Committee discusses VEGI enhancement for employee-owned firms; decides to defer detailed action to next year

The Senate Economic Development, Housing & General Affairs Committee discussed S.88, a proposal to allow employee-owned businesses to qualify for an enhanced benefit under the Vermont Economic Growth Incentive (VEGI) program.

Jessica Hartleben, executive director of the Vermont Economic Progress Council (VEPC), briefed the committee on the proposal'as she summarized it, the bill would allow employee-owned firms to be eligible for the same VEGI enhancements that are available under the labor market area (LMA) or green-VEGI criteria. Hartleben explained the existing VEGI structure: "in an LMA enhancement situation, if a business is in an applies for an initial VEGI, they receive that initial VEGI; they're entitled to that 80/20 split provided that they meet their payroll requirements each year that's verified by tax." She said a green-VEGI enhancement uses a higher incentive ratio and typically yields a larger award when a project meets stricter environmental or growth criteria.

Matt Cropp, executive director of the Vermont Employee Ownership Center, described employee ownership models (ESOPs, worker cooperatives and broad-based employee-ownership programs) and argued such businesses tend to be "stickier" in their communities, support local employment, and broaden the distribution of ownership benefits. Cropp said the enhancement could incentivize more Vermont firms to adopt employee-ownership structures or expand locally.

Committee members and VEPC staff noted practical constraints: Jessica Hartleben told the committee VEPC still requires applicants to meet all standard VEGI eligibility criteria and that employee-owned status alone would not automatically qualify a company for VEGI. The council had discussed the concept and expressed conditional support for an enhancement "if it tips a scale for a business," Hartleben said.

Cost questions were raised. Committee members asked whether the proposed enhancement would raise foregone revenue. Hartleben said VEGI is a tax expenditure and that program costs vary; she estimated the VEGI program's annual foregone revenue is typically in the $2 million to $3 million range overall, and that the LMA enhancement has a $1 million cap that the council has not reached in recent years. The committee heard that green-VEGI had not been awarded historically.

Given limited time and a small universe of employee-owned firms in Vermont, the committee declined to add the VEGI employee-ownership enhancement into H.34 at this time. Senators suggested collecting additional company-level testimony over the summer and revisiting the proposal in next year's economic development bill. Matt Cropp agreed to assemble company perspectives to help shape future legislation.

The committee's immediate decision was to defer substantive action on S.88 and to continue outreach and data collection; VEPC and interested stakeholders will return with more information on how many employee-owned firms exist in Vermont and the potential fiscal impact of an enhancement.