Sen. Jane Kitchel’s triple-layer maple cake with boiled icing and Danville butternuts wasn’t enough to sweeten the mood in Senate Appropriations on Monday.
Kitchel, who is renowned for her confections (she was the chief cake baker for the Creamery Restaurant for many years), is also the chef de la maison in the Statehouse for the complicated recipe otherwise known as the Big Bill.
Most years by the time Kitchel gets the state cake after the annual pass-off from the governor’s office to House Appropriations to the Senate, her job often amounts to icing the layers.
No such luck this session. Kitchel is ready, thanks in part to the substitutions proposed by the House, to start from scratch on some parts of the $5.2 billion state budget, and members of her committee are following her lead. Kitchel is especially critical of the administration’s 69 new positions in the budget and she told senators on Monday that she is proceeding on the premise that none of the state jobs are necessary until they are proven otherwise.
This do-over mentality in the Senate’s most powerful committee spurred the Shumlin administration to do something out of the ordinary on Monday. Instead of simply sending Kitchel et al. a memo outlining the governor’s position on the House version of the budget, officials came to the committee, with memos and spreadsheets in hand, to explain what can only be described as a compromise proposal.
Though Gov. Peter Shumlin found not much to like in the House spending plans, especially the accompanying revenue bill that raises $27 million in new taxes next year and $32 million the following year, he has capitulated on several items that lawmakers have heavily criticized.
To wit: That $17 million tax on break-open tickets that lawmakers openly ridiculed the day of the governor’s budget address? Now reduced to $6.2 million, based on a 6 percent tax rate instead of 10 percent. (The House proposal gives pickle card tax an honorable mention and pencils in $700,000; the Joint Fiscal Office estimates for the tax were $6.5 million — at the 10 percent rate.)
Shumlin’s $17 million transfer of Earned Income Tax Credit dollars for low-income Vermonters (a two-thirds cut in the program) to child-care subsidies has been reduced to $12 million. The administration has revised the calculation for EITC — it will not reduce the credit for families with three or more dependents, and the rate of the the reduction for people with no dependents would be 11 percent, Spaulding said. The average cut would be about 12 percent.
The message as delivered, however, was not in the spirit of compromise, but in the tone of an executive branch issuing orders.
Jeb Spaulding, secretary of the Agency of Administration, chastised the House for raising new taxes that, in his view, are “unwise and unnecessary.” His evidence was anecdotal. He “doesn’t know anyone,” he said, who is bucking for tax increases.
Instead, the administration proposes to balance the budget without raising broad-based taxes, i.e., income, sales and rooms and meals by using $55 million in one-time monies (which will not be available next year, hence the projected $50 million gap for fiscal year 2015), and to pay for program expansions such as the Low Income Heating Assistance Program ($6 million) with the break-open ticket tax and child-care subsidies with EITC.
Spaulding warned senators repeatedly that the governor would tolerate “no new taxes,” and said the administration rejected all of the House tax proposals, including the elimination of a sales tax exemption on soda, candy, bottled water, vending machine food, supplements and vitamins and purchases of clothing of $110 or more. Shumlin also vehemently objects to the itemized deduction cap, a 0.5 percent increase in the meals tax and an increase in tobacco taxes.
There is, however, a tax increase in the governor’s new and improved plan. Spaulding told senators the administration proposes a new tiered bank franchise tax on the state’s five big banks — Keybank, People’s, Merchants, Citizens and TD Banknorth — and that would bring in about $2.4 million and cover the cost of making the so-called “cloud tax” moratorium, a sales tax exemption on downloaded software, a permanent fixture of the state’s tax code.
The governor is wedded to his EITC proposal and will not consider any other source of funding for child-care subsidies, Spaulding said, no matter how much money is directed toward the program.
The administration is also maintaining that the Legislature must also support a Reach Up cap that would go into effect Oct. 1 and save the state $4.2 million next year. Any “unrealized” savings would be absorbed by the Agency of Human Services, Spaulding said. The House booked no savings for the program in fiscal year 2014 and passed a version of the caps that opponents say are so lenient as to be practically meaningless.
Repeal of the $15 million employer assessment? Forget about it. Spaulding told lawmakers they’d need that money next year to pay for state health care programs.
The House proposal for $9 million reserves in the event of more federal cuts? No reason to raise taxes in Spaulding’s view. The state, he said, cannot afford to “backfill” reductions in federal spending for programs. The $2.5 million the administration sets aside for the General Fund budget stabilization fund is enough, he said.
The reception from the senators on the Appropriations committee was chilly. They questioned every aspect of the proposal. Sen. Dick Sears, D-Bennington, said he remained skeptical about the break-open tickets estimates. The Reach Up and EITC proposals generated criticism from Sen. Sally Fox, D-Chittenden, who questioned whether the administration was really addressing the child-care “cliff,” which she believes the House addressed by including $3.3 million for additional child-care subsidies. Kitchel, for her part, is committed to “scrubbing the budget,” to ensure that state agencies are being accountable to taxpayers.
Senate Appropriations is expected to advance its budget bill out of committee this Friday.
