In the previous articles, The Informed Vermonter reviewed the major federal legislation passed in response to the COVID-19 pandemic. In total, this legislation provided for over $2.3 trillion of increased aid and economic stimulus. In this article, the amount of this money making its way into Vermont will be discussed.
As you will soon see, the amounts are not small. It can be difficult to comprehend numbers like $2.3 trillion. When you peel the onion back to Vermont and its population of 624,000 people, the scale and impact of these huge federal programs becomes a bit clearer.
CARES Act Bonanza
As part of the massive $1.7 trillion CARES Act, there was a provision for $150 billion of direct federal grants to states, territories and Indian organizations to be allocated based on population.
Vermont has received $1.25 billion under this program.
This is a huge amount of money for Vermont. In fiscal year 2019, the State of Vermont had total revenues of $6.3 billion according to the annual audit. This CARES Act grant represents almost 20% of the State’s total annual revenues. The grant exceeds total annual state income receipts by $205 million.
The state government has until the end of the year to determine how to spend all this money. Normally, the governor and legislature spend most of their time worried about finding enough money to fund existing programs. It should be quite interesting to see how they handle a $1.25 billion bonanza. There’s probably a very long line forming to get their hands on this money.
Payroll Protection Program
As of May 16, 2020, 11,124 small businesses in Vermont had borrowed $1.17 billion under the CARES Act Payroll Protection Program. This represents an average loan size of $105,178. To the extent all these borrowers use the loan proceeds for qualified uses (75% for payroll…), these “loans” are converted to grants and need not be repaid.
As of May 16, 2020, there was still over $100 billion remaining in this program to be allocated by the Small Business Administration, so more Vermont businesses will probably take up this program.
Unlike the $1.25 billion state government grant, the money sent to income tax filers under the CARES Act can be spent as each individual recipient sees fit. In the aggregate, it’s a lot of money.
So, taxpayers in Vermont received $1,200 each ($2,400 for joint filers) plus $500 per dependent. The Informed Vermonter took a stab at estimating the total amount of money this represents.
In 2018, Vermont had 320,213 individual income tax returns filed. The table below estimates the total payments made under this program.
|Filer Category||Number of Filers||Stimulus/Filer ($)||Total ($ millions)|
|Joint Returns less the $200,000||105,000||2,400||252|
|Single Filers less then $98,000||191,000||1,200||229|
Source: Derived From Income Tax Statistics, Department of Taxation, Vermont Agency of Administration
These are estimates only. First, the number of dependents is an educated guess based on the number of K-12 students in Vermont. Also, the Stimulus payments reduce $5 for every $100 of Adjusted Gross Income above the levels in the table. The table excludes recipients in this category. Having said all that, this estimate is in the right ballpark.
For the Vermonters who lost their jobs or are facing coronavirus medical bills, this money is a godsend. For the majority of Vermonters, this money is a windfall (and tax free at that)!
Extended Unemployment Insurance
The CARES Act increased funding under Unemployment Insurance programs by $600 per week for up to 13 weeks, all paid by the federal government. It also expanded eligibility under the Pandemic Unemployment Assistance program to include independent contractors, people with limited work histories, gig workers and the like. This program pays lost average wages plus the additional $600/week.
Prior to the COVID-19 shutdown, Vermont would have had an average of 10,000 to 11,000 people receiving Unemployment Insurance Benefits at any point in time.
As of May 14, the Department of Labor had received 90,213 unemployment claims bringing the total to 69,444 eligible for normal Unemployment Insurance and 25,361 for Pandemic Unemployment Assistance. This represents about 30% of the entire Vermont work force!
In fiscal year 2019, Vermont paid out $65 million in Unemployment Compensation. Payroll taxes supporting the Unemployment Insurance program have exceeded claims for several years and Vermont’s Unemployment Insurance Trust Fund stood at $523 million as of June 2019. So, Vermont’s cushion going into the crisis was 8 times a normal year. With Unemployment Insurance claims going from a normal level of say 10,000 to circa 70,000, it looks like Vermont’s Unemployment Trust Fund can weather this storm. It seems unlikely that 70,000 people will remain unemployed for a full 12 months.
Both the Pandemic Unemployment Assistance program and the extra $600/week are fully funded by the Federal Government. Average Unemployment Benefits in Vermont are about $510 per week. With 25,000 people now eligible for Pandemic Unemployment Insurance, the weekly cost could be in the $12-$13 million range. With 95,000 people eligible under both programs, the weekly cost of the $600/week extra payment is around $57 million. Combined, that’s about $70 million a week at what is hopefully peak COVID-19 unemployment.
Assuming a straight line reduction in unemployment between May 1 and December 30 to normal levels (this could be optimistic), the extra $600 in weekly benefit could cost in the $500-$600 million range and the Pandemic Unemployment Insurance could run a further $200 million or more.
Supplemental Nutritional Assistance Program (Food Stamps)
With over 90,000 Vermonters out of work, the demand for SNAP benefits must be increasing. Following the Great Recession of 2008-2009, Vermont SNAP benefit recipients peaked at 100,138, or about 16% of the entire population. At the end of 2019, this had reduced to 67,800, or about 11% of the population.
Under the Families First Coronavirus Response Act and the CARES Act, eligibility requirements were eased, benefit levels were raised and federal appropriations were increased.
According to the Vermont Single Audit Report for fiscal year 2019, Vermont received $111 million related to SNAP, excluding the hot lunch school program.
Given the level of unemployment, SNAP benefit recipients could easily increase well above the 67,000 level back towards 100,000, depending on how long people stay out of work. To venture an estimate, lets assume there will be, on average, 15,000 additional recipients for six months. This would require an extra $50 million in federal SNAP grants.
Other CARES Act Funding
The CARES Act provided additional funding to a large number of state and federal programs. Senator Patrick Leahy’s office published a list of other funding that has been granted to Vermont totaling just about $65 million. This is spread across 13 different programs with the largest grants being $20 million for public transportation, $9.6 million for Vermont airports and $5.4 million for public health preparedness.
Much of the above are estimates and educated guesses. We won’t know the real numbers until all the dust settles and a final accounting is completed. With Vermont’s fiscal year ending June 30, a final tally of federal grants won’t be available until after June 2021. Having said that, the amounts indicated above are certainly in the ballpark and they are HUGE.
Here is a tally of the additional federal funds flowing into Vermont as a result of the COVID-19 crisis:
|Program||Amount ($ millions)|
|State CARES Act Grant||1,250|
|Payroll Protection Program||1,170|
|Extended Unemployment Insurance||750|
|Other CARES Act Funding||65|
$3.8 billion is a lot of money! It represents $6,115 on a per capita basis. It is 11% of Vermont’s Gross Domestic Product. It represents a 180% increase in the normal level of federal grants received by Vermont.
Of course, mandatory shutdowns and 95,000 unemployed Vermonters is a completely abnormal and unexpected outcome. Imagine how things would have been without this addition $3.8 billion if assistance. One suspects more bankruptcy’s, more defaults, more joblessness, more hunger, more anxiety and more misery overall.
In the next article, CARES Act tax cuts will be reviewed. For many readers, this will show Washington at its worst!