 Good morning everybody. This is a joint meeting of House Appropriations and House Ways and Means Friday, April 3rd. And the subject is the Education Fund and the challenges in financing our schools in the current economic environment. I really appreciate people's willingness to do this meeting jointly. And what I, one observation I would make as we start is that our committee, we have a limited number of tools. They're pretty powerful, their revenue and taxes. But when people can't pay taxes, we kind of the tools that we normally have really don't work that effectively. And so when we look at financing our schools, which is the state responsibility, it's going to be something that's going to require thinking on the part of many people and these two committees are in the education committee, which we met with jointly yesterday are probably the three that are going to be most involved. So I really appreciate having the opportunity to share information and get everybody thinking on the same page. So, if you want to stay where you do. Sure. Thank you, Janet. And we really, we're going to learn to appreciate the challenges that you're under because of the numbers that we will hear impacting the Education Fund. But also for the Ways and Means Committee, Janet and I, when we met, we thought it was important that we understand your challenges and you understand the challenges within the general fund and not being able to even start an FY21 budget because our general, our adopted official forecast no longer means anything with the major disruptions with the virus and we have to do another budget adjustment. We'll learn these numbers as a group again when Steve is on because the current year is way out of whack too and we have significant problems to close up the current year. And who knows where we're going to end up the FY21 budget. So the challenges are all around and the more we can all be on the same page and work as a team, I think we'll go move through, I don't know, a faster but more wisely. And I just did want to say, George, you're the one person that's in the hospitals daily and thank you for what you're doing and be safe. We need you and the people at the hospital need you. So we're starting with Graham. We're starting with Graham. Yeah, we have Graham, Mark, and Steve Klein are going to be our three witnesses. So, and Kitty and I will call on people as we go along so just bear with us in terms of recognizing you if you have questions. So we'll try to take turns from Ways and Means to Appropriations. I know I think we'll just, I don't know. Okay, perfect. All right. Graham. Thank you very much. Thank you for having me. I'm Graham Campbell from the Joint Discloseless. I'm going to present the document that's so short or Teresa has on the screen right now and this is pretty much just an overview of the new revenue estimates we have from Tom Kovett. So I'm going to sort of go over this as sort of a big overview and I think Steve and Mark will dive deeper down into the two various funds on the general fund, the Transpatient Fund and Mark will do the Education Fund. As again, as I did this before, I caveat this by saying that all these numbers are for fiscal year 20. fiscal year 21 yet and all of these are likely to change will be updated and I'll give you a sense of how much these have changed since last week when I presented them and what we received from Tom Kovett but essentially I have a today a little bit of a little bit of good news and pretty fairly large piece of bad news from the new revenue estimates so looking at this table here. The updated revenue estimates across all three funds are projecting right now. So this is for all three funds that we are going to see potential revenue impacts on the negative side of about $387 million. And about $192 million of that will be from what I'm calling economic impact so slowdown in activity 196 million of it will come from tax deferrals or shifts from fiscal year 20 into 21. And so that's the headline number. That's modestly better than what it was on March 25 that number, instead of $387 million that was that is now was about $415 million. So it's a little bit better. And most of that is coming in the general fund, the good news rather so looking at the general fund. Tom Kovett and Jeff Carr are currently forecasting that fiscal year 20 will be subject to negative revenue impacts about $202 million. And about $62 million of that will be from the slowdown in activity and most of that $62 million is coming from lower personal income taxes revenue lower corporate income tax revenue, and then a little bit on the property transfer tax as well. And then about 140 million of that is coming from the income tax delays, the administration has put in place. So I think it was last week I'm losing track of time to everything's moving so quickly but it was last week that the administration delayed the filing and paying dates for personal and corporate income taxes from April 15 to July 15, which is obviously July 15 it's a different fiscal year. And so those numbers in the general fund the 202 that you see there slightly better in on March 25 that number was about 230 million dollars to the down. The reason why this is a little bit better is because Tom and Jeff have changed their estimates on refunding. So some of the data that we have received to show that because of the income tax delays by the administration. People are delaying their payments but it also appears though some people are delaying their refunds as well. So a lot of people may file their income tax return don't necessarily know whether they have a refund or payment do. I think that we are paying out less refunds at the moment kind of gives us a better picture right now for fiscal 20. Should I pause here on the general fund or should I just move through all the funds and then we can take questions afterwards. I don't know what's the best. I think move through and then we'll take questions at the end. Okay, so the next time to look at the transportation fund right now we're looking at revenue negative revenue implications about $45 million and almost all of that is from the slowdown activity related to the various consumption taxes and also the deferral of some of the motor vehicle fees. The administration issued on March 17. So of the 42 million about 30 ish million of it comes from lower motor vehicle purchase and use taxes and gasoline taxes and another about $1213 million is from lower motor vehicle fees. And that number on March 25 instead of 45 million was about 36 million so the transportation fund has been has seen a sort of negative downgrade in the estimate since March 25. And then the, the bigger piece of bad news is happening in the education fund relative to what we had on March 25. The education funded at this moment is projected to see negative revenue impacts totaling about $142 million. And the biggest change in this forecast is coming in the economic impact side so that's projected to be about $89 million to the down and tax deferrals. And then related to the administration's payment or delay of payment date for the sales and use tax and the meals and rooms tax total about $53 million. To give you perspective of how much this has changed on March 25. The education fund. The economic impact of this so that $89 million number that you see in this table was about just about $4344 million. So, the economists have downgraded the sales and use tax mostly by about double. And it's, it's quite a more difficult situation the education fund them a longer previously looking at even 24 hours ago. And I'll let Mark sort of get into all the issues related to that. And so, and a lot of these now discusses for the on the tax deferral side particularly on the education fund side. There's a lot of risk in that number in the $53 million number that you see here because what the administration has done is deferred the payment, the margin April payments for the sales and use tax and the meals and rooms tax. And all three payments will be needed to be made in May. And so the question is if businesses are using the, the tax payment money to make payroll or to make expenses. It's unclear at this point in time whether they'll, if, if business doesn't start up between now may, whether they'll have even the money to make the May payment. And so right now there is some sort of what we'd call loss being attributed in the meals and rooms tax because of this but not a lot. And so the risk on that remains relatively high. So, before I go into some of the additional revenue issue questions we're thinking about going forward. Does anyone have any questions on just straight numbers here. I don't see anybody who's raised hands but pause for a second. It looks like you can go ahead. Okay. I just wanted to quickly remind the committee, the committees about some of the income that the tax deferral rather that have occurred that are creating a bunch of revenue shifts from fiscal year 2021. And the general fund is the shift to the personal and corporate income tax filing and payment deadline, moving from April 15 to July 15. This includes any estimate quarterly estimated payment dates on April 15, but there's been no guidance issued about the June 15 estimated payment date. And that's what's causing that approximately 140 million dollars in the general fund to be shifted from fiscal year 20 to fiscal year 21. At the same time as the personal corporate income tax delay, the administration announced a delay of filing requirements for the homestead declaration and household income forms which are usually required by April 15. The payments have been pushed to July 15 as well. And I'll let Mark go into potentially some of the issues there. The third is the filing and payment deadlines for the March and April payments of the meals and rooms and sales and use taxes have now been pushed to May 25. And so the way that those payments work in tax world is that for any given payment in the month, it represents the activity in the sales he made in the month before. So if you delay the March and April payments of the meals and rooms and sales and use tax, what's that rep? What that rep is representing is the activity in sales made for February and March. And then finally, the administration on March 17 issued a 90 day extension for renewals for motor vehicle fees. And then obviously will affect the transportation fund. And so these are just, you know, three major revenue issues going forward for both committees, but the obvious one is how do we make up revenue shortfalls and not just the general fund but all three funds at this point. And I think that the emphasis. The presentation was before is now on more so on also on the education fund. Education was not nearly as big of an issue last week as it is right now so we have our fiscal year 20 revenue shortfalls in all three funds. So, how do we make up those shortfalls. The second bullet point here is on some of these trust tax deferrals. These are significant risks. Like I said, these businesses may not be able to pay in days they are using the money from the tax deferral to make payment or to make expenses in March and so is it possible to these deferrals on the trust taxes and a pushing beyond may and that is quite a significant risk to the education plan but also to the general fund because the general fund. Also, the meals room tax is an important part of the general fund. And then Mark will go into this a little bit more but household income form being delayed to July 15. How exactly that's going to work with towns and how they're going to get property tax credits on bills for towns that have early billing or bills that come out in July. Another question. All these revenue estimates also haven't exactly looked completely at also allow the direct app appropriations that come into the general fund. And so, just thinking of top and the property transfer tax. Tom has made an estimate for that but obviously, the, the revenues that come into the general fund aren't necessarily tied directly to the statutory language on that there's direct apps and so how will those get effective. There's also other special funds thinking a little bit top and head, the clean water fund benefits from the meals and rooms tax, and that is currently going to be downgraded so there's other funds here that we haven't even begun to look at yet. The third large goal point here is that the problem is we're, I don't want to say we're flying blind but the revenue data that we have is delayed and so we, it's difficult for I think Tom and Jeff to make as accurate forecast they possibly could under normal circumstances and so the March revenue reports come in at the beginning of the 16 of the April of April so we have some preliminary March revenues. The problem is most of those revenues reflect activity that happened in February. And so, you know, we were anxious to see whether some of the tax, the trust tax flows were already starting to show up in March and it looks like a little bit based upon what we had from April 2. That meals and rooms missed its March target by about 30% and sales news missed it by about 2.3%. But I don't think and Tom and Jeff don't think that this is anywhere near the potential impact we will see come next month and so we have a little bit of data but a lot of the modeling that Tom and Jeff are doing is are basically are based upon bits of information from industry groups also looking at epidemiological models. And so, that's why a lot of these revenue estimates change so much from week to week with with any bit of information they're able to revise these numbers. The notable point I'll wrap up here is, we're still only talking about fiscal year 20 here with these tables and these issues. We still haven't physically or 21 upcoming and is expected that those revenues will be downgraded over what they were forecasted in January quite a bit as well. I'm sorry to to break mostly bad news but at this point I guess I'll pass along to Steve and Mark and hopefully they can put some more flash on the bone here. There are a couple people with questions, Diane and then Scott. Thank you Janet. I'm not too sure if Graham if you're the source but I'm wondering if the state is getting any, you know, upstream delays in our in our relief of paying some of our debt service like our bonding and things that we have to pay. Are we getting sort of a 90 day delay or a year look. I don't know if I'm the best person answer that question I probably defer that one to Steve. Thank you. Scott. Hey Graham. Just curious with these shortfalls and we really don't know exactly what they're going to be and we really don't know what when the economy is going to restart. Has anybody had any conversations with the Treasurer's Office about what the impacts of borrowing might be. I'm going to defer that one to Steve. I think he's had some conversations and I think he would probably be the best person to answer what some of the options there might be going forward. Okay, thank you. Yep. Good. Unless there's other questions for Graham, let's move to Mark. Now. Hey, good morning. Can everybody hear me. Yeah, we can. So for those who have seen this before on the previous presentations buckle up. It's a little bit different right now. I can see that. Can everybody see the education fund outlook. On the screen. Okay. So I think the easiest way to do this is to show you where we were, or where we thought we were. And then move to the COVID-19 stay at home orders taking place and then move to the what's labeled the COVID-19 forecast that's been updated as of last night. So in terms of FY 20, if Teresa or whoever's quote controlling the screen, could you go down to the bottom of the page. Okay, so this COVID-19 issue arising, the education fund was actually in pretty good shape financially. If you look online at 26, you can see that we assume that we had a full stabilization reserve of $364 million. That was a full 5% reserve as is required by statute. And on top of that, we were anticipating closing the fiscal year with a $12.9 million surplus. You can see that number down on line 30. So we were looking at going into FY 21 at that point in pretty good shape. Moving on to the revised outlook for 2020. Teresa, can you go back up to the top of the page and a little bit down just so we can see sources completely. Thank you. Okay, so in terms of the sources now in the previous balance sheets we were looking at we sort of took a midpoint 35 to $45 million shortfall in consumption taxes. And just a line in sources that showed you how that would roll through. We have more information now, we have an up from Tom to that as of last night. I put this in about five o'clock last night and I can just show you what's going on here. First of all, the consumption taxes that are dedicated to the education fund show up on lines three, four and five. Those are the sales and use tax, the purchasing use tax and the meals and rooms tax. The biggest impact, obviously sales tax because 100% of the sales tax is dedicated to the ad funds for purchasing use and meals and rooms tax. They're splinter taxes so the ad fund gets a portion of them so it doesn't take the full brunt of any downturn. One other bit of information that we did not have yesterday is the lottery transfer is also now projected to go down significantly from where it was last year, dropping from 29.2 to $22.9 million. So all told, the difference there from the education fund outlook that we were looking at as late as yesterday is another $48.7 million downgrade. So to see what that does to the education fund, Teresa, if you can scroll down to the bottom of the sheet again. First of all, hold on there. First of all, you can see we have not made any changes to uses that's an assumption, assuming no changes in budgeted education uses that's online 20. But if you go to line 21, you can see that the operating deficit we were expecting has grown from about 15 million up to 104. And that has required us to first of all use all of the surplus we were anticipating online 30 that 12.9. All of the monies that we were assuming were going to be available in the stabilization reserve that 36.4 million dollars roll that all in and right now we're looking at a $39.5 million. In FY 20. This is the current year. Basically the education fund is in solvent at this point. We're short almost 40 million dollars to get through the current year. This isn't even looking forward to FY 21. This is all just current year to make that even worse. These numbers do not take into account any of the deferrals that Graham went over. This just assumes the, I don't have a sheet in front of me that it assumes the loss that we're aware of. It doesn't assume that it assumes that we're going to collect 100% of the consumption taxes that have been deferred until May. And I think that it's an open question as to whether we'll be able to actually collect all that money. And it may also present some kind of a cash flow problem because the final payment for this school year is April 30. And the payments that are coming in the deferred payments that they come, even if they come in 100% of them they could be coming in after at well they will be coming in after the 30th, I think. The other thing I want to mention and we've sort of underplayed it in the previous presentations because it didn't seem like situations are quite so glad dire but we assumed that all of the education property tax money from non homestead and homestead taxpayers was going to be paid into the education fund in a timely fashion. And that means 100% of the education tax money that we were expecting to collect this fiscal year on this balance sheet, we've also assumed that we're all going to collect we're going to collect all that money. So, we took a look at this a little bit earlier and right now we think that there's about $132 million in uncollected education property tax money, still out there. In other words, municipalities have yet to raise all the money that they need to collect. That's going to create if municipalities aren't able to have money. That's going to create a worse outlook for 20 for 2020. And it's going to be a problem for schools because that that money municipalities aren't able to collect it municipalities and the education fund both make payments to school districts, so school districts are going to be left holding the bag we're going to collect the full amount of money. So, I can stop there that's FY 2020. And I can talk a little bit about the issues that ways and means is facing looking forward to FY 21 but sure I wait to pause there and already questions. Mark, I just want to just a clarifying question that you talked about the April payment that's what the state pays the school districts. But it's the municipalities that have to collect the education tax and send it to the state, right. So there's it's actually complicated because the way it works is the municipalities collect the education property tax as an agent for the state. They take that money after they've collected it put it in the bank, and they hold that money until the agency of education directs them, send it to towns on one third of the amount in on three dates during the year. The last one is April 30, and that is still outstanding districts that are able to raise more than they spend. And that's a lot of non homestead property tax plus some homes to tax from places. And that goes back to the education fund, and that money goes out it's roughly 5050 it's a little bit more coming out of the Ed fund, but almost half of the money goes directly from the municipalities to the school district. If the municipalities are unable to collect those funds because people are out of work businesses are closed, or whatever, then it's going to create a cash flow problem for the schools, in order to stay open or continue to make payments for the rest of the chip has a question. Mark. Mark. So 132 million that's uncollected is that that those payments haven't been that those taxes aren't do yet, or they, they didn't haven't been able to collect them even though they're due. No, they're taxes that are not do yet. You know, we have a decentralized education property tax collection system that basically piggybacks on the municipal system. We think that there were 82 towns or 82 municipalities that still have outstanding liabilities of up to 132 million. The biggest concern is that there are 70 municipalities that have fully one half of the education tax money that's still outstanding and that's because they make they bill twice a year. One of those bills is not has not been come do yet and the money hasn't been remitted. I wasn't very concerned about this initially, but given the additional information we've received from Tom Covet and how drastically the consumption taxes have fallen. It makes me wonder whether there's going to be spill over and people are not going to be able to pay these taxes in a timely fashion so what I thought was not an FY 2020 issue but probably a 21 issue may also be an issue this year. If that answers the question have one, one, one good piece of good news. And that is the federal stimulus bill that was passed in the 27 will provide some assistance to us. It will amount to a Vermont's allocation of the total amount that was appropriated at the federal level is a little over $30 million. So that's a close the deficit we've just opened. Part one part two is that that money goes to the agency of education and then directly out to the supervisory unions for distribution to the school districts. That means that money is going to entirely bypass the education part. And so you know that that's, that's an issue that's out there. It doesn't really help us with this problem of a deficit in the funds right now. It's a half million dollars that is intended for education fund relief in the same package that money goes to the governor he has the discussion as to how it's allocated, but it has to be spread out over K through 12 higher ed and any other education related institutions, and it can cover things like childcare and daycare and a whole bunch of other things so I don't know how much of that $4.5 million will be helpful here. Scott has a question. Mark question as far as the this this issue of the municipalities not being able to pay the school districts and or the education fund. Did we run into something similar to this in 2008 nine with the great recession. I remember municipalities being short we had we had a similar situation with the federal aid. Because it also went directly to school districts. So at that time we reduced the general fund transfer to the education fund by the same amount and dealt with the education fund issue that way. In terms of actual payments from the municipalities to the districts I don't remember any problem arising at that time. I know that on an annual basis or maybe I don't know I'm sure we have municipalities because of local circumstances on the ground. They may run into this problem from time to time probably on a just a very few basis for whatever reason. How do they usually rectify that problem. I think they usually go out and they do short term borrowing. Okay, and not borrowing from the education fund it's borrowing from your local. I spoke to Michael gone about that and that's an issue that we're working on but at least right now it appears that some of the provisions in the federal stimulus bill are designed to prop up the municipal bond and short term benefits. So districts may be able to go out and do that but you know that'll add that'll add an additional cost. Right, but they may be able to get through FY 2020 by doing that. That's still that's going to leave FY 21 all these things that we're doing to get through FY 2020 are just going to make things worse next year. Yeah I know that money's going to come from somewhere though it'd be really nice to know if that municipal bond bank is functioning properly. So that's also with that I can go on and talk a little bit about FY 21 if you're interested. Mark I have a quick question regarding the current year we're starting with a 40 we have a $40 million shortfall we need to fill of the federal education stimulus dollars coming in that 30 million it goes directly to schools, but it, it has to go against that $40 million problem doesn't it isn't it a record keeping problem. It isn't I don't I don't know how to address it we have a unique education finance system. When the federal federal government designs these allocations I think they're assuming everybody's foundation formula where we send money out out to the districts, we have a much more integrated system. And again as I mentioned when we had this problem back in 2010 and 2011 when we got $18 and a half million dollars each year for 2010 and 2011. That money also went directly to school districts, and we were able to work around that problem by reducing the general fund transfer by the same amount the $18.5 million in each of 2010 and 2011. Now we no longer have a general fund transfer to the Education Fund we have dedicated education revenue sources going in. So I'm not sure how this could be addressed. Another possibility is that this money is going to be coming into the state very late in the fiscal year I mean we have a month to apply for it was approved on the 27. And then there's another 30 days before the federal government has to pay that money out which is going to put us late in May. So you one possible use of this money would be to allow it to roll over into FY 21 and allow districts to reduce their budgets by that amount of money then. And that would address the Education Fund question because the way the budgeting works is school set a budget from that budget they subtract any categorical or other aid that they get from the federal government to the state and the education payment line would be smaller. That's the number we base education property taxes on. So that that's one way to address this given that it's coming later. I know Steve's been working on this issue show after he does he may have better answers than that. But that's that's where I know about this point. Thank you. Thank you. Peter. So Mark on under maintenance of effort for this I know that we have to the state of Vermont has to support school districts in an average amount provided in the three prior fiscal years. Have you determined what that average amount is for the past three fiscal years prior to the enactment date of this act. No I mentioned that was something we were going to have to watch and I wasn't too worried about it with the $40 million downgrade but with this $88 million downgrade. I have to go back and relook at it. I haven't I haven't checked that yet. It's an issue that we need to look at. When you figure that out. Can you email all of us that information please. Am I wrong to look at this and say that's the amount of of Ed fund that we need to be able to push out to the to the school districts in order to meet the requirements of this act. Whatever that that that MOE dollar amount is average. Yeah, I have to go back and read the language I don't want to answer. It's a great question and I'll get back to you on it and it's, it's important. Mark, just a clarification when I'm looking at the balance sheet the 39.5 deficit is over and above that I'm sorry that leaves the stabilization reserve at zero. Is that right. Well, there's there is no stabilization reserve anymore. Yes. And we have what we're carrying in that line is the 30.9 $5 billion deficit. The funds in the. Yeah. So, so to get the stabilization reserve up to its legal limit which is three and a half. No, it's 5% now would would require more than the 39.5. Yeah, I would require another 38 million on top of that to get back up to. In order to comply with the statute anyway there's a 70 million or so that we're missing. Now, the really scary news is that it looks like going into FY 21, the consumption tax revenue forecast is likely to be even more severe. And on top of that, any issues that we have in terms of collecting outstanding education property tax liability could be a problem as people who are employed businesses shot. All the things that are going on one COVID-19 may lead to the inability just simple inability to pay property taxes in a timely manner next year. On top of the revenue the uncertainties around the consumption tax revenue puts us in a position where we're really flying blind into FY 21 right now we do not have a reliable reliable estimate place for FY 21 spending. So it's going to be very, very difficult to set property tax parameters for next year. As you all know normally prior to the legislature adjourning, the property tax parameters for the yields and non homestead property tax are set. And, you know, right now, you could pick a yield you could pick rates and we can tell you what the property tax implications are but have no way of telling you what the bottom line on the Education Fund would look like. Another point is that voters have already got out and voted during town meeting they approved about a $73 million increase in education for FY 21. So, although we don't know what revenues are coming in we do know what expenditures are looking like at least under normal circumstances. Even if it were possible to reduce spending at this point. Most spending close to 80% of total spending education spending is teacher and staff salaries and benefits. I looked yesterday. I looked at the tax normally have to issue rifts that they're expecting significant problems in the following year and most of those deadlines under contract have already gone by. And in any case, you know, lay off layoffs of teachers in the middle of a recession is not a good outcome. But I looked at it as a, I mean, the draconian possibility it looks like it's our opportunity to do anything like that is largely gone by the boards. So I see that Bob helm has a question. And then, if you could talk afterwards about the budget that have not been adopted. That'd be good. Bob go ahead. Thank you Teresa I'll be quick mark. So, if this virus thing gets over here in the next couple weeks which I don't think it's going to. It's a good issue. However, if it lumbers long until September, October, there are going to be a great deal of people in a property tax payment. And I guess my question is, does the town have the does the municipality have the ability to extend that indefinitely, or is it only for like a year. Do you know the answer to that. I don't know I do know however that municipalities have had the authority to abate only municipal property taxes not education property taxes, and statewide education property taxes account for about two thirds of the total. On top of that the municipalities at least under current law are required to remit that money on a timely basis to the state, or there's an 8% penalty that they have to pay. So if you think about it municipalities if they're unable to collect property tax revenues right now and get hit twice, they would lose the municipal tax money that they need to run, you know police fire roads those kind of things, but they would also be on the hook. They would also be on the hook for the money that they state for the education property tax collections so they're going to be in a real bind cash flow bind. So this thing. This thing has the capabilities of continuing out not a year. Five years three years who knows how many, how much, and for how long but until the economy gets back in the year, which we don't even know if that's going to happen. They're going to be having troubles and aren't we going to pile up a whole lot of back payments on municipal taxes. Yeah, I think so, but I also think that we don't have a really good picture of that at this point. I'm just currently working on epidemiological model so that they can try to get a guess as to how long and how deep any recession is going to be the relation this but that's way way outside of my realm I don't feel comfortable answering it but it does not look good no. Nope, thank you very much I just thought I'd throw up by appreciate it. So Diane has a question. Thank you. So I've had communications from my community as well on this or the town. And it might be too early to ask but I'm wondering if, at some point, we're going to, are we going to have the intent of helping out towns with this cash flow problem either with, you know, either with federal dollars or delays or an answer to this for them, or with them. Yeah, I mean, I don't know the answer to that question but I can say that the payments to the school districts in order to finish up the current fiscal year we're in would normally be paid by April 30. Now, if that doesn't happen, they can go out as I mentioned earlier they can go out but there is that short term, you know, problem and other than the federal money that's rolling in right now I don't know I've heard that there may be a fourth stimulus package that specifically towards municipalities and state governments but I just probably don't know. So, and I'll just end with this later today I've got a phone call with our city managers and others that are looking at that that situation at the community level. So, and they mentioned the short term borrowing. So, would it be correct in my assumption to say to them that would be the avenue to go right now, or should they, should I direct their question to somebody else within the way to go now you mean short term borrowing. Correct. That's that. A lot of districts do it anyways, this time of year when they're closing out the year they may have a property tax payment due after the April 30 date. So I think they're used to doing it and as far as we know the market for short term borrowing is still okay. So that would probably be the best way for them to address FY 20 for FY 20. Can you talk a little bit about the budgets that have not been adopted, which is a whole nother wrinkle the fiscal 20. Yeah, so, so there's two categories of accounts that haven't that have to vote still. There were nine districts that voted down their budgets during the town meeting week, including South Burlington and Slate Valley, which are two large ones. And then there are a number of other districts, I'm not sure the number five or more that schedule their votes, like Essex schedule their votes after town meeting. They have not yet voted. I know South Burlington that had a failed budget schedule to revote and they've now postponed that vote till later. So I don't know when it'll be possible for those districts to pass budgets. There are default just like the yields there are defaults in current law that will allow districts continue to operate even if they don't have budgets, they can spend up to 89% of their FY 20 20 budget, and the commissioner can set their education tax rate at $1 temporarily until other information comes in so districts could continue to operate. When, when, and if they're going to be able to vote on their budgets, I don't know. Well, there's the practical problem of voting and then there's also the problem about whether they can get budgets adopted, given the economic situation that we're in. Right, but they could they could under current law they could go back to I think 87% of your budget and use in order to stay operating so it wouldn't be a complete shutdown. Yeah. Go ahead. Sorry, you go ahead. Okay, so the couple of other issues Graham Graham mentioned, moving the income tax filing deadlines maple 15th of July 15 also caught up homestead declaration and the property tax credit claim forms. So looking at the tax department. I think they believe they can live with on the law as it stands, because municipalities have some flexibility, as I understand it in terms of moving in their first billing date. I saw very few districts that bill in July. Most of them start after in August and if districts were able to delay sending out bills until August 1. They would likely have the information from the tax department that they need to provide bills that include the property tax credit and other information like that. If a district decides to not delay until August 1 they can go ahead and bill, they would just have to understand that they would have to issue a whole lot of correctly property tax bills later. But there are provisions in the law in place to deal with this as you know, inelegant as they are but it looks like right now it doesn't require any legislative intervention to address that problem. And the last thing I wanted to mention is the property tax credit for taxpayers who experienced significant COVID-19 related losses in income in the current calendar year. And I mentioned this because I'm expecting you'll hear from constituents that get hit by this but the property tax adjustment that is going to show up on people's bills in 2020 the ones that they're going to in 21 the ones that they're going to be getting for the next school year are going to be based on their household income in calendar year 2019. So any losses in income that they're going to face because of COVID-19 will fall into the current calendar year 2020, and they will not receive any adjustment for that until 2022. So get their money but it's it's right now they won't seal any immediate resistance and people who have lost their jobs and have no income. You know, maybe surprised that they're not going to get assistance on their property tax bill this year. In terms of the 2020 impact I was worried about a really big spike that year and I think that there will be by the little bit offset to some extent because household income is defined broadly enough to include uninsured benefits and any other federal assistance that comes down as a result of the stimulus package that they've paid. No, it's not good news. Let me pause for a second and see if people have questions. I think Peter Fagan has a question. I put his hand down so Peter, do you want to jump in? He answered my question. Thank you. That's that's what I figured I saw you I saw you lower your hand here. If I could jump in I can answer a question that you asked a couple days ago. Okay. You want and that is can how big a deficit can municipalities and school districts run school districts, as far as we can tell there's no limit on the amount that they could want as a deficit, however, they have to pay that money back within the next three years. So it has to be added to their education spending. So while it would, you know, get them through this immediate problem in 2020 again it's just pushing it out until 21, and there are requirements that they actually add that cost on to their education spending in the next fiscal year and raise that money to sort of to close that shortfall. Did you say three years they have to pay it off? Yeah, I think they can spread it out over three years if they want to. Mark, one of the things that seems pretty clear from what you've said is that whatever solutions we come up with for fiscal 20 are going to affect this, how we, the problem that we have in fiscal 21. We can't separate the years. Well, at this point we can't separate the years and we're close to the close of the year anyways we were, you know, coming towards here so you know even school districts have very little flexibility to reallocate money or do anything at this point we're pretty much locked into where we were so. Yeah. Anything else anyone has for Mark? If not, I think we'll switch to Steve. Mark, thank you. Yes. Steve, we hope you have great news for the general fund after that delivery of information. Are we getting Steve on here? We have you Steve. Oh, you know, Mark, what we're waiting for Steve, if you want to talk about, or maybe already did the elementary and secondary school emergency relief fund did you already go over that? Basically, that's the 30.1 million. I see Steve's here. Go ahead Steve. Oh, no, I was just, I'm okay, sorry. Operator rare here. You go ahead. That doesn't really work. Okay. Okay. Okay, sorry. Steve one and I'll try to be focused. So yeah, I was gonna focus. I'm gonna put up on the screen. I'm gonna put up a fast flow sheet in a minute just to talk about this, but I thought what I'd do is spend about total maybe 10 minutes going over context and then let's see it says host has started video. Okay. And then go into the specifics on the Ed fund. And first of all that one of the things we're seeing with this change of the forecast is just that we're in an unfolding pandemic resources are changing constantly and this some of this the house for reasons heard last Wednesday but what and one of the things we'll we'll talk about maybe later is the, the federal resources and just how their restrictions meet your time. We're seeing leave coming just to give you a sense of the timing the big money the 1.25 billion that's coming in is coming we've been told that the guidelines for its use will be submitted to us the week of the 12, and the money should arrive on the 24. And one of the things really interesting about this is they're actually sending us a check for 1.25 billion, which raises all types of issues about where we put it. How the how it's put in different bank accounts. There's rules about collateralization and the treasures trying to figure all that out. What it does do is it makes the importance of provision that we hopefully will pass in the next bill out of the station called borrowing. And what it is at the end of the year and in December we have a authority for the treasure to borrow, if one fund doesn't have enough money, you basically could borrow from another fund the Treasury has and so the inner fund borrowing provision will be important given what's going on the Ed fund and we're with this change would do would allow her just for this year to start using it if she needs to earlier like in the I think it's in May so or May 15 so the idea is you want to pass in April so she can sort of get that in use and we'll go into that a little bit later. I just want to flag and this is just sort of a larger context thing I talking to other states and one thing to remember about one we talked about this a fair amount that Vermont's a pretty unique state in that we're a very powerful legislature, you know, many seven all but seven states have line item vetoes, which means the governor has a lot more power over what comes out in the bills. One of those states it does not, which is really strong. And what you can see when you talk about relief situations and issues like this is the same type of thing happens in how states can respond to New Hampshire's afford to a pandemic so I mean, New Hampshire, once the emergency declaration is made. The governor can accept funds and spend funds and has quite a bit of authority beyond to change laws and things like that so there's a lot of flexibility here in Maryland, the governor can use federal funds that haven't been appropriated. And they also have the authority, normally to do a budget adjustment and to give the, the legislature the right to some committee is right to review it but not to stop it. Generally, it's sort of like our rules committee that if the legislature reviews it and says we don't like this sometimes he'll back off but that's within his authority. And so they think that with the state of emergency, they may just wave that whole process and the governor has flexibility there. Tennessee has a similar thing where what they do is, the governor can spend money. The legislature is not in session with the agreement of the two finance chairs. So in all those cases they have authority to go beyond what we do in our books and just one more at New Jersey has just sounds like they're going to do this there. Because of this whole end of the year problem they're talking about changing their fiscal year and maybe extending the fiscal year another three months or so and then it's very complex and you know it's got a lot of issues because then it means the following fiscal year as opposed to be a full year and so it's it's not an easy fix and I'm not sure it's great. So I've talked a number of other states and most of them are doing on the appropriation side a smaller budget whether it's a three month budget or whether they're doing a stripped down budget bill which the knowledge that they'll have to come back and do more and part of the thinking there and I think, as Graham mentioned in our revenue is because of all this information not showing up until probably end of July. So we really hard to understand what's happening in 21 in, you know, big way until after July until August and so part of the thinking is, do we do something to bridge this fiscal year change gap and give us money in FY 21. And then do we just, you know, make our big decisions at that point education fund is to flag that is different you know you guys have to take an action. Now, but that's going to affect the education fund for a whole year. So whatever effort that's made on the general fund and pieces like that will will have to incorporate some, some differences the education funds an example of the fact of the fund and in normal year in the parks department would spend more money in the summer. Those are areas where we probably have to adjust whatever bill we do to meet those needs. There's a lot of ifs and I just want to maybe what I thought I'd do is, maybe while Teresa is putting up that chart about cash availability answer the two questions came up. And I think there's no been no effort to try to get it delayed any of our bond payments I mean basically everything the treasure has thought about is just, you know, we can continue to pay our bills we can do it and that we can meet our all of our obligations and that's pretty important I mean part of this is doing this in a way that Wall Street doesn't feel we're in their world and doing something that's just, you know it's when the we fill out this form and they they look at budget tricks you know it doesn't state do any. Is it transparent is doing a budget this is a year where anything the states are all going to, I don't know how they're going to rate us next year because there's no state be able to get through this without doing something and the other question I think to represent back point at this point we're not looking at short term borrowing on the state level. Partially because of the sheet which I'm hoping three second you get up the cash flow sheet. It's up Steve do you see it is that the one you wanted. Yeah, I don't see it but I'm if it's up that's great I can talk about it if it's invisible to me. Oh well, I just see myself that's all I see I wonder if I've done something wrong. Yeah. Hold on a minute. Okay, I see I'm sorry. Okay, so you need to roll it up because I mean roll it go to the top because what this is a picture of our cash flow through Monday I guess it is and so what we this is a tracking of every year of our monthly cash flow as you can see as of Monday we had $374 million in cash and part of this is because we keep pretty strong reserves and we're probably among the states and one of the. You know I don't whether it's like quartile wind probably the top quartile or just having reserves on hand we've got lots of sources and it shows up in that 374 normally what happens in normal years, April with the big income tax is an up and then you pay out the money to the schools it goes down, you know, it just doesn't keep going up and then June you get your last before the payments so. You know the question here is on one hand where the highest we've been in any fiscal year I mean 374 to 340 last year you can see in past years it's gone is was lower. This is really if we do allow inner fund borrowing. This will be our ball work and what she does is she looks at every fund takes all the revenue estimates that we create and sees how close she gets to zero and as long as she's above zero with a little bit of a cushion. This is a treasure here she can then say you know we can probably survive that. That that period of time and because we are looking at some of this money coming back in July, you know, and it's so on a short this is one of the things that we think about. And last time when I first heard about this education fund down I was sort of like a little crazed and then I think that as I, you know, I sort of talked a little bit with that this morning about it. We do have this casual piece that is a little bit better than than and maybe enough. I talked to Adam about this too. The other wild card you have is in our. $2.25 billion. And we have, you know, I asked, we talked about the idea well that's really going to be in our catch this inner fund borrowing let us borrow against that get through the fiscal year and again, it creates a tremendous resource for us. And there's several questions that come up that we don't really ask Washington. And that's one, you know there's another one is what happens to the interest because the way it was written. It's not a big money but it is, you know, a million or two or three, you could get an interest in this one. What happens with that and it's those are the type of things that we, you know, I've talked about with people here I am probably talking to YouTube and, but, you know, we don't it's not a question they want to pose to the Treasury about these things because, you know, we don't want answer will get what's in this guidelines that they're developing between now and the 12th or so we're after Easter when they're going to issue them. You know, and, you know, those are, are several of them. So I don't know if I want to, I guess I would stop there and see if I missed the target or whether there's things that are questions or where you want me to go. Steve, this Janet I have a question. So I, I think I heard you say that when you first looked at the ad fund figures you were I think you use the word crazed and then you. It's just a big drop. Yeah, and I do worry about this is not, you know, the concern here is, you know, once you have sorry. I just so but then you said you looked at this cash flow, you know, she and that made you feel better. But we've got the ad fund issue is more than a cash flow issue, I think so can you link those things. So there's two things that run through my mind and you know obviously you're, you're right I mean, and all these things it's how do we get through the fiscal year. And then what do we do a larger term, and you know clearly the larger term issue for all funds whether it's the ad fund the general fund the T fund, the strong possible I think Ram had on a sheet is there's we're going to be lower we're going to have a real problem. So I'm just trying to compartmentalize and say, first goal is to get through the fiscal year. The larger term piece. We have to think about that and you're part of what I'm hoping, you know, obviously, there's got to be a lot of discussions we have. You know, there's a lot of, I, it's part of this building the 21, you know, do we build up on the general fund side we build a short term budget, just get started. There's so much we don't know. And I. I mean, I guess I'm saying is there's a ton of ideas ton of approaches to your the next year, even though we don't know how much we're starting to build those but I guess I was reacting to my immediate concern of getting through this year. Okay, that's helpful. David has a question. Dave. So Steve. So there's positive cash flow. And if we use it with the interfund borrowing to help solve our problems. Our liabilities are bigger than our available cash however. So do we end the year in deficit and are we allowed to do that on an accrual basis. So, so this is not a casual this is a balance sheet this is sort of like what we had in the bank. And so the question really is, do we spend every, you know, given your right on for this month we were going to what Beth will do is she'll look at all the money going out between now and the end of June. And then she looks at how much she has in the bank. And then she says, and how much do we expect to come in from all funds, we mix that together and we say do we have enough to not go out to the short term market. And that's what this is about that basically, and this you could have her come in and talk about this there. Her evaluation of this is that we are still a little above the, then point where we go negative on cash overall we're selling the positive territory. The issue that the chair raised is, and the issue you're raising is, this is not a situation that goes beyond June 30. Once the next year's projections and numbers come in. You know, we, we will have burned through our cash we will have a situation where it's unclear revenues keep up with expenses. So we haven't built them. We're going to jump in for a minute so what, what basically you've said is there is a probably, and I'm going to use probably a path forward to close out fiscal year 20, but when once we hit fiscal year 21, we've got problems in every single fund whether we see we've we understand clearly the Ed fund but the general funds going to be in in very desperate straight as well as pressure on the the transportation fund so we can use these dollars and these reserves that we've built up to close out fiscal year 20 happen in in a hopefully in a balanced way, but once we hit 21. That's why we're going to have to move slowly with maybe a three month budget, because we don't even have a forecast to work off from. And it also makes the Ed fund the difficulty of figuring out what the yield is because you know it'll be a problem in 21 you don't know how big a problem, and you know how do you set the yield because in that case you don't have the option of three months in an environment where the information is just really not there. And just to go back to the one other question you asked is the balance budget question Vermont does not have a law or constitutional provision requires a balanced budget. We have had balance budgets I think there was one time in history and I've just heard this I don't know if it's a fact where we didn't but the unique thing is we, I think this was during the maybe and the but what happened was the administration had a plan to remedy it wasn't the case of just we're out of balance there was a case of we're out of balance but there's a strategic there's a whole plan about revenue changes like this. So it was, you could go to Wall Street and say, yep, one year it's going to be bad but this is how it's going to be remedy and people could take that and it gives you some sort of a different story in the situation now where we probably if we don't have a balanced budget and we don't know what the situation is and we don't have a plan. It's a little less pretty. Peter has a question. Peter. So Steve, thank you. I just unmuted myself. Does this does the balance sheet include the reserves the stabilization reserve, the daily fund, the human services caseload reserve and the 2753 week reserve. It includes every bit of dollars in the state. Yes. Gotcha. Gotcha. That's what I figured just checking. Thank you. Kimberly. We don't have any assumptions in these numbers yet about recisions. Is that correct? Correct. This is based on current outflow and FY 20. And so this is this is based on. No, I think of that these numbers are really just cash that's going on your screen. It has nothing to do with spending. So what she does in her analysis. Here's our cash position. Here's what we know about budgeted amounts. And and she can she does sensitivity analysis. She might say, if you know what, how do we cover time for that to revenue changes. She can say, you know, after all the stuff is in, we have whatever 50 million left to pick a number and then, then we can sort of also say, if we reduce spending that means that you have using less of the capital. So you're correct. This does not include, this is just a picture of where she expects the balance to be, but where it's been through March with three gaps in April, May and June. Other questions for Steve. Steve, did you have more you wanted to cover? I mean, I could go anywhere else just that this is a lot of the things you're asking or things are going to have to be resolved and you know, like, when do we do a budget timing of things and that's fine. So, if we saw fiscal 20 Ed fund issues, and I confessed to not really understanding the budgeting side of this but by using this cash flow, cash position, whatever you want to call it. How does that get paid back and what kind of problems does that create for us in 21. You're right. And basically what it says it says, and this is all very tenuous but it just take your take marks balance sheet you're basically leaving that deficit in the bottom line. So, your fund will have a negative balance but like other funds with a negative balance, it, you know, on a when we move money around we've covered it on a cash basis but as far as your problem for fway 21 it doesn't do anything to solve it and as a matter of fact it lets you carry forward. And less than less than nothing. So, so this is this is purely making sure that we can pay our bills but it doesn't. It doesn't replenish the checking account. Correct. Correct. Okay. Any other, any other thoughts questions anyone has a Steve. Yeah. I'm just going to say again again. So, I'm just trying to think through here, the current in the future. Folks that are, and this is the reason why we need people to apply for unemployment insurance that's federally taxable I know, given a 1099 G, when you file. Is it state taxable as well. You know, I, my understanding is it is, but I'm not going to be a, I think I better understand that question. It is. Okay, good. Thank you. Okay, so then, so given that what part of our education property taxes are collected by individual property owners versus business property owners which are still trying to work through potential ways of keeping their businesses open and being able to pay the property tax. Yeah, and I probably would turn that back to Mark. He spent more time than I have on this. There's a lot of issues and how much of the property taxes are s quote how much of it is our business is going to. And actually this morning I was talking to a business about hearing about it, where they are going to keep paying their workers because what's happened federally is they get money to continue to grant if they write their workers on. Right. So the goal is to keep the workers on and and defer, defer all their payments until right at point. Yeah, you're raising good problems. Mark, do you want to explain how those different components of the education tax work. So most of the education property tax money that comes in is non homestead property taxes. You don't have the percentages and far from me but well most implies a little over 50%. So it's more it's more than that the the non the non homestead property tax revenues coming in at $694 million and the homestead tax is $614 less the $168 million in property tax credit. Gotcha. Thank you. Peter. Peter Anthony. Yeah. Since the topic has come up, I have to make an observation and it really is a question I think both of Mark Graham and Steve and it goes to the issue of making payments to trust taxes, which obviously affects to funds and in the general fund. I guess we're in a situation where we have to guesstimate because filing has been waived in addition to making payments with my question is though amongst the federal assistance to businesses, whether they be proprietors ships or some other form and refunds and the individual checks that are soon to start being mailed. I don't hear that there's a policy by at least two departments in the executive branch to make sure that uncollected, but nevertheless owed trust taxes are stand as secured creditors, if I may use the analogy in other words, the state trust trust taxes that are uncollected or unpaid are the first priority if you will, from those to federal largesse. Thank you. Any other comments or questions anyone has. Katie is there anything else you wanted to cover before we close down. No other than our committee will meet on Monday morning to do our training. I'm going to send out another meeting. Okay. I think this was really valuable, Janet for both committees. The stresses and it's really going to be all of us working together, which is really difficult. We're not outside each other's doors. Exactly. Yeah, I missed the little the little conversations but this is this is it's good that we can do this. And just really appreciate everybody sort of getting the minds around around the challenges. But the thing we do best just isn't available to us, which is figuring out revenue. And we have no money to spend, but we have bills. Yeah, well, we're going to have to figure out a resolution and we will. Thanks everybody committee ways to means I'm not sure when we're going to get back together so be checking your email I need to work with the speaker's office in terms of timing. All right, going to stop the live cream now.