Administration proposes tying capital-cash spending authority to capital bill reallocation rules

The Corrections & Institutions committee on Feb. 11 heard legal and administration testimony about proposed changes to how a capital infrastructure subaccount in the state's capital cash fund would be treated after appropriation, including whether unspent cash would automatically remain in the subaccount or be subject to the capital bill reallocation rules.

John Gray, legislative counsel, told the committee the existing statute (Title 32, Section 1001(b)) currently says any entity authorized to make expenditures from the capital infrastructure subaccount ‘‘shall have not more than two years from the legislative session in which the act authorizing the expenditure was enacted to encumber the funds’’ and that ‘‘any remaining unencumbered funds shall remain part of the fund account.’’ Gray said the administration's proposed change would strike that language and instead make spending authority for that subaccount subject to the provisions of 32 V.S.A. §701(a), the statute governing capital construction acts and reallocations. He summarized the consequence: under §701(c) there are reporting and reallocation steps after two years and a mandatory reallocation after five years for unexpended amounts.

The administration’s witness, Nick Kramer, chief operating officer of the Agency of Administration, framed the change as seeking parity between cash‑funded appropriations and bonded (bonded/dollar) capital appropriations. ‘‘Our whole proposal has been that the cash fund and bonded dollar appropriations are equal in terms of their utility and . . . the allowable uses,’’ Kramer said. He said the administration’s intent is that cash appropriations and bonded appropriations ‘‘should be the purview of the institutions committee’’ and tied to the existing capital reallocation process run by the repo/reprogramming committee.

Committee members pressed speakers on the practical effects. Under current law, committee members were told, a two‑year encumbrance rule means departments typically only get one full construction season to encumber cash appropriations made in a session; the administration argued that ambiguity about the statutory start date (date of passage, last day of session, or some other date) could cause funds to ‘‘automatically expire’’ at the start of a construction season. John Gray noted the key legal distinction: current language addresses ‘‘encumbrance’’ of cash while §701(a)/(c) addresses reallocation of spending authority and sets both a two‑year reporting point and a five‑year mandatory reallocation for unexpended bonded‑dollar spending authority.

Committee members also raised questions about committee jurisdiction and control. Several members asked whether reallocations after two years would be considered by the Appropriations Committee or by the institutions/repo process; speakers suggested both are possible depending on where appropriations and reallocations are located in bills. Kramer and others said the administration envisions the cash fund appropriation process moving into the capital bill, and that reallocations could then follow the capital bill reallocation mechanics rather than the current budget reversion process.

No vote or formal committee action was taken. Members asked staff to coordinate with Appropriations Committee leadership and legislative fiscal offices to clarify current practice and to return with information showing—by statute and by practice—how cash‑fund appropriations have been treated, what practical dates and deadlines apply, and what the administration expects the proposed language to change.

Next steps: committee members asked staff to consult with the Appropriations Committee and the Joint Fiscal Office; witnesses offered to provide clarifying memos on current practice, the precise statutory dates of concern, and options for drafting language that preserves either an explicit encumbrance deadline for cash or achieves parity through the §701(a) capital reallocation pathway.