Vermont’s state revenue and spending plans were finalized late Friday night after days of wrangling over property tax rates, policy incentives, sales taxes and budget line items.
The deal includes about $5.79 million in new taxes. That’s the amount final negotiations boiled down to after a day of closed-door meetings punctuated by public displays of agreement and optimism.
The budget totals $5.5 billion — $1.4 billion from the state’s General Fund and $1.5 from the Education Fund. Almost $2 billion is expected in federal funding.
The extra money is needed to fund a gap created by an agreement between the Shumlin administration and the newly formed home health care union. Lawmakers scrambled to find a way to pay for a $2.2 million tentative contract with home health care workers two weeks ago.
One of the biggest compromises on the spending side came in reimbursements to health care providers who serve low-income patients on Medicaid. The Senate Appropriations Committee pushed for a 2 percent reimbursement rate increase in response to the House proposal of 0.75 percent proposal. They settled on 1.6 percent, which will cost more than $2 million.
And they agreed to a complex, decade-long formula for fully funding retired teacher health care. The state has been borrowing from the teachers’ pension fund to pay the health care costs, which now cost about $28 million per year.
About $2.8 million more will be raised by temporarily changing the calculations for business penalties that help incentivize and pay for affordable health care. “Employer assessments” currently are levied on businesses whose employees are not covered by health insurance.
The conference committee agreed to extend the penalties to employers who offer health insurance, but whose workers earn so little they’re enrolled in Medicaid.
The House did not agree to the Senate’s proposal for a tiered structure, however, whereby larger businesses would be charged more.
Instead, the assessment will be indexed to the fiscal year 2015 amount on July 1, 2014. The payments won’t be due until October, when the assessment will “look back” to the first part of the fiscal year. Assessments will return to calendar-year indexing starting January 1, 2015.
Cigarette taxes will go up by 13 cents per pack, to $2.75, to raise $1.1 million. An equivalent tax on snuff and smokeless tobacco will raise another $850,000. E-cigarettes and bottled water will not be taxed.
New fees will be charged on pre-paid cellphones through the Universal Service Fund. The pre-paid USF will divert $450,000 to the General Fund to help close the gap.
As a final touch, Commissioner of Finance and Management Jim Reardon presented a new strategy to conferees late Friday afternoon, to which they agreed. Budget writers are counting on squeezing an estimated $800,000 out of noncompliant taxpayers. The names of the state’s most delinquent individual and business taxpayers — 100 each — will be published.
House and Senate members settled on a 4-cent increase in homestead property tax rates (from 94 cents to 98 cents per $100 of assessed property tax value), and a 7.5-cent increase for non-residential property tax rates ($1.515). Income-sensitized payers will not see a change from the current 1.8 percent.
Reardon said other states had tried similar strategies with good results.
Five of the conference committee members from the House and Senate signed the final report. Sen. Mark MacDonald was unwilling to endorse it. He reportedly left the Statehouse earlier in the evening. MacDonald did not respond to an email late Friday night.
House Ways and Means Committee Chair Janet Ancel, D-Calais, said the conference process was challenging this year because the property tax and miscellaneous tax bills had been combined. The House passed the property tax rate separately from the miscellaneous tax bill; the Senate put the two bills together.
Senate Finance Committee Chair Tim Ashe, D/P-Chittenden, said next year may be even tougher. The House and Senate tax writing committees want to incorporate a new income component into the tax formula for funding education next year. They also want to work with the governor on estate tax changes.
CORRECTION: This article was corrected at 9:05 a.m. on Saturday, May 10, 2014. The House did not agree to the Senate’s proposed tiered structure for employer assessments.
