The 2010 legislative session starts on January 5th. I will be spending a majority of my time on the restructuring and reorganization of the state courts as one way to save taxpayers money, increase efficiency, and respond to budgetary needs. We will start with look at the proposal by the Vermont commission on Judicial Operation.

Vermont is not alone in its attempt to restructure its courts. As of 2010, 48 of the nation’s 50 court systems will require budget cuts The challenge will be ensuring that Vermonters are still able to access services while making wise fiscal decisions. The courts are our cornerstones of justice. The New York Times reported that as court across the country make budget cuts, the cuts are “impeding core court functions, forcing court closures, shortened court hours and a tangible narrowing of access to justice”. “State Courts at the Tipping Point”, The New York Times Editorial, November 25, 2009.

I am mindful that budget cuts often hurt our most vulnerable citizens. In the court system for example, that means family and juveniles cases, mentally ill, and victims of crime and sexual and domestic violence. Constitutional rights such as access to a speedy trial are also at risk. These very important issues will be considered as we deliberate judicial restructuring.

Congratulations to Jasi Jones of Northfield who has been chosen to serve as a legislative page. It is very competitive process, and it is great credit to her to have been chosen. I look forward to working with her at the State House as she learns about the democratic process, makes life long friends and has fun.

Renewable Energy Resource: From VPIRG: “Have you ever thought about installing your own renewable energy system? The good news is there are many funding resources available to help you invest in renewable energy and efficiency.

VPIRG's new guide is a resource for individuals, communities and businesses to help find the incentives, rebates, providers and programs that are available to help you be part of Vermont's clean energy future.” Visit vpirg.org.

Committee and Commission

updates.

Over the summer and fall commissions have been meeting to determine ways to respond to budget restraints. The following are reports from House members who sit on the commissions.

Commission on the Design and Funding of Retirement and Retiree Health Benefit Plans for State Employees and Teachers

The Commission has met 8 times. Both the State Employee and Teacher Retirement systems have modest benefits when compared to other states both in New England and in the country. Other states are studying similar changes as we are, which will bring them down to where Vermont is currently. Listed below is the latest thinking of the majority of the commission members. There may be another option by substituting 10 years for 5 years where they appear for all groups.

Retirement is a complex. There are no changes recommended for currently retired employees. All of the below applies to employees currently working as either State Employees or Teachers:

Revisions to normal and early retirement ages:

State Group F and Teachers’ Group C (nearly all employees)

Raise normal retirement age from 62 or 30 years of service at any age to 65 or the rule of 90 (age plus years of service to equal 90) for those more than 5 years from normal retirement eligibility for full 50% average final compensation (AFC) benefit. This means no change for those 57 years old or older or with 25 or more years of service.

Raise the early retirement age from 55 to 58 for those more than 5 years from early retirement eligibility. This means no change in this benefit for those 50 years or older.

State Group D (judges)

Raise normal retirement age from 62 to 65 for those more than 5 years from normal retirement eligibility. This means no change for those 57 or older.

State Group C (law enforcement/ fire fighters)

Raise the early retirement age to 52 from 50 for those more than 5 years from early retirement eligibility. This means no change in this benefit for those 45 or older.

Lengthening the average final compensation (AFC) period:

State Group F and Teachers’ Group C (nearly all employees)

Use a 5 year AFC instead of a 3 year AFC to calculate benefits for those more than 5 years from retirement eligibility. This means no change for those 57 or older or with 25 years of service.

State Group D (judges)

Use a 2 year AFC instead of final salary to calculate benefits for those more than 5 years from retirement eligibility. This means no change for those 50 or older.

State Group C (law enforcement/ fire fighters)

Use a 3 year AFC instead of a 2 year AFC to calculate benefits for those more than 5 years from retirement eligibility. This means no change for those 45 or older.

New Benefit-Increase maximum benefit of 50 per cent of AFC to 60 per cent of AFC for State Group F and Teachers’ Group C for those with more than 5 years from normal retirement date. This means that if an employee works more than 30 years they could get an additional benefit up to 60 per cent of AFC. Raise contribution rates for employer and employees (risk sharing):

Develop a going forward proportional linkage (50/50 or 60/40), using FY 2010 as a baseline, so that employer and employee contributions rise or fall in tandem. Preliminary estimates, on a 50/50 linkage, show this would increase the employer contribution for the State employees system to 8.94 per cent from 7.57 per cent and increase the employee contribution to 6 per cent from 5.1 per cent. For the Teachers system this would increase the employer contribution to 9.46 per cent from 7.41 per cent and increase the employee contribution to 4.76 per cent from 3.4 per cent.

Retiree Health Insurance:

Instead of the current 80/20 split of retiree health insurance premiums, a new tiered system would apply to all employees more than 5 years of eligibility to draw this benefit. This means no change for those 50 years or older or with 25 years or more of service. State employees went to a tiered system for newly hired employees on 7/1/08. The new employer share for the tiered system would be either:
30 per cent-10 years
50 per cent-15 years
70 per cent-20 years
OR
40 per cent-10 years
60 per cent-15 years
80 per cent-20 years

Also provide ability to “recapture” health insurance benefit with 20 years of service upon drawing retirement benefits. Teachers currently have this benefit after 10 years of service and newly hired State employees have this benefit after 20 years of service. This means that if an employee leaves employment after 20 years of service, when the employee reaches eligibility for retirement, the employee can regain the health insurance he or she had when they left service.

Possibly add spouses of teachers to health insurance coverage at the same premium split. This would require an increase in employee contributions however.

Sources of additional funding

for the Teachers’

retirement system:

The Treasurer has proposed that the State continue to pay for unfunded liabilities from the general fund but normal costs of the retirement system be transferred to the Education Fund with a 3 year phase-in.

The employer share of Teacher retiree health insurance for current Teachers continues as is. For newly hired Teachers, school districts would be charged on a prefunding actuarial basis. It is unclear in the proposal what happens when they retire.

Teachers Retirement Board Governance: If the proposal goes forward, increase membership on the Board from 6 to 7. Add a school board member and a superintendent and eliminate the BISHCA Commissioner or designee.

Current Use Proposals

Increase the dwelling exclusion from two acres to five acres for most residences

Would capture “amenity value” for people who don’t earn their living from the land. Two-acre exclusion would still apply to landowners who earn at least 50% of gross income from agriculture and from growing and harvesting wood products. Estimated fiscal impact: $ 1 . 6 million in FY2011 in increased Ed Fund revenues (towns would also collect an additional $500,000 in municipal taxes). $2.1 million in FY2012, due to a reduction of $500,000 in State reimbursement for lost municipal taxes.

Change method of calculation and collection of Land

Use Change Tax (LUCT)

Base LUCT on 10 per cent of developed land, rather than on present pro-ration formula Administer locally with 50 per cent going to town and 50 per cent to State Must provide an “easy out”: landowners have option to (1) withdraw all land without penalty and no reenrollment for five years; (2) withdraw part of land and pay penalty based on pro-ration formula; (3) keep all land enrolled.

Estimated fiscal impact: This is uncertain. While some landowners will withdraw with no penalty (option #1), others will choose option #2 and accelerate a partial withdrawal in order to take advantage of the lower rate. Because the new formula will produce much higher income, a much small amount of withdrawn acreage will needed to produce the $500,000- $650,000 that the State collects annually under the current formula. Eventually, when withdrawals return to a normal 3,000-5,000 acre annual rate, LUCT revenues should total $3.5-6.0 million or more.

Increase the Property

Transfer Tax on sales of

enrolled land

Change PTT rate from 0.5% per cent to 1.25 per cent. Estimated fiscal impact: $300,000 annually

Levy temporary $25 per parcel tax surcharge to complete

electronic

administration

Surcharge would apply for three years, and then sunset, maximum surcharge would be $100 per landowner; landowners with more than four enrolled parcels could apply for a refund. Estimated fiscal impact: $300,000 annually for three years

Note: In order for the Recommendations #1, #2 and #4 to have an impact on FY2011 receipts and expenditures, the Legislature must adopt these changes within the first 30-45 days of the 2010 legislative session

It will be a challenging session. I look forward to working with you and for you as we strive to keep our communities thriving. I wish you a happy, healthy and safe holiday season. Please stay in touch. maxjg@wcvt.com. 496-4244.