[U]nder a cloud of opposition from Republicans, including Gov. Phil Scott, the House gave preliminary approval Friday to a spending package aimed at averting a government shutdown in the event that a budget standoff draws out until July.
Lawmakers proposed the plan this week, hoping to advance the budget lawmakers agreed to with broad bipartisan support before adjourning last month. The proposal left out specific provisions on which legislators and the governor disagree.
The budget bill, H.13, which passed on a partisan vote of 86-44, would not include provisions to set property tax rates or address education finance cost containment measures. Most notably, it would leave on the table $34.5 million of contested surplus money the governor hopes to harness to artificially buy down taxes.
Democratic lawmakers say passing H.13 will give government agencies and Vermonters needed assurance that a looming shutdown won’t happen, while allowing negotiations over property taxes and education finance to continue in the coming weeks.
House Republicans slammed the proposal this week and said passing it will eliminate pressure for Democrats to engage in serious budget talks.
They and Scott say the proposal risks triggering a 5.5 cent nonresidential property tax hike if lawmakers don’t continue to negotiate with the Scott administration to craft a budget deal.
Democrats have repeatedly pledged to work with the Scott administration on an education finance proposal — once the possibility of a government shutdown is eliminated.
“I don’t need the threat of upending Vermont to do my job,” House Speaker Mitzi Johnson said after Friday’s vote. “And it makes me sad to think that the Republicans feel like they need that.”
Most House Republicans and the Scott administration want to see the threat of a nonresidential property tax increase taken off the table before they’d be willing to give the new budget proposal their endorsement.
Because H.13 doesn’t set nonresidential property tax rates, if rates weren’t set in another proposal, they would default to the statutory level of $1.59. Secretary of Administration Susanne Young has said Scott would be open to supporting the budget bill if lawmakers eliminated uncertainty over nonresidential rates.
“As it stands, H.13 does not address the $23.1 million automatic tax increase on non-residential payers, who are primarily Vermonters,” Young said in a memo to legislative leaders on Thursday.
Without addressing the nonresidential rates, she wrote that lawmakers “risk looking like [their] plan in proposing this budget was to allow non- residential rates to automatically increase on July 1.”
Young suggested lawmakers amend the bill to either eliminate the statutory default rate or have it revert to the prior fiscal year’s rate.
Johnson said the $1.59 statutory default rate has been on the books since 2003 and it doesn’t determine the rates lawmakers actually set.
“Last year had we walked away from the negotiating table, nonresidential property taxes would have jumped up and nobody freaked about it. This has been the standard thing,” she said. “We have always adjusted rates according to what the education fund needed to fund our schools.”
On Friday, lawmakers shot down two amendments that would have assuaged the Scott administration’s concerns: one that would have eliminated the statutory rate and another that would have transferred $24.5 million of one-time money to the education fund to keep rates level next year.
The second amendment was offered by Rep. Cynthia Browning, D-Arlington, who said putting the money into paying off Act 46 tax incentives would keep tax rates stable and relieve an ongoing annual burden on the education fund.
But Democrats say they don’t want to allocate the $34.5 million of one-time money in H.13. Instead, they want to save the pot of surplus dollars for a separate bill, H.4, in which they plan to include their education finance agreement with the Scott administration.
“I think that we’re going to need the one-time money that is being spent in this amendment in the context of the negotiation on H.4,” Rep. Sam Young, D-Glover, said on the floor Friday. “If we don’t have that one-time money, we don’t have the ability to negotiate and solve this problem.”
But many Republicans argued passing H.13 without addressing the possible non-residential tax hike is shortsighted. They say Scott will veto the measure unless the default rate is removed.
“H.13, as constructed, leads us one step further to a government shutdown,” Rep. Kurt Wright, R-Burlington, said on the House floor Friday. “It sets up a pathway for a tax increase. He is not going to support it.”
“What a waste of time,” Rep. Anne Donahue, R-Northfield, said on the floor after Friday’s vote. “Who are we kidding?”
Johnson has called H.13 the “Kumbaya bill” and said there is no reason for the governor to veto the measure.
“Nothing in there increases taxes,” Johnson said. “The governor can let this become law and still keep all of the promises that he has gone way out on a limb to make.”
The administration disagrees.
In a statement released minutes after Friday’s vote, Scott’s spokesperson, Rebecca Kelley, said that by failing to pass the amendments that came up on the House floor, legislative leaders went back on their commitment to craft a proposal that excludes points of dispute with the administration.
“This makes it abundantly clear to Vermonters that the majority leaders will use every trick in the book to impose a property tax hike on Vermonters,” she said.
The bill will likely pass on a second vote when the House meets again on Tuesday.
