so we would need to have some conversations and do some estimating between tax and the league and and see if we can get a better feel with mark on this and and get a better feel for this there is language that's already being looked at in house ways and means they they they took testimony in that today from myself from Karen from others and they're going to make we're going to meet actually with um Becky later on today and see if we can tweak that that language a little bit and certainly get that over to you folks as well but it's a little harder to to get a handle on that and we're going to need to do some quick discussions about that maybe I'm missing go ahead maybe I misunderstood but so this is only for the municipal ed fund liability not for their own operating uh budgets is that accurate yeah essentially this cannot be used just as COVID can't be used to cover revenue loss here um and the state level can't get the local level as well but it can be used to defray the interest cost of a borrowing over and above your your normal but borrowing because of the the COVID at least that's the interpretation we have now um and there is some risk in doing this because if it is not it's deemed later not to be covered we we'd have to appropriate those dollars but um this is uh uh suggestion is to create a separate fund to do this so it has its own fund integrity uh and um uh there is a risk but I think it's a risk that um has some proper fair fair the good probability associated with reimbursement and I think it's the right thing to do for the for the municipalities as well so that that seems clear to me but if they are if tans are struggling to collect property tax in order to reimburse the state for ed funds they're also by default having struggling to collect their municipal tax and and I guess I'm wondering if anyone's had conversations or you know we talked about this when we did just a very simple vote authorization for municipalities in terms of changing their due dates is the logical follow-up thanks for covering our borrowing costs for the ed fund could you also cover our borrowing costs for municipal funds and and I just wondering I'm not against for or against that I'm just wondering if anyone's had that conversation your knowledge uh no um and again I want to be very um um I want to take a look at the numbers before I um would would offer any recommendation I think going into this you have to have some sense of where you are on this again I do think that um uh um using this for revenue shortfalls would not be appropriate but um I get your point and we can certainly have more of a conversation on that that might be an add-on in the road I would want to get this one done as quickly as possible I think right now we can say that we are all treading water uh just getting through the next deadline until we find out what the future is um there's somebody who's a CPA pointed out to me we have a 25 unemployment rate but that means that 75 percent of us are still working so we probably know more after that I'm assuming May 15th is the last payment so we'll get a better idea we're just we're assuming there's going to be a shortfall in the property tax but we don't know how much or how severe we will probably have a better idea after May 15th um and again it will the it'll depend on how quickly the economy comes back it will depend on how lenient the towns are in abating taxes um we'll find that all out as we go through but this is really just getting us through the first of the year or the first of the fiscal year um until we get more data because we aren't even going to have the income and the trust taxes until July 15th and it'll depend on if the economy picks back up or if we get shut back down um we're treading water yeah senator I will verify with the league what their understanding of this is too and ultimately it's up to you folks um you know we've made a recommendation but uh it's up to um both the the house and the senate committees and then in the general assembly as a whole uh how far you want to go with this okay and as things evolve we can't we are going to be back here in the fall sometime um we can make addition subtractions uh once we get a better understanding of what's actually going on but this gets us through June 1st and keeps us at the 152 million next year because that assumes property taxes are going to be paid that's and I'm not seeing mark here to shake his head at me but um that's while you know the the deficit is the loss in the sales tax primarily um so the more property tax we don't collect the worse it's going to be yep okay so Beth basically we can short we can to get through um next year's deficit we can't come up with another revenue source um um we can go to indifferent borrowing lines of credit then short term debt um we'll probably get some leniency from the rating agencies on this year's we have 3.7 now but and we might even get a little leniency next year but if we can't remove you know at least have a plan for replenishing the the reserves and for removing the deficit the longer we go until we do that the worst it's going to be with our overall financial ratings is that yeah I would say that's fairly for the most part I would be hesitant to say the rating agencies will do this um or this way um because I can't speak for them but I do think that um from the literature that I've seen from the the commentaries that I've seen um again it's you know they're looking through the crisis to the other side so I have more comfort but no guarantees with 2020 as you get into into a larger problem in subsequent years again keep in mind that the ed fund is considered a major fund in our financial statements and and and this this becomes more problematic and we do need to address it um so again can't speak with the folks but I think that there is a strategy to go forward and we need to do that so okay committee questions thoughts comments um my thought would be we won't take this up again until the house bill comes over I'm expecting the house bill on this one will come quickly because we've got a limited time to get it out there for the municipalities to have some security so if you have any questions or anything let's get those before you know let's know what they are and see if we can get questions answers send to Pearson um just to your question about timing for the treasurer uh is it would we assume that municipalities sort of look into this get ready to borrow and then are relieved to find us covering the the interest costs in other words the sequence we can't wait until the bill gets to the governor before they start exploring borrowing I'm assuming yeah do I have that I think yeah I think that this is going to remind me a little bit of 2011 when we tried to relieve um I shouldn't be saying this in this context but it was a little different with the with the takeout with the infrastructure reimbursements from FEMA but we delayed a payment at that point in time the December uh first payment and the legislature was not in session but folks could rely on the the the intent of the legislature and I think that I think if we can get someplace down the road on this and get from consensus through all parties the administration the treasurer the the general assembly and the Vermont League of Cities and again if I look at the bill you know we may be talking past ourselves and what what amounts um actually be covered in terms of property tax but that will be a decision for the for the general assembly and again how far you want to go with this but um um I guess that's the bottom line for me is that that we need to have some type of consensus that folks can rely on and preferably get this done as quickly as possible and the banks as they said are standing ready to to assist yeah this is something most towns do as a matter of course so it it's not like it's going to be new their banks know them they know their banks they're ready this they will they will borrow and I think we've been very clear that we weren't very fond of the idea of just forgiving it and saying well we'll just accept the deficit uh so they've got no reason to think that we're going to change our minds this will give them an out and I believe this says we will reimburse them so they can know you know knowing that the cost is coming to them eventually they will have to repay it um if this continues any year from now we're having the same discussion then we've got a bigger problem um remember moody said we were one of the 12 best states situated to so that makes the question of what are the rest of them going through um and there's probably some bigger redder states with more clout than we have that are going to be facing the same issues and talking to washington but right now and the the guidance that came out today I believe the house was talking about being able to use some covid money to do grants so that people could pay their property taxes and um the guidance said nope can't use it to offset revenue that the town's losing and that includes payments to folks to pay their taxes so um we will probably have a better idea by the end of may but we've got to give the town you know as to what the shortfall will actually be but we've got to give the towns uh some hope uh that they'll get through that and then you know by october maybe we'll have a better idea for how quickly the economy is going to come back and how quickly the unemployment rate is going to start to decline but um um any other questions or beth i'm going into the manufacture of silver bullets madam chair i think that's going to be a real hot item these days you got it you got it yeah if i could take up any conclusion so um that yeah if i could i just want to say if you know the conversation you had about moody's and and the comments that you heard uh that we were in and in better shape than others that's because you did the right things that's because you had healthy reserves you did not have those in the 90s when uh when you had to do those deficit borrow the deficit borrowing and more cash flows so i want to congratulate the legislature in this committee for the good work that you've done on those issues because we're in better shape because of it it's still not you know still still looking for that silver bullet but the bottom line is that we're better prepared because of the foresight that the general assembly had so thank you we would be looking at a $59 million deficit this year exactly um and it did and it having been through those knockdown dragout brawls over a penny on the tax rate holding on to that reserve has been difficult but that this is what it's there for it's not for school spending to choose choosing to spend more it is there for when the bottom just drops out one way or the other so okay if you have anybody else you'd like to hear from on this any more information let me know senator syracan if you let faith know who you'd like to hear from on those two bills um i'm in contact with her right now okay um then we will get those up and running for a walk through on thursday and then i will try and schedule a discussion with the house committee um about the plan that is put out i know that chair briglin shares my concern that it is a really big plan and our ability to either carry it off in six months or to control the outcome i mean if we get very few bidders or we get bidders that only bid on places in washington and chitenden and franklin county what do we do with the places that are really hurting so um i mean we've got pockets in washington county have that have very difficult time we've seen that with some of the folks that shown up for these meetings but um i think you know we really want to get the biggest bang for our buck and i think we're we're just trying to figure out how to do that so we will schedule that at least the group discussion on tuesday hopefully by then we may have a miscellaneous tax bill in the short term borrowing bill to to work on and we had a few things we were going to put on the miscellaneous tax bill senator piercer m chair i'm hearing that houseways and means is also looking at some ideas to remove the lag between year of income and your income sensitivity uh at least okay i'm i think that's vitally important for us and i hope we can at least understand what they're thinking about or or your own brainstorming just as uh it's really essential that we figure out some stopgap measure i think it it may be possible i think the problem with a complex engine is when you remove one part all the rest get affected but it's worth looking at and i think we will have a better idea when this tax payment comes in how much how many people are going to be really hurting a fair number of these folks are going to be renters um that aren't employed right now it's how many folks are really not going to pay their property taxes and then then we'll know the size of the problem we're dealing with and we can figure out how to deal with it okay all right all right i think that's it for today thank you all thank you treasurer and brad and mark um and thank you committee i have a whole half hour before i have to go back to joint fiscal and work out the acceptance of the 1.25 billion dollar grant the administration sam mcdonald did you do you have something to say no i'm gonna go spread i'm gonna go spread fertilizer and drive fence posts fertilizer is a good word for it thank you okay thank you committee we're all gonna go