Scott says he’ll veto bill that avoids shutdown unless Senate makes changes

By Xander Landen, VTDigger.org

With the budget deadline just over three weeks away, a spending bill that would prevent a government shutdown could arrive on Gov. Phil Scott’s desk as soon as this week. But the governor said Wednesday he will veto the proposal unless it sees a major change in the Senate.

Sen. Tim Ashe, D/P-Chittenden, the Senate president pro tem, said he had no intention of capitulating to Scott just so lawmakers could send him a bill that he would sign.

Scott said Wednesday that he will kill the latest budget bill, H.13, unless lawmakers eliminate the possibility of a default nonresidential property tax rate of $1.59 from kicking in next year.

That would be an increase on the $1.53 rate this year, and in turn a broken promise by the governor, who has pledged to impose no new taxes and fees on Vermonters.

But this statutory default rate — which would mean a 5.5 cent tax increase — will only be triggered if lawmakers and the governor aren’t able to make a deal on taxes and education finance policy before the end of the month.

Legislative leaders have said the first priority is to eliminate the threat of a shutdown, but have pledged to sit down with the administration in the coming weeks to set property tax rates in a second piece of legislation, making the statutory rate irrelevant.

But Scott is wary of this timeline. He told reporters Wednesday that if lawmakers didn’t lower the tax rate in the budget bill, there would be “no incentive for anyone to come back to the table.” He said he was hopeful the Senate would remove the possibility of the rate increase.

However, Ashe said the Senate, which will take up the proposal when it convenes Thursday, does not plan on modifying the bill at the governor’s request.

Ashe said he doesn’t want the Legislature’s starting point in budget negotiations to involve using one-time money to artificially buy down the tax rates, as the governor has been advocating for weeks.

“If we did that we would be saying we are making the default betraying the whole system and using one-time money so we have a bigger problem next year,” he told reporters Wednesday afternoon.

Democrats say using one-time money to buy down rates is bad fiscal policy and that using money to artificially lower taxes this year only creates a bigger problem next year, when the apparent tax increase will be even greater after another year of artificially low rates.

The latest budget proposal was crafted by lawmakers last week after the possibility of a government shutdown became part of the debate in Montpelier.

Democrats shot down a Republican proposal to ensure stopgap funding in case of a shutdown on the final day of the legislative session in May, but then turned the tables and came up with their own proposal a few weeks later.

Scott vetoed their initial budget and tax bills, despite broad bipartisan support in the Legislature, because they included an increase in average property tax rates.

H.13 incorporates most of those bills, but leaves out provisions in the few areas in which the governor and lawmakers disagree.

The bill doesn’t 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 the aim of the bill is to put in place the budget that lawmakers approved, while allowing negotiations on points of dispute with the governor to drag on as long as needed.

“We hope the governor will sign the bill … and the moment he does that we can all breathe and work together on those areas of disagreement,” Ashe said.

But Scott says lawmakers haven’t actually removed all of the contentious provisions from the spending package.

“If they were being up front about that then they should be willing to do whatever they can to take that — the nonresidential rate — out of the equation. And then we could have a deal,” the governor said.

If Scott vetoes the budget again, lawmakers would likely have to return to Montpelier for another special session to come up with another bill. Another veto would also place Scott in a tie with Howard Dean for the most vetoes in a single session, with 11. He would also have the distinction of vetoing the budget as many times in one year as other governors have in the history of the state.

Ashe said that H.13 doesn’t raise nonresidential rates. The senator’s Democratic colleagues have pointed out that the statutory default tax rate has been on the books since 2003 and is always in play if rates aren’t set by lawmakers and signed into law by the governor each year.

Scott and his Republican allies in the Statehouse say the bill effectively defaults to a tax increase, as last year’s rate was set lower than the statutory rate.

“They can send out a hundred press releases saying it raises non-resident tax rates, it does not,” Ashe said. “Does it leave that fight for another day? Yes, but they are saying something that’s not true.”

Adding another dimension to the budget standoff, the Scott administration on Tuesday released a revised revenue forecast showing that an additional $11 million of additional surplus tax revenue could be available for appropriation during the special session.

Updating this year’s revenue projections and making this money available for the budget process would require assembling the E-board, which is chaired by the governor and composed of lawmakers involved in budget and tax decisions, to approve the new forecast.

But Democratic members of the E-board don’t see the new revenue as a game-changer, and have accused the governor of seeking political points by adding more money to the equation and pressuring Democrats to use it to buy down taxes.

“The $11 million of new money coming in doesn’t change the fundamental reason why Phil Scott himself as a candidate for governor said we shouldn’t use one-time money for ongoing expenses,” Ashe said.

Elizabeth Hewitt contributed reporting