Vermont Business Magazine The legislative leadership and Governor Phil Scott will meet on Monday to discuss procedure for the special session May 23, which the governor called for earlier this week. Unlike a veto session, a special session allows for any legislation to be addressed not simply that which the governor vetoes. Scott said he will not sign the budget or tax bills as currently written. Without an agreement, state government would shut down July 1. Scott maintains that there is plenty of money available to balance the budget without raising taxes. Below is his letter to Senate President Pro Tem Ashe Thursday. In it, the governor lays out his reasons for not signing the bills. He also urges lawmakers not to distract from discussions on the budget and taxes by bringing forward other, unrelated measurers.
The governor seeks an agreement that ensures Vermonters don’t see the $33.4 million increase in property tax rates passed by the Legislature – particularly in a year "in which we have $160 million in new money without raising taxes and fees." To avoid an increase and introduce long-term stability, the governor previously proposed a five-year plan, which identifies funding sources and policy mechanisms to keep rates level this year, "as well as achieving nearly $200 million in property tax relief and nearly $300 million in savings to invest in educational opportunities over the next five years."
Legislators are skeptical of the governor's accounting and maintain that enough money needs to be raised in order to meet education spending that voters agreed to back on Town Meeting Day. They increased the residential property tax 2.6 cents (non-residential 5.5 cents). And in Senate President Pro Tem Tim Ashe's pointed letter to the governor on Wednesday (see below), he said that using one-time money is simply bad governance, while the legislative plan will save, over time, $100 million.
Governor's Letter to President Pro Tem Ashe
Dear Senator Ashe:
Thank you for your prompt response. I would be happy to meet with you on Monday, as you have suggested. Monday from 9:00 a.m. - 11:00 a.m. or 2:00 p.m. - 4:00 p.m. work for me and I am happy to host in the Ceremonial Office.
To make the meeting representative of the interests of the Legislature as a whole, we will be extending an invitation to the House (as we extended an invitation to you for our meeting with them today), as well as to the minority leadership in both chambers as noted in my previous letter.
While your letter contained many grievances, and I welcome a conversation to go through them more specifically, I offer the following feedback on the specific points you emphasize at the outset of your letter:
- Special Session - Unfortunately, a special session is necessary because the Legislature chose to adjourn without exercising its constitutional prerogative to schedule a day to return and address vetoes. However, if we work to resolve our one remaining difference, no more than one session of short duration should be required. Over the last two years, I could not have been clearer about my unwillingness to raise taxes and fees. I believe Vermonters need a break. That's why I cannot support raising property taxes by $33 million this year - especially when we have $160 million more in revenue this year versus last year. So, in case there is any ambiguity on the part of the Senate or House about my position, I will reiterate here: If the Legislature wants to raise taxes this year, it will have to override a veto of the budget and tax bill.
As has been the case since the start of the legislative session, the Legislature has two options - work together with the Administration to prevent this unnecessary property tax rate increase or take a straight up or down override vote on the veto. There is no reason to start the fiscal year on July 1 without a budget- but that is in the Legislature's hands.
- The Fiscal Policy of Raising Property Tax Rates - I appreciate the Legislature's support of my Working Family Taxpayer Protection Act proposal and its inclusion in H.91 1. I would have preferred you passed, as I proposed, the charitable giving incentives without a cap and other elements, but this is an example of an area I am willing to concede to the Legislature.
Your reference to the use of surplus revenues this year indicates a clear misunderstanding of what my proposal achieves, and the fact that every penny I propose to use to prevent the property tax rate increase can be paid back to the General Fund. The savings that will be achieved through the policy and tax mechanisms could additionally be redeployed to address your preference for depositing it into the Vermont State Teachers' Retirement System.
Although your proposal to use one-time money to pay down the unfunded liability in the teachers' retirement fund would save a projected $100 million - you overlook the fact, and Vermonters should understand, that this savings does not materialize until the year 2038.
Taxpayers need relief now and my proposal saves taxpayers $58 million in avoided tax increases this year, and about $200 million over 5-years, while fully funding school budgets passed in March. The investment of the same money that you propose to use to achieve savings in 20 years, will generate an additional $270 million in savings that we can invest in our kids and/or lower rates or make additional payments on the retirement debt before 2038.
- Saving $100 Million by Paying Down Teachers' Retirement Obligations vs Long-Term Property Tax Relief - It is clear you feel strongly about achieving the projected $100 million in the year 2038. I can fully support this idea - but not at the expense of property tax relief and additional investment in our kids over the next five years. We should do both.
Doing so would combine the 2038 fiscal benefit of your teachers' retirement proposal with the fiscal benefit of my plan to hold the line on property tax rates and redirect more value to our kids in 2019 - 2023. It would be a win-win.
Based on the cost containment tools the Legislature has already passed and the apparent savings already being achieved through Act 46, coupled with some additions like a statewide healthcare benefit for school employees, we can still prevent this year's rate hike, keep rates level for several years, payback the General Fund transfer and reinvest it in teachers' retirement. We can find a clear and achievable middle ground on this matter.
Your letter also includes a fundamental misstatement of my proposal to achieve savings through the projected 1,000 retirements and other natural vacancies every year for the next five years. My plan includes the task force approach you passed in H9ll.
We believe the combination of Act 46, the collaborative approach of a task force, and additional cost containment tools such as a modification of the excess spending threshold OR the much more aggressive change in income sensitivity you voted for in H.911 (though not my preference because of its rapid and aggressive transition back to the pre- 2016 adjustment levels for many property taxpayers) will result in improved staff-to-student ratios.
To achieve the projected ratio savings, schools would fill four out of every five naturally occurring vacancies (from retirements, etc.), on average, over the five years. And we'd still have the smallest classrooms and the smallest staff-to-student ratios in the country. We believe this is an achievable and reasonable goal, without a mandate.
- Public Meetings - Here is an easy area of agreement. As always, during the special session, we would be very happy to work with standing committees if invited and the dialogue is collaborative. I would also be more than happy to conduct all meetings with legislators on this matter in the plain view of the public. This is a request that you, politely, declined last year when we were negotiating the opportunity to save taxpayers $26 million each year by moving to a statewide health benefit for school employees.
Additionally, for meetings outside the standing committee process to be productive, it is important for my team to know who the Legislature will designate to negotiate on its behalf. As previously noted, we will also ask that the minority be included as well.
- The Legislature's Role in a Special Session - It is true that the Legislature determines what it will, and will not, do in a special session called by the Governor. I would note, as have Vermonters, that the Legislature adjourned last weekend explicitly saying its work was done, despite my clear and frequent objections to an unnecessary $33 million property tax increase.
I have called this special session to resolve this one, single remaining issue, on which we are very close to agreement. A special session that extends beyond addressing this issue would be an indication the Legislature did not, in fact, consider its work completed when it previously adjourned.
I am hopeful the Legislature will focus on the one matter for which this special session has been called. An efficient resolution is within reach and is necessary.
Lastly, I want to reiterate, that after all the process and positioning leading up to your decision to adjourn sine die, there are, ultimately, only two paths forward: We can work together to avoid this unnecessary tax rate increase and achieve the goals you have for the teachers' retirement fund, or, the Legislature can vote on whether to override or sustain my objections.
The tone, duration and achievements of the special session are in your hands, and the hands of the Speaker, as you contemplate the two options available to resolve my concerns: work together or hold a vote to determine if the Legislature will override or sustain my objection to this property tax increase.
It is my sincere hope you opt to have a productive discussion and reach a resolution, I look forward to seeing you Monday, if not earlier.
President Pro Tem Tim Ashe Letter to Governor Scott
Thank you for your letter indicating that you are calling the Legislature back for a special session. Before offering some specific responses, I’d like to emphasize the following points on behalf of the Senate:
- There is no reason for a special session; you should sign the budget and tax bills into law.
- We do not support paying for state government on a credit card.
- We support saving taxpayers $100 million by paying down pension obligations.
- We continue to oppose your Administration’s proposal to mandate teacher and staff cuts based on arbitrary ratios.
- We will not participate in behind-closed-doors negotiating meetings that bypass the legislative process.
- The Legislature, not the Executive Branch, will determine the manner in which the special session is conducted.
I offer the following observations to your letter in order to help you understand the Senate’s position on the budget and tax bills.
1. It is not too late for you to sign both the budget and tax bills. As you know the Senate passed the budget 29-0. When the most conservative Republican and the most liberal Progressive and everyone in between vote for a budget it is a very powerful statement. It suggests the budget has struck all the right notes - modest growth (less than your own proposed budget), positive investments (rebuilding our mental health and family court systems, increasing child care subsidies, etc.), and a reversal of your budget’s most unfathomable cuts (services to individuals with severe physical disabilities like quadriplegia and severe development disabilities, for example). In addition, the budget paid down $35 million of our pension obligations, which will save taxpayers $100 million over time.
2. Your insistence on “governing on a credit card” is bad fiscal policy. The tax bill, H.911, as is equally deserving as the budget of your signature. It passed through the Senate with a strong majority of your party’s members voting in favor, and that was for good reason. The bill reduces income taxes by approximately $30 million compared to current law. The residential base property tax rate grows at roughly the same rate as the modest growth in education spending supported by local voters on Town Meeting Day. Using the amount of one time money you wish to use to fulfill your political veto pledge is both unprecedented in terms of the scale of “governing on a credit card” it represents, but it is also unwise, as the use of one-time money could be much better spent.
3. The Legislature’s plan saves taxpayers $100 million over time; your plan saves nothing. Which represents sound fiscal management - your plan to use $33 million of one-time funds to artificially buy down education tax rates on a credit card, or to use the same amount to pay down our pension debt and save taxpayers $100 million? Your strategy saves $0, the Legislature’s saves $100 million. We ask you to show fiscal discipline and save taxpayers real money.
4. Your practice of vetoing the budget is bad governance. There have been just two budget vetoes in Vermont history, and this year should not mark the third. If it does, you will have been responsible for two of the three budget vetoes in Vermont history. While some on your political staff will resort to Twitter (where you indicated you would veto the Senate budget) to level silly charges against members of the majority, what makes it so upside-down is that the criticisms are, by extension, against virtually all the legislative members of your own party. In the Senate alone, all seven Republican members voted for the budget, and a large majority voted for the tax bill. It’s worth noting that last year’s budget also passed unanimously.
5. We are heartened to read that after a productive legislative session you believe there is just "one remaining area where there is not yet agreement” between you and the Legislature. If by this statement you are signaling your intent to sign all other pieces of legislation sent to your desk, this is good news indeed for the State of Vermont. The minimum wage and paid family leave bills will go a long way toward improving the economic well-being of tens of thousands of working Vermonters, while allowing Vermonters to be at home, when needed, to care for family members or for maternity leave. S.197 and S.105 will hold polluters and corporations with consumer-unfriendly practices accountable. S.289 enacts strong net neutrality protections into Vermont law to guarantee Vermonters have a free and fair internet. H.764 prohibits massive data firms from charging fees when Vermonters need to place credit freezes, often because of the firms’ own carelessness. Can you confirm that it is indeed your intent to sign these and all other bills passed this year into law?
6. We were surprised to learn from your letter that you are unaware of H.897, the special education reform bill that passed both chambers and is on the way to your desk. The Legislature identified the need for reform in this area several years ago and H.897 is the result of a thorough investigation of our special education delivery system and a thoughtful approach for moving forward. We are pleased you dropped your arbitrary, mandatory teacher and staff reductions plan when the public found it unpalatable. Special education savings then remained the most significant savings opportunity that needed legislation to realize, and H.897 accomplishes that. Moving forward, I hope your team will review communications you share with the press for such inaccuracies lest the press and public be denied important information concerning the joint work of the Legislature and the Agency of Education.
7. Your office owes the Joint Fiscal Office an apology. Your letter refers to the five-year “plan" which you distributed in sketch form in the closing days of the legislative session. Indicative of its hasty preparation, it was riddled with factual errors including double counting special education savings and use of incorrect growth assumptions. Our Joint Fiscal Office deserves thanks from the Administration for pointing out these significant mistakes. Our JFO didn't need to alert your Fifth Floor staff of these mistakes but did so out of a sense of collegiality and a history of cooperation. They are committed to public discourse founded upon the facts. Unfortunately your Chief-of-Staff Jason Gibbs accused the non-partisan JFO of playing partisan politics. The only time I’ve observed such disrespect toward non-partisan government analysts is from President Trump and some extremists in the current Congressional majority in their abhorrent treatment of the Congressional Budget Office. As a longtime legislator yourself, you know how important it is to respect the integrity of our non-partisan staff. I am calling on your office to apologize to the staff of the Joint Fiscal Office so any work between now and the next legislative session will be free from the cloud Jason Gibbs has cast over our dedicated non-partisan staff.
8. The Senate has displayed unprecedented bipartisanship this biennium. I take great pride in the work of the Senate, and am pleased that the legislation we have passed has in almost every instance been favorably voted upon unanimously. While you and your team like to describe the legislative leadership as engaging in “partisan politics” (most recently in your speech in Brattleboro previewing your “plan”), the votes in the Senate belie your claim. 30-0 is not partisan. 29-0 is not partisan. 26-3 is not partisan. It is the amazing bipartisan quality of our work in the Senate this year which makes your possible vetoes of the budget and tax bills so dispiriting.
9. The Senate will conduct its business in public setting, not behind closed doors. The Senate is not interested in behind-closed-doors sessions with you and your staff to circumvent the Legislature’s normal processes. Whatever work needs to occur in the special session should be done in House and Senate committees, open to the public and the press. The Administration is invited to participate at all times.
10. Your Administration, we believe, is facing the consequences of its disengaged approach to governing. The Legislative session began in the first week of January, and for the next four months the Legislature worked with Agency-level state officials and other interested parties to develop important legislation that will improve the well-being of the state. For the second year in a row, the Fifth Floor dropped in at the zero hour and attempted to render the previous four months of work meaningless. This represents a serious departure from decades of cooperative work between the Executive and Legislative branches. Hopefully in 2019 the Administration, regardless of the outcome of the November election, will break this two year pattern.
While we will not participate in closed-door negotiations that bypass the Legislature, the Senate leadership team (the Pro Tem, Majority Leader, Assistant Majority Leader, and Third Member of the Committee on Committees) would like to meet with you as we do throughout the session to discuss the logistics of the upcoming special session. Either of the times on Monday you indicated in your letter work for us, so just let us know which you prefer and we will lock it in.
Respectfully,