Gov. Phil Scott addresses the Senate Saturday at the close of the 2018 session.
Updated May 13 at 12:04 p.m.
With muted enthusiasm, the Vermont House and Senate passed the state budget and tax bills late Saturday, and adjourned just after midnight.
In a repeat of last year’s legislative finale, Gov. Phil Scott indicated he’d veto both the budget, which received significant Republican support, and the tax bill. His main objection this time: Lawmakers declined to back his proposal to use $58 million in one-time money to buy down property tax rates.
In speeches to the House and Senate at the close of the session, the governor didn’t utter the word “veto,” but he did restate his hardline stance against any tax or fee increase, saying, “I acknowledge a fundamental disagreement remains, as I simply can’t support adding to the tax burden of Vermonters.”
Scott is expected to call lawmakers back to the Statehouse in the coming weeks to hash out a deal in a special session. He has significant leverage because the 53 Republicans in the House can sustain his vetoes. If the two branches of government fail to reach a compromise by June 30, state government would shut down.
Senators listen to Gov. Phil Scott's address.
At several points in his speech to the Senate, the governor unsuccessfully tried to lighten the mood. “Admittedly, we’ve struggled a bit with this new reality and relationship,” he said, referring to the dynamic between his Republican administration and the Democrat-led legislature.
Lawmakers have criticized Scott for waiting until the final two weeks of the session to unveil a plan to buy down property rates and reduce spending over a five-year period. They’ve also questioned the soundness of the plan itself, suggesting it’s unwise to rely on one-time money and uncertain whether the plan would achieve savings. Relations have been strained since Scott made a similar late-in-the-session gambit last year when he tried to get the legislature to adopt a statewide teachers’ health insurance contract.
At the end of his six-minute speech, Scott’s staff clapped loudly in the balcony, compensating for senators’ tepid applause below.
Theatrics aside, lawmakers touted what they said was a prudent, restrained spending bill. It passed unanimously in the Senate, and on a vote of 117-14 in the House.
Rep. Kitty Toll (D-Danville), who chairs the House Appropriations Committee, stressed that the $5.8 billion budget would increase all state funds by only 0.5 percent.
Benefiting from a windfall of tobacco settlement money and higher-than-expected revenues, the budget would use $34.5 million — some of the same money Scott proposed using to buy down property tax rates — to shore up the teachers’ retirement fund.
“I cannot overstate the significance of this investment,” Toll said, telling her colleagues that the move would save Vermont taxpayers more than $100 million in lower interest payments.
“It is trying to make long-term decisions that have long-term benefit as opposed to short-term decisions,” said Sen. Jane Kitchel (D-Caledonia), who chairs the Senate Appropriations Committee and is Toll’s older sister.
The budget would devote more than $9 million to address a shortage of workers in the fields of mental health and substance abuse. It would restore several cuts the Scott administration proposed making, including to disabilities programs and a doctor loan repayment program.
Both bills contain several initiatives Scott sought, including removing a tax on social security benefits; free college tuition for Vermont National Guard members and tax relief for residents hit by changes to the federal tax code.
Scott wasn’t able to convince lawmakers to eliminate taxes on military pensions, nor did they give him the money he wanted to launch a marketing program to entice people to move to Vermont.
Most importantly, the tax bill fails his litmus test — though just barely.
H.911 would increase the property tax rate for homeowners by 2.6 cents. Lawmakers made two last-minute changes to lower the rate, which would otherwise have been roughly five cents. They used $9.6 million in one-time money to fill the education reserves, which they had depleted last year as part of a last-minute compromise with the governor. And they garnered $11 million of ongoing money by slightly reducing eligibility for the income sensitivity program, which allows residents to pay based on their income rather than property value.
Lawmakers say they shouldn’t be blamed for raising property tax rates because those rates are simply a reflection of the school budgets that local voters approved in March. The governor contends that those voters don’t understand the connection between their school budget votes and their tax bills, and it’s incumbent on policymakers to exert more control over the education fund and deliver tax relief.
Despite Scott's opposition, the tax bill earned support from some Republicans in both chambers. It passed on a vote of 89-43 in the House, and it appeared to pass on a unanimous voice vote in the Senate, although afterwards at least two senators, Sen. Joe Benning (R-Caledonia) and Brian Collamore (R-Rutland) said they voted no.
“Remember that with school taxes, the people who are in control are the local voters in the communities,” said Sen. Carolyn Branagan (R-Franklin). Asked about the governor’s conflicting position, she said, “I think he’s a good man and I really respect him, but the people who know best … are local voters, not us.”
"We got it down a lot," said Sen. Randy Brock (R-Franklin), referring to the property tax rate.
Brock, who voted for the bill, expressed optimism about the prospects of the governor and legislature reaching a compromise — even though Scott has been unwilling to cede any ground and Democratic lawmakers have signaled they have no appetite for using more one-time money.
“There’ll be a way to get to the end, yes. I think there will,” Brock said. “Because remember we’ve gotten very close in what we’ve done, so we’re not far away from where the governor wants to be.”