Clean Water Funds Challenges Being Faced

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VERMONT - A meeting of the Clean Water Board was held Wednesday afternoon to discuss the updated SFY20 Clean Water Fund Budget. Along with the establishment process and timeline revision for the SFY21 Clean Water Fund Budget. 

 

Susanne Young, Secretary of the Clean Water Board, started by wanting to talk about what she calls, "the lay of the land. Going over all the items on the agenda. First, in light of the Covid-19 pandemic, with the stay at home order in effect, with the closure of restaurants and hotels. That has had a significant effect on revenue the state of Vermont has suffered such as the rooms and meals tax that helps to fund the Clean Water Fund.

Second, to discuss what the Board has done in terms of meeting their obligations to not overspend the FY20 Clean Water Fund Budget. Third, To discuss the minny budget appropriations that all state government is going through. Fourth, A timeline for reviewing and revising the FY21 Clean Water Budget, as well as giving everyone an update on the Clean Water Fund.

Young then turned the mic over to Emily Byrne with the Agency of Natural Resources, to discuss the review of the updated Clean Water Fund revenue projections for state fiscal year 20 and 21. As the Covid-19 pandemic started to unfold, Byrne and a colleague of her's started to look at the revenue into the clean water fund. Trying to determine what kind of impact the state of emergency might have on the funds given to the Clean Water Fund. The two created a spreadsheet to organize the budget.

"The spreadsheet that we included had a very high level at the very top. The revenue updates that Dug and I have put together. At the very top there was some unallocated balance in the fund of two million dollars. So that's sitting in the fund at the end of FY20. We then pulled the actual receipts through the end of April into the end of the Clean Water Fund. As you can see year to date we've earned about eleven point three million of the thirteen point nine that was budgeted for the clean water fund in FY20." Which puts the Board at about two million dollars short of their target budget.

Then Bryne goes on to talk about the estimated budget for the end of the rest of the fiscal year for May and June, on the clean water surcharge itself. Based on consensus estimates for FY20 that were put together by the state's economists. "So we are projecting a little bit more clean water surcharge from the property transfer tax to come in this fiscal year. Which is about six hundred thousand, which is about half of what we were anticipating to come in through the end of the fiscal year."

She wraps up that portion of the meeting by discussing the rooms and meals tax, and what they anticipate to collect through the last two months of the fiscal year. Which is at about sixty thousand dollars, so their projections through the remainder of the fiscal year to get an additional five hundred thousand dollars. Which will put the board at about two million dollars short of what the board had in the clean water fund.

The next item of business is for the board to be looking at what the fiscal year of FY2021 looks like. "We have also started thinking through what this might look like for FY2021. Recognizing that probably this summer there we still will not be at the same capacity we were anticipating. We have started thinking through some scenarios. I think our initial scenarios were a 10%, a 25% and a 40% impact to the Clean Water Fund and what that revenue might look like. We are sort of holding on that. I know there is going to be another economic forecast, I believe this month." That will be the starting point for the conversation that the board will have on the 21 budget.

The next portion of the meeting was handed off to Secretary Julie Moore with the Agency of Natural Resources. She goes on to talk of the revenue shortfall that is expected in the FY20 Budget. In order to close any gaps in the shortfall, the group turned to the unobligated funds. The unobligated funds amounted to about three hundred thousand dollars.

"So then we did need to look at some other proposed commitments. First again turned our attention to projects that while planned did not have a full executed grant or contract agreement." All of the work that is being done will be shifted to year fisual FY21 as opposed to fiscal year 20. Which means a number of projects will be pushed off due to the effects of the Covid-19 pandemic in order to make certain accommodations for the budget. Leaving the group with a balance of about eighty thousand dollars on the bottom line of the Clean Water Fund.

After the meeting I spoke with Emily Bird, Manager of the Clean Water Initiative Program to talk about the background of the Vermont's Clean Water Board. The Clean Water Board was established back in 2015, the state of Vermont passed a landmark piece of state legislation called The Vermont Clean Water Act. That act's purpose was to ramp up the state of Vermont's water quality to reduce pollution. "A big part of that was driven by Lake Champlain and some of the water quality challenges Champlain has been experiencing."Along with that came the Clean Water Board to oversee funds.

The Clean Water Board is made up of five state agencies including the Agency of Administration, Agency of Agriculture Food and Markets, Agency of Commerce and Community Development, Food and Markets, and Agency of Transportation. Addition to those private board members that represent the agencies, there are four additional public board members appointed by the governor. Each year these agencies help the Clean Water Board to put together a draft budget for the upcoming fiscal year.

"That budget gets posted for public comment, usually for six weeks or so and the board hears comments from the public during a public hearing. Then the board processes that public comment, and they may make modifications to the recommended budget for the next year. Then in the fall they make a recommendation to the administration. Governor Scott's administration on how they think that budget should be written. Then it gets handed off to the state legislator as part of the governor's budget to go through the legislative review and approval process."

She goes on to giving me a little insight on the funding that goes into the Clean Water Fund. "There's three different revenue streams." Originally there was one sole funding source which was the property transfer tax surcharge that was established back in 2015. Since then the legislator and administration have created some additional revenue sources to support the clean water fund. Including the receipts from the unreturned bottle deposits.

Along with a portion of the rooms and meals tax to support the Clean Water Fund. "Having that variety, as you probably heard today, is very important because if one revenue stream is underperforming due to unforeseen circumstances such as a pandemic that we are currently experiencing. Then some others may provide a little bit of stability."

I then asked her about the effects that Covid-19 has had on the Clean Water Fund and what kinds of decisions are being made in order to keep things going. "The real challenge here is that the revenue sources that support the Clean Water Fund like a lot of other revenue sources in our federal government are underperforming." She says the lack of tourism in the state of Vermont has really taken an effect on the funding needed for the Clean Water Fund. But, she does tell me that the revenue from the unreturned bottle deposits are doing really well at this time to help the funding.

Last but certainly not least she walked me through the plans for the fiscal year 2020, FY21, and a new term called the "skinny budget." "Right now we are in state fiscal year 2020 and state fiscal year 2020 will end at the end of june. Then we will start operating under state fiscal year 2021." The summer of 2018 the board made its SFY2020 recommendation, in the winter of 2019 the board went through the decision making process.

Since July 1st, or 2019 the board has been running its grant program, to get money out in order to local partners to conduct projects. "With the Clean Water Fund we're spending revenue the same year we are earning revenue. So where we found ourselves with this covid situation around March/April realising the extent of this pandemic and its impact on revenue. Along with data from the tax department and the state economist we were realizing that we were going to end up with a gap."

So the agencies involved with the Clean Water Fund needed to estimate that gap. Originally the gap was said to be one point seven million dollars, but it ended up being closer to eight hundred thousand presented in the board meeting. "So state agencies had to figure out how to cover that. Luckily we had across state government enough sort of leftover or uncommitted dollars that we could pull together to meet part of that target." Since the group will have access to next year's funding in July, they were able to defer some commitments for July.

Now, because of the circumstances the board is going through a supplemental budget process with the legislator to bring appropriations of funding down to the level they expect it to be. Based on the revenue underperforming, "So we can close the books on that fiscal year." Then June of 2019 the board approved the draft budget for state fiscal year 2021, which starts July 1st. The group feels now, because of Covid-19 the state budget should be re-evaluated to match the revenue decrease.

That's where the "skinny budget" comes into play. Because of the uncertainty of all the commotion that has come with Covid-19 there's going to be a need to rather than the legislature approving the whole budget for fiscal year 21. The board will re-from their budget in the next couple of weeks, "so here is what we think we need for the first quarter, starting July 1st so we can run our grant programs to the best of our ability." Bird is unsure of what the board will decide to do from there. They may decide to run it quarterly so that the programs in place may run smoothly, or they may decide on another way to run things.