Department of Labor outlines budget adjustments: close WEP fund and return $8 million to general fund

Michael Harrington, commissioner of the Department of Labor, told the Appropriations Committee that the department is supporting two technical budget adjustments in the current budget-adjustment bill: closing the state’s Workforce Education and Training (WEP) fund and allowing about $8 million in prior-year appropriations tied to unemployment insurance (UI) modernization to revert to the general fund.

Harrington said the WEP fund balance is roughly $2.600.000 and appears to be mostly carryover from subgrants and awards made before 2016. "We wouldn't be defunding any programs by wiping out the fund," Harrington said, explaining that the fund has not received a direct legislative appropriation in several years and that unused subgrantee balances have accumulated.

The second adjustment involves $8 million that Harrington said originated in the department’s base budget for fiscal years 2023 and 2024 for UI modernization work. The money remained in those budgets because the modernization project had not begun; the project kicked off in August–September 2024, he said. Harrington said some ARPA dollars were used in FY24 to spend down time-limited funds, which freed general-fund dollars in those prior years and results in the current proposed reversion.

Harrington gave the committee an operational update on the UI modernization project and the health of Vermont’s UI trust fund. He said the project began in late summer 2024 and that the vendor go‑live is expected in the summer of 2026. "The project kicked off in August, September of 2024. Our go live date is the scribe slash summer of 2026," Harrington said.

On the trust fund, Harrington characterized the fund as in a relatively healthy position. He said it is "a little over $300,000,000," and later discussed figures in the low $300 millions, noting the fund was higher pre-pandemic (about $520,000,000) and was drawn down during the pandemic by roughly $300,000,000. He said Vermont is currently on tax schedule 1 — the lowest employer tax schedule — and that the taxable wage base is roughly $15,000–$16,000.

Harrington described technical limits of the existing UI mainframe, which processes transactions in nightly batches and has produced frequent outages and manual workarounds. "It took roughly 7 to 8 minutes to take a new claim over the phone; now it takes about 25 minutes," he said, attributing the slowdown to aging systems, batch processing, and loss of legacy mainframe expertise.

Harrington said the modernization vendor contract is roughly $28,000,000 and that the legislature appropriated about $30,000,000, leaving the department in a funded position for the vendor contract. He also described Agency of Digital Services (ADS) staff and subcontractors as the primary technical support for the department, and he noted there may be modest additional ADS costs as the project proceeds.

No formal vote or legislative action on either budget adjustment item was recorded in the transcript of the hearing. Harrington pointed the committee to language in the budget-adjustment documents (pages beginning around the 50s in the language packet) for details on the statutory or drafting changes under consideration. He also told senators the department’s annual trust-fund report would be available the following week and would include a more complete accounting of trust-fund health and implications for employer tax schedules.

The committee exchange included questions about whether federal rules allow sector-specific tax relief (Harrington said federal law requires uniform treatment of contributing employers), how the trust fund is audited and overseen (Harrington noted federal oversight and regular audits), and whether any programs would be defunded by closing the WEP fund (his answer was no, based on available records of subgrants).