Senate sends ‘Budget 3.0’ to House with $19 million divide

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Vermont Senate
The Vermont Senate debates legislation in March. Photo by Mike Dougherty/VTDigger

Senators unanimously approved the third budget proposal of the session on Thursday, leaving a $19 million gap between the Legislature’s proposal and the governor’s plan to keep property taxes level.

The deadline to avoid a government shutdown is nine days away.

Senate Minority Leader Joe Benning, R-Caledonia, spoke in support of the budget on the Senate floor and called on Gov. Phil Scott to sign it.

“We come to the point where we face an administration that in fairness has been very clear from the get-go as to what its position has been,” he said of Gov. Phil Scott’s pledge not to raise taxes. “I am at this point hoping that he changes that position.”

The administration has given no indication that Scott is prepared to make that change. Upon vetoing the second budget proposal, the governor said he was confident that there was still plenty of time to reach a deal and have a budget in place by July 1.

The latest big bill, which is officially titled H.16 and has been dubbed “Budget 3.0,” now heads to the House, where GOP members have been far more active in pushing the governor’s agenda than their colleagues in the Senate.

House Minority Leader Don Turner, R-Milton, said he would be proposing two amendments in an attempt to alter the bill so that it meets Scott’s tax objectives. Democrats have not been receptive to GOP amendments to the previous two proposals.

Rep. Cynthia Browning, D-Arlington, a moderate on the House Ways and Means Committee, said she would also be proposing amendments to move the bill closer to the governor’s position of level property taxes.

The Senate proposal uses $20.40 million in “one-time” surplus revenue to pay down tax rates needed to cover school budgets that were approved by local districts. However, that would still require a 4.5 cent increase in nonresidential property taxes to fully fund schools.

The governor says that is unacceptable during a year when there is so much unexpected revenue, and is proposing the use of $39.60 million in one-time money to fully buy down tax rates to last year’s level.

That leaves $19.20 million of daylight between the two proposals.

The administration is forecasting another $19 million of revenue on top of what has already been officially forecasted. However, Democrats declined an invitation this month to a meeting of the emergency board, the body that officially recognizes revenue forecasts.

Because Democrats are refusing to officially recognize the money, lawmakers from both sides of the aisle can’t bank on that $19 million for spending in the budget proposal.

mitzi don
Speaker of the House Mitzi Johnson speaks with Minority Leader Don Turner. Photo by Anne Galloway/VTDigger

“When appropriating money we use the most recent consensus forecast,” Speaker of the House Mitzi Johnson, D-South Hero, said Thursday, referring to the last meeting of the E-board, which approved a forecast of $44 million in general fund surplus.

“Anything over that — including money that’s already come in over targets — has to be treated in a contingent fashion as surplus,” Johnson said.

There is also up to $10 million in additional sales taxes coming next year after the federal Supreme Court decided on Thursday to allow states to impose a tax on online sales.

With so much unforeseen funds either on the table or on the horizon, Browning said there should be a way to craft a compromise budget, by putting some money toward immediate priorities and putting contingent funds into others.

“If we can’t make a deal now, I don’t know when we will,” she said. “We might end up with enough money to solve this thing, but we haven’t recognized it yet.”

Most Democrats oppose the use of one-time funds to buy down tax rates even if it is available. They worry about a $55 million hole in the education fund next year if they follow the governor’s proposal, and are hesitant to play into the governor’s efforts to cut public school spending.

During Thursday’s Senate debate, Sen. Dick Sears, D-Bennington, said he felt like the Legislature had already moved too far toward the governor. He said he would support the proposal only because he recognized the need for a compromise to avoid a government shutdown.

Dick Sears and Tim Ashe
Sens. Tim Ashe and Dick Sears confer during a recess in debate earlier in the session. Photo by Mike Dougherty/VTDigger

“So I’m very concerned about the direction we’re going and the fact that were moving more and more toward the governor’s position, which I think eventually would be control of the school budgets on a statewide level,” he said.

Apart from allocating $20 million toward paying down taxes, the bill also includes most of the governor’s longer term education cost-saving proposals.

Most notably, it creates a new body to negotiate a statewide teacher healthcare benefit at the state level, which has been one of Scott’s priorities since he entered office.

The bill would create a 10-member body made up of five members representing the teachers union, and the other five members appointed by school boards.

The Vermont-NEA opened the way for a deal when it gave up its demand to keep health care negotiations at the local level earlier this year. In exchange, the union demanded equal representation on the decision-making body. The NEE currently has one out of five seats on the body that decides which health care options are up for local negotiation.

The big bill also creates a task force pitched by the administration to encourage districts to reduce staff-to-student ratios, and includes other tax changes backed by the governor.

“This is what compromise looks like,” said Sen. Tim Ashe, the Senate president pro tem. “And if this compromise isn’t good enough, I’m starting to think we should go back to where we started.”

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