[T]he House passed a bill Tuesday that would ensure the government doesn’t see a shutdown, even if lawmakers and the governor can’t resolve a budget stalemate by the the end of the month.
It needs to clear the Senate, which is convening on Thursday, before heading to Gov. Phil Scott, who opposes the plan, and has already vetoed one budget bill this session.
Lawmakers put the proposal, H.13, on the table last week, hoping to eliminate the threat of a shutdown as they remain locked in a dispute with the governor over property taxes and education finance. The budget deadline is June 30.
The latest proposal, which passed in a vote of 80-43, incorporates most of the vetoed budget and tax bills that were passed last month, while carving out provisions in the few areas in which lawmakers and the governor disagree.
The bill does not set property tax rates, address education finance cost containment measures, or allocate $34.5 million of surplus money the governor hopes to use to buy down taxes.
Democratic lawmakers say they are committed to reaching a deal with the administration on these contentious areas in a separate bill.
But Scott and the majority of House Republicans have balked at the proposal, which would trigger a hike in nonresidential property tax rates if there is no deal with the governor.
They say this would effectively remove the governor’s leverage in ongoing negotiations and achieve the Democratic goal of allowing taxes to fill a $20 million hole in the education fund, so that one-time money can be used elsewhere.
Since H.13 doesn’t set nonresidential property tax rates, if rates were not set in another proposal they would default to the statutory level of $1.59 — a 5.5 cent increase over this year’s average rate.
House Republicans have argued that passing H.13 is futile, because Scott will veto the proposal if it comes with a possible tax hike. Though the governor has not explicitly stated that he would veto the bill, Secretary of Administration Susanne Young has said he opposes it.
On Tuesday, the Scott administration criticized lawmakers for failing to adopt amendments proposed by Republicans that would have guaranteed level tax rates.
“Majority leadership appears inflexibly committed to raising tax rates on Vermonters in a year we have a surplus — and multiple proposals — to avoid it,” Scott’s spokesperson Rebecca Kelley said in a statement after Tuesday’s vote.
Ahead of the vote, lawmakers shot down a compromise proposal backed by House Republicans that would have used $34 million of one-time money to buy down tax rates next year, and pay it back over time by keeping Act 46 tax incentive costs artificially high.
The proposal would have also introduced a cost containment mechanism to eliminate “rate inequity” between low and high spending school districts.
Rep. Scott Beck, R-St. Johnsbury, who pitched the proposal, said taxpayers in low spending districts are currently paying a “rate premium” to reduce the rates of higher spending districts.
The mechanism would be phased in over 10 years and result in higher tax rates for districts that spend more than the yield, and lower rates for low spending districts. Republicans say this change would reconnect voters with their spending decisions on Town Meeting Day.
A version of Beck’s cost-containment measure was included in the tax bill passed by the House this session. But that bill also contained a new income tax surcharge, which would have raised about $60 million in additional revenue, and was therefore opposed by Scott.
The income tax surcharge didn’t survive the Senate and without it, Rep. Janet Ancel, D-Calais, who chairs the House Ways and Means Committee, said the cost-containment measure could result in a heavy burden for high spending school districts.
“To do that kind of shift with the higher spending towns, with that much increase in their tax rate, without any additional revenue in the system, it just is really problematic,” she said.
Democrats opposed other cost containment provisions in Beck’s proposal, including one that would require school districts to have a supermajority of 60 percent of voters to approve budgets with per pupil spending set higher than the projected statewide average.
Last week, Democrats rejected two other amendments that would have taken the threat of a nonresidential property tax hike off the table, by making use one-time money.
Among the reasons that supporters of H.13 say they have rejected the proposals is because they don’t want to allocate the $34.5 million of one-time money in the bill. Instead, they want to save the pot of surplus funds for a separate bill, H.4, which will became the central vehicle for education finance negotiations with the administration.
Democratic leadership in the House and Senate is also trying to make sure as much of their budget — which restores cuts proposed by the governor to many programs that serve vulnerable and disabled Vermonters — remains intact for the next fiscal year.
“The aged, the blind, the disabled and so many more, must not be pawns in this political scrimmage,” Rep. David Yacavone, D-Morrisville, said on the House floor Tuesday.
The bill now heads to the Senate, where lawmakers will take it up on Thursday.
