By Colin Meyn
and Xander Landen
In lieu of negotiating a deal to resolve an ongoing impasse, both lawmakers and the governor appear content to await the governor’s decision on a budget veto before considering further concessions or compromise proposals.
Gov. Phil Scott repeated on Tuesday that he is poised to veto a budget bill the Legislature passed last week in an effort to avert a government shutdown, unless lawmakers act in the coming days to remove a provision that could lead to a default property tax increase next year.
The speaker of the House said lawmakers won’t be considering those tax changes until Scott makes a decision on whether to kill H.13, the spending package they sent to his desk last week. The governor has until the end of today to make his decision.
“We’ve had action in committee rooms for a few weeks and we need a response on H.13 to define the scope of our work,” Speaker Mitzi Johnson, D-South Hero, said Tuesday. “We need to know if we have some sort of partner.”
Treasurer Beth Pearce, a Democrat, issued another letter Tuesday afternoon warning members of the Legislature and administration of the costs of a government shutdown, or pushing closer to the July 1 budget deadline.
“As the prospect of a shutdown becomes more and more likely, so does the likelihood that the State will suffer real and permanent costs, even if it is averted at the last minute,” Pearce wrote.
“I urge both sides to take the long view here and remember that Vermont’s well-earned reputation as a fiscally responsible State is on the line,” she added.
However, there was little indication Tuesday that either side was prepared to give up their political position, at least not yet.
“The likelihood is growing every day that I’ll be vetoing that budget,” Scott told reporters Tuesday at his ceremonial office.
“I feel as though that’s the only tool I have to make sure that we continue with these conversations, or let’s just say start the conversations, because we really haven’t had any at this point,” he said.
The latest budget proposal was crafted by legislators upon returning for a special session called by the governor after he vetoed the first proposal. The House Appropriations Committee pitched the second bill, H.13, as a non-controversial spending package that left all divisive issues to be hammered out in talks on a second bill, H.4.
However, without rates set in the second bill, H.13 would default to a statutory nonresidential property tax rate of $1.59, which would be a 5.5 cent rate increase on last year’s rate of $1.53 — and therefore is unacceptable to the governor.
Scott wants to add in language to H.13 that would avoid the possibility of that increase, but Democratic senators have said that’s the only leverage they still have to keep the governor at the table.
Johnson said she and Senate leader Tim Ashe had sent a letter to the governor committing to negotiating tax rates once he signs the spending package.
“Take the threat of a government shutdown off the table and we change the rates in H.4. That’s how this works,” Johnson said.
House leaders canceled plans to reconvene on Wednesday and delayed committee meetings on a new tax proposal until later this week. Johnson said there may be no need for those meetings.
If Scott vetoes the budget, leadership will attempt to override it and then, if that fails, get to work on crafting a new budget. If he does not veto, Johnson and Ashe have pledged to appoint a bipartisan group to work on reaching a deal on the remaining points of dispute.
The work lawmakers have done in H.4 so far hasn’t inspired confidence in the administration. On Friday, they took up the bill and moved it further away from the governor’s stance on keeping property taxes at the same level as last year.
Finance Commissioner Adam Greshin said Tuesday that the administration is prepared to relax its position on everything except for property tax rates.
“Given the hour is late, we would concentrate on the main areas of disagreement and offer flexibility in other areas,” he said.
That means not necessarily insisting upon cost-savings proposals such as staff-student ratio targets, district spending thresholds or a statewide teacher health care plan, Greshin said.
The administration is also continuing to highlight the abundance of one-time money at the state’s disposal this year and pressing lawmakers to use the surplus to buy down property tax rates.
At a presentation before administration officials and a handful of lawmakers Tuesday afternoon, Jeffrey Carr, the administration’s economist, reported that state revenues are coming in at $11.3 million higher than had been forecasted at the last meeting of the state’s E-board, the body that approves revenue forecasts.
That would put the surplus tax revenue at $55.5 million this year, up from the $44 million surplus that economists reported at last month’s meeting.
Last week, Scott called another E-board meeting, hoping lawmakers would adjust the revenue estimate to reflect the new tax dollars. The four chairs of the Legislature’s tax and budget committees — who along with Scott make up the board — declined the governor’s invitation, although they agree with the new estimate.
Democrats are opposed to using one-time money to buy down tax rates, and have said that doing so is effectively governing “on a credit card” — delaying the burden of a tax increase and making it even more painful to return to actual tax rates at some point in the future.
Scott said Tuesday that he rejects that argument.
“That analogy from my standpoint doesn’t work. When I use my credit card, it’s because I don’t have the cash to pay and I need a bridge to get there,” Scott said. “In this case we have the cash, so this isn’t putting anything on the credit card, this is paying cash.”