BEST OF TIMES
The Vermont legislature ended the third week of the 2018 special session without any indication a final adjournment is on the horizon. The standoff between Democratic leaders in the legislature and the Republican governor over the budget is more intense now than ever. Governor Phil Scott is vehement in his position that he will not support any increase in the statewide property tax rate and that utilizing one-time money combined with a long-term effort to reduce student-teacher ratios and impose a statewide teacher contract is the best path forward. Democratic leaders maintain that using one-time money for the teacher’s retirement obligation is fiscally prudent, and that using one-time money to buy down property tax rates will only result in significant property tax increases in the future.
Neither side seems inclined to compromise. This is probably compounded by the fact that neither side feels particularly vulnerable in the upcoming election. The filing deadline for the 2018 election was May 31. Governor Scott will be challenged in November by the winner of a four-way Democratic primary. None of the candidates have held elected office before and despite his support of controversial gun-safety legislation and the ongoing fight over the budget, Scott remains a strong favorite to win reelection. In the legislative arena Democrats have fielded far more candidates than the Republicans, and will certainly hold onto their majorities in the House and Senate. There is even a strong possibility Democrats will pick up a super majority in the House. The impact on the special session is clearly that neither side feels pressure to compromise their positions.
The governor announced earlier in the week that state revenues have increased by $11 million above projections in the past month. He says higher than expected revenues provide even more reason to ensure rates are not increased this year. He has said he will try to convene an unscheduled and unusually-timed meeting of the Emergency Board, which consists of the governor and chairs of the money committees, to update revenue forecasts to include the $11 million. Democratic leaders say the $11 million does not change the policy implications of the governor’s proposed solution, and that calling an E-Board meeting is a political ploy. It is unclear if the Democratic leaders will agree to meet.
Democrats moved forward in passing a revised budget when the Senate approved H.13 on Thursday. They say the new budget is non-controversial and should be passed to prevent a government shutdown, which would occur if a budget has not been approved by July 1. H.13 includes everything in the budget the legislature passed during the regular session but does not include a provision to address the allocation of the one-time money that is the root of the controversy. The governor still objects however, on the grounds that H.13 does not specifically set rates for non-residential property taxes. As a result the non-residential tax rate would go up on July 1. He says he will veto the bill. H.13 will be sent to his desk when the House completes the proofing process.
To highlight the level of disdain both sides have reached, the Senate passed SR.4, a resolution that conveys the Senate’s support for the non-partisan Joint Fiscal Office (JFO). The resolution is a direct shot at Governor Scott’s chief of staff, who has criticized JFO as being partisan after they panned the governor’s long-term education proposal. On the Governor’s side there have been daily press releases criticizing Democrats for wanting to raise property taxes when state revenues allow for the use of one-time funds to prevent an increase.
To sum it up, no one seems to be going anywhere anytime soon. The big question will be how do the legislature and governor act as the July 1 deadline closes in and an unprecedented government shutdown looms.
WAYS AND MEANS
The House Ways and Means Committee, joined by some members of the House Appropriations and House Education Committees, met on Friday to discuss the education finance and budget issues that divide legislative leaders and the governor.
Tax Commissioner Kaj Samsom and Finance Commissioner Adam Greshin presented a $45.5 million plan to reduce income sensitivity and use various pots of one-time money to keep the average statewide property tax rate at FY18 levels.
The House Ways and Means Committee considered various proposals and late on Friday afternoon gave conceptual approval by a 6-2-3 vote to take $45 million in one-time money and use it to put $15 million into the education fund to buy down property tax rates in FY19, $15 million into a FY20 education fund reserve and $15 million toward teacher retirement obligations. Chair Janet Ancel, D-Calais, and others on the committee liked the symmetry of using $15 million in one-time money to buy down property tax rates in FY19 while reserving $15 million to lower property tax rates in FY20 so there wouldn’t be a hole in the education fund in FY20.
The proposal increases the average homestead property tax rate by 1.9 cents and the non-homestead property tax rate by 4 cents in FY19 so it doesn’t meet the governor’s no new tax pledge. Republicans on the committee voted against the proposal because they want to direct more of the one-time money towards reducing these property tax rate increases.
The proposal will be drafted as an amendment to H.4, a bill pending in the committee. The committee is expected to give H.4 final approval next time they meet, which will likely to be next week but no specific date was set.
POLICY BILLS
During its floor session on Thursday the Senate suspended its rules and made quick work on a number of policy bills by giving them final approval. All of the bills were either similar, if not identical, to ones that were on the verge of passage by both chambers during the regular session. Two of them were responsive to gubernatorial vetoes by “fixing” the issues that caused the vetoes, as explained by the governor in his veto messages. Those bills are as follows:
- S.1, relating to co-payment limits for chiropractic care and physical therapy. The Senate concurred with the change to the bill made by the House. S.1 is similar to S.224 from the regular session. The bill will now go to the governor for his consideration.
- S.4, relating to miscellaneous judiciary procedures. This bill responds to the governor’s veto of S.222 from the regular session by removing a provision concerning the arraignment of criminal defendants by video conferencing, which the governor objected to. S.4 bill will now go to the House.
- S.5, relating to the mitigation of systemic racism. This bill responds to the governor’s veto of S.281 from the regular session. The governor vetoed that bill because it provided that the person who filled the newly created position of Executive Director of Racial Equity could only be terminated by the Racial Equity Advisory Panel that is also created by the bill. The governor felt objected to that provision on the basis that since the Executive Director is an executive branch employee he (and his successors) should have the authority to dismiss the person. S.5 is simply silent on who can discharge that person from state employment. S.5 will now go to the House.
- S.6, relating to short term rentals (i.e., AirBnB type rentals). S.6 is similar to S.204 from the regular session. S.6 will now go to the House.
- H.7, which creates the Department of Liquor and Lottery, and the Board of Liquor and Lottery. At the outset of his term Governor Scott proposed merging the Department of Liquor and the Lottery Commission. The Senate’s passage of this bill, which has already cleared the House, accomplished that goal. H.7 is similar to H.571 from the regular session, and it will now go to the governor.
- H.8, which discontinues various state government Boards and Commissions that are no longer relevant. H.8 is similar to H.913 from the regular session, and it will now go to the governor.
- H.9, which sets up a study group to study the issue of whether persons other than the manufacturer of a given consumer electronic product should be able to repair that product. H.9 is similar to S.180 of the regular session, and it will now go to the governor..
- H.10, which relates to “transportation network companies” such as Lyft and Uber. H.10 is similar to H.143 of the regular session, and it will now go to the governor.
