June 22, 2018

Vermont Legislative Update 6-22-18

A special update from DRM's Government & Public Affairs Team

Encouraging Signs as Special Session Heads to Fifth Week

Republicans in the House and Senate this week added their voices to those calling for a compromise between Republican Gov. Phil Scott and Democrats in the legislature after the House failed to override Scott’s second budget veto on Tuesday, 90-51 (95 votes were needed). By late Friday there were signs that a compromise might be in the works, the first positive development since the Special Session began on May 23.

At the center of the storm are fundamental differences between Scott and Democratic leaders over raising taxes, and a projected shortfall in the Education Fund of up to $55 million. In addition to Scott’s long-standing opposition to any new taxes and fees during this biennium, his no-tax position appears to be bolstered by an influx of more than $171 million in previously unexpected revenue, of which $55 million remains uncommitted. Scott argues that the state should not raise taxes when it has such a large surplus.

Democrats regard the windfall as “one-time money.” If it is used to keep property tax rates level, they say, the legislature will need to raise as much or more in new revenue next year. Instead, they would use some of the revenue to make up for a shortfall in the Teacher’s Retirement Fund, which is chronically underfunded.

Although the budget rejected on Tuesday did not overtly raise any taxes, it also did not include language to set a new rate for the non-residential statewide property tax. Unless the legislature sets a new rate, the tax reverts to $1.59 per $100 of valuation under existing law, which amounts to an increase of 5.5 cents. The higher rate would raise an additional $23 million from the owners of commercial, vacation and rental properties as well as camps and second homes.

Four Republicans joined Democrats on the Senate Appropriations, Finance and Education committees on Wednesday in approving a new budget plan that keeps residential property tax rates stable and reduces the proposed increase in the non-residential property tax rate to 4.5 cents. The bill was ratified by the full Senate on Thursday, 27-0.

The House returned to Montpelier on Friday. Amid questions of Constitutional precedent over a tax bill originated in the Senate, word leaked out that House Democrats and the governor had reached a tentative agreement, facilitated, in part, by House Minority Leader Don Turner, R-Milton. They planned to introduced and pass a new bill that would reflect the compromise.

The tax and budget deal would keep the statewide average residential property tax rate at current levels, but allow non-residential rates to increase more slowly that the Senate-passed bill. It would also include a number of the governor’s top priorities, such as tuition forgiveness for members of the National Guard and a reduction in taxes on Social Security income.

Lawmakers in the House were expected to be working on the bill late into the evening on Friday. If it does gain approval Friday night, the Senate will need to return to Montpelier next week to deal with the new draft. The Senate may approve the bill as written, propose amendments, or call for a committee of conference. The word in the Statehouse was that the Senate had not been part of the agreement.

Without an approved budget, many areas of state government might be forced to shut down, and many Democrats, including State Treasurer Beth Pearce and Secretary of State Jim Condos, have issued statements warning of dire consequences beginning on July 1 if no budget is in place. Scott has assured the public that the state will have a budget.

DRM will continue to follow developments at the Statehouse and will issue a final report when the Special Session is adjourned.

DRM’s Government and Public Affairs professionals help the state's critical industries to achieve key objectives involving government, the press and the public. For more information about the content of this Legislative Update, please contact any team member:

John Hollar | Trey MartinJoseph Choquette IIILucie GarandRebecca Lewandoski


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