Senate President Pro Tem Peter Shumlin and Speaker Shap Smith today announced a companion bill that the Vermont Legislature will consider and pass during the special session on June 2 to enhance the legislative budget and economic development efforts. Some of the strongest objections made by Governor Douglas, which triggered his promised veto of the budget, are addressed. Among those are: changing the capital gains increase to July 1 (the start of the state fiscal year, instead of retroactive to January 1); giving farmers a 40 percent break on capital gains; addressing the growing shortfall in the unemployment insurance trust fund; and recognizing constitutional concerns over the governor's ability to lay off state workers. The cost to the budget and how these changes will be paid for was not addressed. These changes could make the budget more palatable to swing votes away from sustaining the governor's veto and toward and override.
The Legislature passed a $4.5 billion budget that leaders called a "careful compromise at the end of the session that gives the middle class relief through a tax cut, asks all Vermonters to play a part in solving our budget crisis and returns fiscal responsibility to state spending, said Senator Shumlin. The Speaker and I have listened to our members, business owners and Vermonters since the end of the session, which is why we are proposing additional measures today to enhance our budget and economic development efforts.
The budget and economic development enhancements, which include exempting farmers and loggers from the capital gains proposal, a Research and Development tax credit, additional funds for the telecommunications authority, a one year bridge to a permanent stabilization of the Unemployment Insurance Fund will be considered and passed by the Legislature as an amendment to the budget at the special session on June 2.
I ve heard a lot of constructive feedback from small business owners, farmers, hi-tech innovators and working Vermonters about steps we can take to set the state on a more solid footing for the future, said Speaker Shap Smith. With businesses and workers struggling, I m willing to try anything that may give businesses and families the boost they need to weather the storm.
The governor only received the budget from the Legislature Thursday night. He has five days to sign or veto the bill. If he doesn nothing, the bill becomes law without his signature. Legislative leaders said they have held onto the budget hoping to reach a compromise with Douglas.
Details of the proposals follow:
Key elements of Companion Bill
Postpone Capital Gains change to July 1, 2009
After listening to business owners and Vermonters throughout the state who felt that the retroactivity of this tax policy was overly burdensome we decided to postpone the capital gains changes to July 1, 2009. We will account for this change with a partial rate reduction in 2009 and a full rate reduction in January 2010.
Allowing Farmers/Timber sales to retain the current 40% exclusion for Capital Gains
After reviewing the impact that closing the capital gains loophole would have on farmers and loggers we decided to exclude them from the capital gains proposal that we are enacting.
Provide R & D tax credits as of FY 2011
Since the conclusion of the legislative session business owners have spoken to us about the importance of an R&D tax credit. We have heard from these employers that the credit will encourage economic growth through the investment in and development of new products and services.
Address the UI fund shortfall
We recognize that Vermont s unemployment insurance system is in critical need of reform. Current projections indicated the Unemployment Trust Fund will run out of money in early 2010. While we disagreed with the Governor s plan to raise taxes on businesses by $66 million during these difficult fiscal times, failure to act has the potential of resulting in higher costs for employers and more layoffs. We are offering a thoughtful approach to shore up this fund by taking the following steps:
Increase employer contributions to fund UI
§ Raises taxable wage base from $8,000 - $10,000 in 2010.
Freeze UI benefits
§ Freeze benefits by maintaining the maximum weekly benefit at $425 (this amount is scheduled to increase to an estimated $438 as of July 1st)
Require a minimum of 4 weeks of work to qualify for UI benefits.
§ The Commissioner of Labor would have the ability to make exceptions to this rule.
Disqualify those who are fired for gross misconduct from receiving UI benefits.
Create a study committee to review underlying issues such as those employers who carry negative balances.
Provide the Vermont Telecom Board $400,000 - the FY 2009 appropriation amount
$150,000 over as-passed amount from bottom line of budget
Anticipated receipts language or budget revisit to ensure up to an additional $350,000
Make minor changes in the state employee retirement incentive as recommended by the treasurer
By making a few relatively minor adjustments, enactment of this proposal will be a positive step toward making our government more efficient and should be basically cost-neutral in year one and will save the state money in future years. Changes will include:
A time period will be specified for interested employees to state their interest in taking voluntary retirement and a lottery process will be put in place if there are more than 300 employees interested in taking the retirement incentive.
There is currently no mechanism in the bill to ensure that the positions freed up by voluntary retirement are not refilled. We are in the process of developing a mechanism to ensure that roughly 1/3 of the positions freed up by voluntary retirements are not refilled.
Make changes in employee position language to address constitutionality concerns
Discussions are underway with the Attorney General s office which would limit Joint Fiscal s position to review position reductions above a threshold similar to the rescission process (one percent).