Committee reviews rescission rules and emergency authorities amid federal funding uncertainty

Catherine Reynolds of the district office briefed the Senate Appropriations Committee on March 28 about existing Vermont statute and practice for managing revenue shortfalls when the Legislature is out of session.

Reynolds outlined tiered mechanisms built into current law: if the emergency board's most recent revenue forecast shows a reduction of 1 percent or less, the secretary of administration may prepare an expenditure-reduction plan. Under that 1%-or-less scenario, the secretary may reallocate appropriations but may not reduce a single appropriation line by more than 5 percent without additional approvals, and the plan must be filed with the Joint Fiscal Office. Reynolds told senators that such plans are filed with Joint Fiscal but are not subject to automatic approval by the Joint Fiscal Committee under the statute as written.

If the revenue reduction exceeds 1 percent and is up to 4 percent, current law requires the secretary to prepare a plan for the Joint Fiscal Committee; the committee has 21 days to review and either approve or reject the plan. If the committee disapproves, statute allows a 14-day back-and-forth and directs a public hearing on the rescission proposal. Reynolds and committee members discussed that the statute gives the executive some authority in smaller adjustments but that larger reductions typically require legislative involvement or reconvening the General Assembly.

The emergency board also has authority to transfer funds or make expenditures to respond to unforeseen emergencies; Reynolds noted the board may move up to about 2 percent of current-year general fund appropriations via emergency action (the presentation cited approximately $44 million as the 2% threshold in current-year terms). She and other presenters provided ballpark figures to contextualize thresholds cited in statute: 1 percent of the general fund was presented as roughly $23 million and 4 percent as roughly $91 million, depending on exact appropriation totals.

Presenters emphasized that federal funds are treated differently in practice: Tom Cabot and Jeff Carr (the two economists who produce the consensus forecast) typically accept the amount of federal funding that has been appropriated rather than making independent forward estimates, so sudden federal funding changes (for example, reductions in Medicaid authorization or match rates) do not always appear in the same way in the revenue forecast. That disconnect was central to the committee's concern given continuing national discussion about Medicaid and other federal program changes.

Committee members raised operational questions about timing and process if federal cuts arrive in multiple stages (for example, partial cuts announced in May, then larger measures in October). Senators discussed whether to rely on the emergency board, the Joint Fiscal Committee, or to reconvene the Legislature in a special session for large-scale adjustments, and they discussed the practical and equity considerations of allowing the administration comparatively broad authority for small reductions while preserving legislative control for larger decisions.

No formal decisions were made at the hearing. Reynolds said staff would return with additional analysis and that the House's separate draft language addressing federal funds would be the subject of a future briefing.

Ending: Committee members asked for follow-on sessions to review the House's proposed language addressing federal funding and to consider options for rapid reconvening or targeted committee response if the federal fiscal environment changes.