Gov. Phil Scott vetoes budget that would keep Vermont government open

April McCullum | Burlington Free Press

Gov. Phil Scott has rejected the Vermont Legislature's latest attempt at a state budget and tax bill because of something not contained in the bill — the possibility that non-residential property taxes could automatically rise.

"As you know, as a matter of principle, I believe Vermonters deserve a break and the opportunity to keep more of what they earn," Scott wrote in his letter stating he would not sign the bill. "I also believe employers need a more stable and predictable environment in which they can invest, grow and create more good jobs. I understand, and respect, not everyone in the Legislature shares this point of view."

The governor's decision to veto the budget — for the second time this year — leaves open the possibility that Vermont may not have a budget on July 1, causing a state government shutdown.

The Vermont Senate and House of Representatives could override Scott's veto with a two-thirds vote in both chambers.

Scott instead suggested a possible path of cooperation.

"There is ample time for the Legislature to work with the Administration to pass a budget and tax bill I can support," the governor wrote.

"One easy solution to resolve the budget debate would be to send me a new bill that prevents the automatic increase in the non-residential rate. This would ensure we have a budget in place long before July I and require us to work together, on a level playing field, to resolve our remaining differences in the tax bill."

The bill that Scott vetoed was a mammoth combination of a state budget, significant changes to Vermont's income tax laws, and a stopgap property tax plan.

The legislature's two main leaders were not happy with the governor's decision.

"The bill would guarantee there will be no government shutdown. It does not increase a

single tax rate, nor does it include anything the governor opposes," said House Speaker Mitzi Johnson and Senate President Pro Tem Tim Ashe in a joint statement.

"The bill reflects movement by the Legislature toward the governor, while the governor

has not made a single concession," they said. "The governor's veto is disappointing. We expect more from the governor,"

The bill would create a default homestead property tax rate if the Vermont Legislature fails to set the tax rate July 1. Under current law, there is no default homestead rate and the state would be unable to collect taxes from homeowners.

Lawmakers declined to change the default non-residential property tax rate, which has been on the books in Vermont for years. The rate defaults to $1.59, which this year would be a 5.5-cent increase. Scott complained that lawmakers failed to block this possible tax increase. He argued that if the bill passed, lawmakers would no longer have an "incentive" to negotiate with his administration.

At a Statehouse meeting on Tuesday, Scott minimized concerns over a possible government shutdown, noting that he reached an agreement with lawmakers last year in late June.

"We have plenty of time," Scott said.

After Scott vetoed the budget in 2017, he promised that government would not shut down. His administration worked out a compromise with lawmakers behind closed doors. No such meetings are happening this year, and there is not yet any sign of a compromise.

Scott has vetoed a total of 11 bills this year, matching the record set by Gov. Howard Dean in 1994.



Statement #1: Text of Gov. Scott's letter

June 14,2018



The Honorable William M. MaGill

Clerk of the Vermont House of Representatives

I 15 State Street

Montpelier, VT 05633



Dear Mr. MaGill:



I appreciate that the new budget sets the homestead "yield" at the current level, and that some effort was made to separate the remaining areas of disagreement from the budget. I also appreciate that several amendments to H.13, though they were not adopted, were introduced by both Democrats and Republicans in the House and Senate. These amendments, if they had passed, would have either removed a $23 million tax rate increase set to occur on July 1't or set the non-residential rate for fiscal year 2019 at the current level. Either of these approaches could lead to a reasonable and timely compromise.

As you know, as a matter of principle, I believe Vermonters deserve a break and the opportunity to keep more of what they earn. I also believe employers need a more stable and predictable environment in which they can invest, grow and create more good jobs. I understand, and respect, not everyone in the Legislature shares this point of view.

Nevertheless, our large and growing surplus ($55.5 million since the January 2018 consensus forecast), combined with other unanticipated revenue, allows us to craft a budget and tax bill that fully funds school budgets, keeps statewide property tax rates level and makes a significant payment towards the unfunded teachers' retirement debt.

Unfortunately, as the Administration and others have noted, H.l3 leaves in place an automatic $23 million (5.5 cent) property tax rate increase on non-residential payers - our rental property owners and renters, camp owners, and employers.

Without a commitment from legislative leaders that we can achieve level property tax rates, or an amendment that would prevent the automatic 5.5 cent property tax rate increase on non-residential payers, I cannot support H.13. As a result, pursuant to Chapter II, Section I I of the Vermont Constitution, I am returning H.13, An act relating to making appropriations for the support of government, without my signature because of my objections described herein.

As noted, I do understand that many members of the Legislature do not share my view on avoiding tax increases. If the Legislature does not agree with my reasoning, the Constitution provides a mechanism -- a veto override vote - to resolve the disagreement.



If my decision is sustained, there is ample time for the Legislature to work with the Administration to pass a budget and tax bill I can support.

One easy solution to resolve the budget debate would be to send me a new bill that prevents the automatic increase in the non-residential rate. This would ensure we have a budget in place long before July I and require us to work together, on a level playing field, to resolve our remaining differences in the tax bill.

It is important for Vermonters to know that there are many other options available to the Legislature to ensure government operations are not, in anyway, impacted by our discussions. As I have said many times, I do not want to see any disruption in government services, and I believe the Legislature shares this goal as well.

For this reason, I have directed my Administration to proceed with the full expectation that state government will be entirely operational on July 1st. Here is why:



First, our area of disagreement is very small and given our $55 million surplus, which is expected to continue to grow, we do not need to increase statewide properly tax rates to fully fund school budgets or reduce the debt in the teachers' retirement system.

Second, we have plenty of time to come to agreement well in advance of July l't. I'm confident with more focus - and an earnest commitment to meet in open session to discuss how we come to agreement -- we can resolve the one remaining area of disagreement in a short amount of time.

So, as I have noted above, my Administration will proceed with the full expectation that state government will be fully funded on July 1st, unless the Legislature decides otherwise.

We are four weeks into the Special Session, and I remain ready to work with the Legislature to achieve a consensus that will fully fund school budgets and strengthen our education system without raising property taxes in a year of unprecedented surplus and unexpected revenue.

I have directed my staff to make meetings with the Legislature our top priority and we will make ourselves available to them every day, and every night if necessary, to reach a resolution on this important matter.



Sincerely,



Philip B. Scott

Governor

Statement #2: News release from House Speaker and Senate President Pro Tem:

Joint Statement by House Speaker Mitzi Johnson and Senate President Pro Tern Tim Ashe on Governor Scott's Veto of H.13

June 14, 2018

Let us be clear about what the Governor vetoed today when he rejected H.13:

1. A budget supported by virtually every legislator including members of his own party.

2. Approximately $30 million in income tax reductions to avoid negative effects of the Trump tax plan.

3. Significant reductions in the taxation of social security income.

4. A level residential education tax rate.

The Governor supports all four of these measures.

The bill would guarantee there will be no government shut down. It does not increase a

single tax rate, nor does it include anything the governor opposes.

The bill reflects movement by the Legislature toward the governor, while the governor

has not made a single concession.

The governor's veto is disappointing. We expect more from the governor.

Contact April McCullum at 802-660-1863 or amccullum@freepressmedia.com. Follow her on Twitter at @April_McCullum.