Gov. Phil Scott has allowed a Covid-19 aid package including funding for infrastructure projects, struggling businesses and the state’s mental health system to become law without his signature.
Scott said he refused to sign the bill because he disagreed with its use of federal Covid-19 funds and objected to a provision that would tax some of the loans Vermont businesses have received from the federal Paycheck Protection Program.
“Unfortunately, I cannot sign this bill because it includes policy and spending choices that suggest we have very different opinions about how best to deploy the federal recovery and economic stimulus funding,” Scott said in a statement Saturday
The governor said the $104 million package “includes some valuable relief for Vermonters,” such as $5 million in mortgage assistance to help prevent foreclosures, funding to expand mental health services and grants to low income families.
The bill also contains $47 million in spending that Scott had pitched in his January budget proposal, including $10 million for business grants, funds for brownfield remediation and investments in affordable housing and outdoor recreation infrastructure projects.
But Scott expressed concern over the Legislature’s decision to harness some of the recently approved federal funding from the American Rescue Plan Act to pay for the state recovery package.
The governor said he’d rather allocate those federal funds in a single bill. Earlier this month, Scott pitched a $1 billion plan for spending federal ARPA dollars, including spending on broadband buildout, affordable housing and climate change initiatives.
“I feel very strongly that we need to invest federal American Rescue Plan Act (ARPA) money in a truly strategic and fully transparent way, preferably in a single piece of legislation,” Scott wrote Saturday. “These investments should be in tangible infrastructure that provide the greatest economic benefits and will truly transform our economy — especially in the parts of the state that need it most. I will not support a piecemeal or diluted approach to the investment of ARPA funds.”
Scott said that the initiatives in the bill “are not bad investments, but they should not be funded with ARPA money.” Instead, he said, the Legislature should have used state dollars and money from the Coronavirus Relief Fund — which Congress sent Vermont last year — to pay for the relief package.
The governor said he had let the legislation become law because it “contains urgently needed funds for Vermonters.” But he said he would “not support any additional, unnecessary, or unwise use” of federal dollars.
The House has already passed a state budget that would spend another $650 million of the ARPA funds, setting up another potential clash with the governor. The Senate is now considering that proposal.
Scott also raised concerns with a provision in the Covid relief bill that could require businesses to pay state taxes on certain Paycheck Protection Program loans. At the last minute, lawmakers added a provision to the aid package that would tax loans forgiven in 2021 as if they were normal income.
Democratic leaders have claimed they’re still undecided on the issue and plan to debate it further — even though they sent a bill to the governor enacting such a tax, and that bill has now become law.
So far, 14 states have opted to tax forgiven PPP loans or are considering doing so, even though the federal government has made the loans tax-free.
Scott said the Legislature “should reverse its decision to insert, at the last minute, a new and punitive tax liability on federal PPP loans.”
“These forgivable loans were issued to help employers survive this pandemic and preserve jobs. And our businesses have applied for these loans with the understanding they would not be taxed,” Scott said. “The Legislature should be at their side, helping them up. Not on their back, trying to raise yet more in taxes.”