 House Ways and Means Tuesday, April 19th. And we are taking up three different issues this morning. The first one is going to be an update on revenue for both fiscal 2020 and 2021 that Graham and Mark will walk us through. And this is a consensus forecast, I believe. The last one we had was not consensus, it was just Tom Kovett. And Tom Kovett is available by phone if we need him. Then we're going to look at a bill S283, which is the Hartford TIF they have asked for an extension. I'll let them explain why they need it. Has passed the Senate. It's been in our committee since before we left the building March 13th. So it was this date that I timed things before the 13th and after the 13th. We've had that spilt for a while. And then we're going to look at H716, which is a bill that would give hunting and fishing licenses to Native Americans. It's a bill for free. And it's a bill that came to our committee on March 12th. So when I was first asked about it, I didn't realize we even had it in the committee because once it arrived there under rule 35A and I just wasn't aware that it had had gone in there. So we'll hear about that bill. And that will be our morning. So with that, Graham, I think are you the one who's going to start us off? I believe so. I mean, I should first ask if the committee has anyone on the committee has an announcement or something they want to put on the table before we get rolling. Okay. Go ahead, Graham. Thank you very much, Madam Chair. Graham Campbell from the Joint Fiscal Office. Sorcia, would you mind putting up the document that I sent you this morning? Also a public shout out to Sorcia for the many changes to this document that occurred between last night and this morning that she had to post multiple times. So thank you for that. So I'm here to talk about the updated revenue forecast that, like Madam Chair said, was consensus between Kankovet and Jeff Carr, the administration. This is an update for all three funds and it's fiscal 2021 and we got our first glimpse at fiscal year 22 as well. So I'll be walking through that. The main sort of headline summary here is that the numbers by certain standards, but in terms of the size of the revenue downgrades we've seen are not actually, it's a relatively small update, but in sort of regular world terms we're talking, you know, five to $15 million. So large depending upon how you think about it, but in terms of the dollars we've been seeing not super significant. So I'll begin with fiscal 2020 here. The total revenue downgrades across all three funds total about $143 million. That number last forecast on April 28th was $146 million. So a very modest improvement for fiscal 2020. The general funds expected to be $46 million to the red. And that does not include the direct app that we receive on the property transfer tax. And so that is an additional roughly $2.8 billion. So the true number to $8 million up or down additional down. So the real number here should be about $49 million. The transportation fund down about $42 million. Oh, sorry, I should say that the general fund number back on April 28th was negative $48 million. So it's roughly the same. The transportation fund is now estimated to be negatively impacted by COVID-19 to the tune of $42 million. That number was $44 million back on April 28th. So it's a little bit better. And the education fund is basically the same as it was on April 28th down $55 million. That number was $54 million on April 28th. So it's a million dollars worse than it was on April 28th. May I ask a question? Why are we waiting on the property transfer tax because it's a direct app and it doesn't go into the office? Well, maybe I didn't explain this very well. So the property transfer tax is one of the wackiest taxes that we have where it starts with the general property transfer tax and then statutorily the first $2.5 million comes off for debt service for the housing bond that was passed a couple of years ago. And then there are statutory percentages in terms of diversion and revenue, but we not withstand that every year. And so the department taxes gets a small chunk in statutes about 2%, which would work out to about $850,000, but we have only appropriated about $500,000 to them. VHCB gets, I think it's, let me see here, about 50% of the remaining revenue, but that's not what stood. And then the municipal planning board gets 17% according to statute, but that's not what stood. So essentially what happens is we say VHCB municipal planning board and department taxes will get a set amount that we specify in the budget and the rest of it just flows to the general fund. What Tom does here is he produces a downgrade for the property transfer tax as a whole. And then he uses the statutory percentages, but the actual loss to the general fund is really what is left over after the, we account for those, what's actually put into the budget. So in the budget last year, we put in a certain amount for those other areas. And so essentially any loss that happens in the property transfer tax will be borne by the general fund, both through its statutory percentage, plus any of the remaining, what we call the direct app that's left over after the other three parties get their portion. So that total loss Tom is projecting at about $4.3 million. And that is basically all borne by the general fund. But what he shows in his tables is only the 33% of that, which is the general fund share, but in reality it's greater than that. So kind of a long-winded explanation to say that the property transfer tax loss is mostly, is all borne by the general fund. And so the 46 number that you see here is actually more negative. It's about 49 once we account for that direct app part. Okay. I was just curious why we, why we waited on it. But I think, I think I understand because it's a direct app. It's, it's what gets left on the bottom line at the end. Yes, exactly. Thanks. Other questions on fiscal 20 from anybody? I don't think so. So let's go on to 21, unless you have one other notes that you wanted to go over. No, I just have the notes there at the deferrals going on still. I know that small update that I've heard from Tom on the meals and rooms and sales news tax is that the interest and penalties on those were waived for the March and April payments. So we should be getting those, those deferred payments on May 25th. And it's my understanding that after speaking with the department of taxes, the two economists have sort of counted most of those deferrals as showing up in fiscal 20. So there's not much deferral revenue loss accounted for. And you see that sort of at the bottom line of the table here, fiscal 21, the actual deferral here is only 6 million. Whereas that number used to be as high as 40 million in previous forecasts, because there was the assumption that the administration might extend this or people might not pay. And it seems as though they've, they've changed their thinking on that, that that money will, most of it will show up before the end of fiscal year 20 close out. Do we know that the deferral won't be extended or is that just built into what the economists have agreed on? I don't know for sure that answer. I think it's just, when I spoke to Tom, that was the assumption that they're making is that that money will be mostly paid before the end of closeouts or the end of the fiscal year. Okay. Anyone, any other questions anyone has? So moving on to fiscal 21. So the current, the newest forecast has total revenue downgrades across all three funds of just about $378 million. That is better than it was on April 28. That number was $430 million. So we are just under $60 million better in fiscal year 21. Going across all three funds, the revenue loss of fiscal 21 relative to the January forecast for fiscal 21 is down $230 million, roughly. That number was $266 million in April, late April. So about $36 million better than it was. The transportation fund is down about $47 million in this current iteration. That number was $52 million in April 28. So small amount better there. And the education fund is down about $100 million in fiscal 21. And that's just the non-property tax revenues. And that number was $113 million in April. So we're about $13 million better than we thought in the education fund. So, and then the additional note there is that any revenues that actually defer revenues that are received after July 30th will sort of increase the revenue loss in 2020 will increase the available revenues in fiscal 21. So the extent the monies aren't actually paid before the closeout, they'll actually increase revenues in fiscal 21. So less of a deal though now because they're starting to assume that most of those deferred revenues will actually be counted in fiscal 20. So just flagging that for the committee. So the question I've got, I'm looking particularly at the sales tax, but I guess that applies to Rooms and Meals as well, is the slightly improved, well actually it's improved by close to 13%. That's not so slight, at least on the fund side. Is that improved picture because of a change in economic activity or is it a change in the information that was available and not reflective of underlying economic activity? Or do you know? I don't have a great answer for that. I know that the numbers are up because the Meals and the sales tax numbers are better than they were in April, but I don't know whether Tom and Jeff have received better economic information from the people from the contract with Moody's or whether they've received better information. But I imagine some of that is probably due to more information they have from the April payments. So they've looked probably more at the larger payers. This is typically the process they do. They look at the larger payers and see how much they paid and get a sense of how much they are struggling in this environment and then they revise the forecast. So I imagine it might be both, but I can't say for sure. I saw information somewhere, I think you when I exchanged a note about it, about the online sales, which had been, I think I'm going to get the figures wrong, but 13% of the total in March and April. This is national figures in March and April were 30%, they've gone from 13% to 30%. Did I get the figures right? Yeah, that's what I remember too. Yeah, some very large online sales activity going on. In Vermont, it's about 11% of pre-COVID sales work. 11% of pre-COVID sales were online. So I imagine that percentage has gone up, but we don't know what the specific figure is. But if it's comparable, if it went from 11% to 25% or something like that, I mean those increases are huge and that's all money we collect. Yeah, it's blessing that this committee and this legislature passed the marketplace facilitator bill when it did. And then also that the Wayfair decision came down about two years ago. Or else this would have been much more difficult of the situation for the state. Committee members, questions for Graham? Or questions for Tom Covet that you want to loop him in? Scott, are you jumping in? I'm trying. You go ahead then. I'm looking for blue hands and I didn't see one, but I see that you turned on your mic. Graham, I know you probably don't know this number right now, but I'm curious about that movement of $13 million in consumption taxes. How that breaks down as far as sales tax and rooms and meals tax? Yeah, I don't know off the top of my head. I can follow up with you after this and let you know. That'd be great. Thank you. Yeah. Sosha sent me a note that Tom Covet is on the call. I may ask him the same question. We can ask him the question Scott just asked about the breakdown between rooms and meals and sales. Tom, if you're there, I'm also, I don't see that you're here. There he is. Okay. I'm on. There you are. The question about how much of the improved estimate is information about underlying economic activity or just better data? Okay, so when you say improved, you're talking about relative to the last round because some things are worse and some things are better. Specifically at sales tax because I'm sort of focused on the education fund at the moment. So the both sales tax and meals and rooms, we have scant information because of the deferral issue that is not giving us complete information and then the information we have is likely to be from firms that are better off. But we just learned prior to doing this that there will not be deferrals this month and next month. That was the original assumption was I was going to continue and presumably all of it would be due in July and then that could be counted and recaptured in the current fiscal year. Now the assumption is the money that's been deferred for March and April will not be captured in FY20. That's going to go to 21. But we will get May and June revenues with full detail. So in terms of analysis, we'll have a better picture on that. But what we've been doing is going through all of the April data trying to find, so we have all payers and then we're looking at those that filed but didn't pay and those that didn't file and didn't pay and those that paid right through. And so that's where we've made some adjustments based on that. I think that's probably nudging the numbers up a little bit. They might still go up as we get more information. Because of the deferral situation, it left us without a lot of basic data that we would otherwise be using to inform this. And the question Scott asked about how much of the change in the education fund is bills and rooms and how much is sales tax. Did I get that right, Scott? Yes, you got it right. Yep. Yeah, I have to go back and look at the prior sheet that you're comparing it to. We do sort of a rolling update and then periodically when we're asked, we kick out the sheet. So every two or three days, we'll have different numbers, but we don't always print them out and release them. So maybe Graham, you could just look and see relative to the last time this was presented, which numbers are higher or lower. You know, with meals and rooms and sales and use. I suspect most of it would have been sales and use, but I'm not sure the reference point. Yeah, so I've pulled it up while we've been talking. So sales tax is about $9 million better than it was on the April 29th forecast. And meals and rooms is about $3 million better. Or sorry, yeah, about $3 million better. So it's mostly sales and a little bit of meals. On the other hand, proportionately, that's a much better increase in rooms and meals. Yeah, I'm pretty much the only thing going on in rooms and meals now, of course, is the meals part is very little way of rooms. And the opening up to that, you know, that that improves some of the June numbers, but really the restrictions around tourism visitation that, you know, two week quarantine effectively makes that impossible. So you might as well say you're closed. However, in conversations with Commissioner Pitchick on Friday, he said that he felt testing was getting to the point where people might be able to come in, have a test done or have a test done right before they leave whatever state they're coming from. And if they quarantine between the time the test was done, and the test results came out, which now can be 48 hours, maybe 72, depending on the test and all, but then they could immediately be able to register to stay in Vermont. So anyway, that's still problematic. But some of the other reopening was a little bit earlier than we had assumed before. So some of the gas tax stuff and things like that. June is a little bit better. Committee. I have one other question. I think it goes to the deferrals, sort of the way those are playing out. And I have to admit I get confused about the month that the tax was owed and the month that it's paid, I mean, where the economic activity is and when the return comes in. But the question is really looking at the education fund and trying to understand exactly how much of a problem we have to solve in fiscal 21. How is it really going to be? So the question really is when are we going to have figures that we can be reasonably confident about? And is that the August forecast? Or are we because of the way the deferrals are going to work? Or is that earlier, is that before July 1? Yeah, good question because we don't know really the scope of, you know, the deferrals in terms of the actual money. All we have are accounts. So we'd have to do some kind of formulaic projection by payer and then, you know, get a rough idea. But that's really fraught until we get it. I'm hopeful that the tax commissioner would say, you know, this is due, I mean, they said they need to send a letter with 30 days advance notice. So if that were done soon, that could even be FY20 money. That would be the best. I mean, it's money that's already collected from the consumers who pay it and just held. So yeah, it's for activity in February and March. And only half of March was heavily affected. But otherwise, I don't know when they're going to send the letter. And then when the payments are made, maybe two that the longer that you wait, some of those companies may not have the capacity to pay if they've used that money for something else down the road. So it's hard to say. The reason we were saying do a September update is because at the end of July, we'll have the personal income tax stuff, which is the enormous revenue swing. And that would take some time in August for the tax department to process. And then if we did a September update, that would be a relevant point of time where we'd know a lot more. Hopefully we know a lot more about sales and use of meals and rooms by then too. But it's up to the commissioners when he wants that money to be due. Thank you. Questions? Okay. Tom, thank you. And where was it so far each time I've gotten an update? It's slightly better. So that's good. And continue to try to get a good read on what's going on, particularly before we take action. I think, Graham, did you have anything else you wanted to add? Yes, fiscal year 22. Okay. Another year. Gosh, okay. Yeah, so I think that the primary purpose of looking at fiscal 22 is getting a sense of, you know, once we sort of pit rock bottom, what's it look like on the other side, potentially, just to give us an idea of how we might handle fiscal 21. And I think the overall story here is that there is a modest bounce back in revenues, although I'll show you some charts later to show that, you know, it's kind of good news, bad news, depending upon how you want to spin it. But overall, relative to what we had in fiscal 22 and the January forecast, revenues are down 220 million. And that's obviously spread across the three funds, 141 in the general fund, 21 and a half in the Transcation Fund, and they're 57.4 in the Education Fund. And so that as you can see in the year over year percentage change line there at the bottom, that's across all three funds, but 9.2 percentage growth from fiscal 21. So a bounce back, but fiscal year 21 is kind of sort of the low point here. So you're bouncing back from a low base. And so that's sort of the main story there. So if you scroll down to some of the charts here, I'll show you how that sort of looks like, how these sort of look like graphically. So the general fund here, the blue line shows you essentially what available general fund revenues were from fiscal 17 through forecast of fiscal 22. And the blue line is what we had in the January forecast. The red dotted line is what we now think we will have for available general fund revenue. And so you can see fiscal 21 is a precipitous drop in revenue. And then we receive sort of a small bounce back in fiscal 22. And so it's just somewhat, I guess, positive improvement there. But another story you might say is if you look at the endpoint of fiscal 22, it is lower than the total general available general fund revenue we had in fiscal 17. So we have a bounce back, but our revenues basically are what they were five years ago in the general fund available. Robin's got a question. Did you want to jump in, Robin? I'll wait till we get to the Ed fund. Okay. Transportation funds kind of the same story. The chart there, we see sort of a small bounce back, but fiscal 20 and fiscal 21 are roughly the same amount of revenue in that fund. And then we get the bounce back. But again, even once we get that bounce back in fiscal 22, we're talking about fiscal year 17 levels of revenue in the transportation fund. So I guess you could say that the epidemic is set back of revenues in these two funds almost five years. And then the education fund, things are actually a little bit better. So to make this a little bit more comparable, I added 100% of the sales tax and 25% of the meals and rooms tax for fiscal year 17-18. Even though that percentage split didn't occur in those fiscal years, we had a general fund transfer, but just for a little bit of comparability. So this may not be exact amounts for non-property tax education fund remedies, but it's relatively close. But you can see we see the big drop in fiscal 21 with the rebound. So the education fund at least will sort of rebound to its fiscal 19 levels of revenue by fiscal 22 for non-property tax revenue sources. So it's a little bit better situation there. So I wonder why it feels like such bad news. That's what I said. It's good news and bad news, depending on how you ask it. Yeah, Robin. Thank you, Graham. You answered part of my question because this is non-property tax education fund revenues, but I'm wondering how you're starting to think about the income sensitivity and property tax credits that are going to affect FY 22 because of the way we account for them. And that's the year that's really going to get hit by that. Is this too early to start asking those questions or are you thinking about that? I think Mark will have good answers for that. Okay. I'm going to use the best person to ask about that. Okay, thanks. Anyone else? Mark, are we shifting to you? Oh, Emily, go ahead. Thanks. Are all of these models built on the assumption that we're not going to have another shutdown? I think I would defer to Tom on that. I don't know what the assumptions are, whether there's a resurgence in the buyers or not. I don't know the answer to that question. Yeah, the assumption is there is not a second complete shutdown. So there are tremendous unknowns about this, and it's not like an economic model is going to tell you what this path is. It's an epidemiological model. And the information to date has been so limited with the testing. That's improving all the time. So as more data comes in, more will be known about transmission characteristics and risks a second wave. I think those risks are substantial from everything I know now. But that's why these are important to view as order of magnitude type estimates. And not only is FY20 changed all the time, 21 and 22 potential ranges are huge. This is not like a normal revenue forecast where we have relatively tight bands around the risk elements because this is an epidemiological event primarily with huge economic consequences. It's not an economic collapse based on any economic fundamentals. So that's a risk going forward. Okay. I think we'll go to Mark and you're going to talk about, are you going to present that fund balance sheet now? Is that the idea? Sure. Good morning, everybody. This is pretty straightforward for the education fund, but we can go over the balance sheet. To answer a representative shy's question, we haven't done any, I don't think we've done any analysis on what the property tax adjustment would look like in 22 yet, but you're right. There's a concern there because for FY22, household income would be based on calendar year 20. So that would reflect the significant downgrading people's incomes. Offsetting that to some extent, however, will be, household income is defined very, very broadly. So it'll include unemployment, insurance, compensation, and I think the other monies that are coming out from the federal government. So household income is a really broad definition of income. So it will include more than just people's actual wages and salaries during that period, but we haven't looked ahead. I would expect it to grow. Does that answer your question? Yes. Thank you. Okay. So on the education fund outlook, the revenue upgrade you just, we'll present to you with goes from 20 to 22. We're only looking at FY20 and 21 here. So if you can page down to the bottom, I think this is pretty straightforward and we can just show what's going on here. So all of the changes to the education fund have come on the sales and use, purchasing use, and meals and rooms taxes. So this is just three sources to the education fund that are affected. For FY20, the forecast is a little bit worse so that where we initially had a $3.7 million deficit to carry forward from FY20 into FY21, we're now showing a $4.6 million deficit that needs to get carried forward. You can see that on line 26. So a little worse there and that carries right through these three examples that we've been looking at. And then in FY21, the forecast improves. So where we had been looking at line 31, a current year unallocated, not reserved, basically a deficit of $166.7 million. We're now looking at $155 million. So not usually different, but it's an improvement. And I don't know if we'll be going out to FY22 at some point. I haven't thought about it, but it's possible that we could try to carry out the fund another year and just see what's going on there. But it gets really speculative because of the spending and all that. And the issue Robin raised about income sensitivity. Yeah, I think the big one would be really how to just decide what schools and voters are going to decide they can spend in FY22. It will depend on how this pandemic rolls out over the next six months or so. All right. Questions for Mark? So when we've been talking about $167 million problem to solve, we're now talking about $155 million problem to solve. Not that that's simple and easy, but as we learn more, I'm glad to see that the number is not growing. It's shrinking. It's not shrinking a lot, but it's shrinking. So that's good news among the bad. Let me see if people have questions. I think so. Anybody want to jump in? Great. So we're going to look at Ed Finance again tomorrow. And so I'm not going to spend more time on it this morning other than to say thank you to Tom and Graham and Mark. And then so we're going to shift gears.