The second week of the 2022 legislative session started with big news relating to the state’s pension funds. On Monday, the Pension Benefits, Design, and Funding Task Force unanimously approved recommendations to fix the state’s underfunded pension system. The Task Force includes members from the legislature, the Scott Administration, labor organizations and the Office of the State Treasurer. The Task Force agreement would require the state to make a $200 million payment toward the system’s debt and use 50 percent of future general fund surpluses to support the fund. Member contributions would also increase and benefit plans would be scaled back. The changes would not affect current retirees and beneficiaries.
There was a buzz of optimism in the legislature this week as a result of the agreement. There is still a long way to go though, as the recommendations need to make their way through the legislative process.
The pension agreement had an immediate effect on the discussion about the FY2022 Budget Adjustment Act (BAA) in the House Committee on Appropriations. It highlighted the importance of having state funds available for both the investments in the pension fund and to draw down federal matching funds that will become available as a result of the recently approved federal infrastructure bill. As a result, the House Committee on Appropriations put a lot of effort into using as many American Rescue Plan Act (ARPA) funds as possible in the FY2022 BAA in order to preserve General Fund dollars.
House policy committees spent the week scrambling to make their budget adjustment recommendations to the House Committee on Appropriations, which by Thursday evening had a rough draft of the spending plan finished. On Friday, House Appropriations worked diligently to finalize and vote the FY2022 BAA, with a goal of having the bill pass the House next week. The committee was eager to finish BAA in advance of Governor Phil Scott’s FY2023 budget address, which is scheduled for Tuesday, January 18.
The House Committee on Appropriations’ version of FY2022 BAA includes more new spending than is typical for a budget adjustment bill. The budget adjustment process is usually designed to true-up the current budget year, adjusting for changes to the state revenue forecast and other budget deviations that have occurred in the first six months of the fiscal year. But with the pension recommendation, and the pandemic’s ongoing impact on the healthcare workforce, testing shortages, childcare, housing, education and virtually every other aspect of life, the administration and lawmakers are looking to make larger-than-usual investments through BAA.
Overall, the FY2022 BAA authorizes more than $350 million in new spending. The House Committee on Appropriations passed the FY2022 BAA late Friday afternoon on a unanimous vote.
The state received some good news this week when state economists informed the governor and lawmakers that state revenues are expected to be $44 million higher in the general fund in FY2022 than what was projected six months ago. This increase is largely driven by ongoing federal stimulus/recovery funding as a result of the pandemic. The economists warned that the state needs to be careful about budgeting into the future as the pandemic continues to create economic uncertainty and because the impact of federal support will recede in the coming years.
Another significant development this week was the decision in the House to return to semi-in-person legislating starting next week. The House Rules Committee approved a resolution on Thursday authorizing House floor sessions to remain remote through the remainder of January. Because the previous House resolution authorizing remote participation in all legislative action expires on January 18, the effect of the new resolution is that committees will return to the statehouse for in-person committee meetings next week. However, the resolution authorizes members who cannot attend in person due to symptomatic illness or direct COVID-19-related circumstances to participate in committee proceedings remotely. After a lengthy debate on Friday, the House adopted the proposed resolution, meaning that next week, House committees will meet in person for the first time during a regular session since March 13 of 2020.
The Senate has opted to remain fully remote.