by Timothy McQuiston Vermont Business Magazine The money that separates the two sides in the state budget battle would be relatively easy to swallow, but the rhetoric is increasingly a bitter pill. Responding to Treasurer Beth Pearce's call for the governor and legislative leaders to come to a quick and decisive compromise on a new budget to avoid financial risk to the state, Administration Secretary Susanne Young today said that if there is risk it rests with the Democratic leadership, as the state is flush with cash and does not need to increase the property tax to pay for public education costs.
She also countered Pearce's argument, made in a June 12 letter to Governor Phil Scott and legislative leaders, that even the threat of a state government shutdown could hurt the state's bond rating. A lowered bond rating could cost the state millions of dollars. Pearce also said the elected leaders had a responsibility to the citizens and state workers to let them know now, before a potential shutdown July 1, what it would mean to individuals and institutions.
SEE FULL MEMOS BELOW
"While every effort should be made to avoid a State government shutdown, it is time for the Administration to provide guidance and direction to the public and State employees on what happens in the event of a shutdown," Pearce said.
Administration Secretary Susanne Young. VBM file photo.
"It is unfortunate," Young wrote in her memo, "that anxiety has been created among state employees by the Legislature's decision to send the Governor a budget that he was clear he would not sign. There has been ample time since the delivery of the budget last Friday, June 8 for the Legislature to meet and work with the Administration to resolve our remaining difference and there is still time today to reach a resolution so the Governor can sign H.13.
"The Legislature and the Administration are not that far apart. With a growing surplus in revenues, there is no need to raise statewide property taxes by $23 million. This surplus allows everyone to easily come together and keep tax rates level and make an additional payment on the retirement fund debt."
While saying the two sides are close, Young nevertheless chided legislative leadership: "It is disheartening that the Legislature has decided to use the Special Session to both raise property taxes and threaten to shut down state government unnecessarily."
As for a budget angst being an issue for the credit rating agencies, Young responded to Pearce, "Also recall that we did not have a budget agreement until June 23 last year and a signed budget on June 28. At the August meetings with the rating agencies, I don't recall those facts being an issue. In fact, all three rating agencies underscored our increasing and unfavorable demographic challenge and slow economic growth as our primary weaknesses, in addition to our unfunded retirement liabilities."
Legislators want to use a substantial part of the current surplus to pay down some of that liability. They've said that pushing $34.5 million into the teacher pension liability would save $100 million by 2038.
Vermont Treasurer Beth Pearce
Pearce took a more urgent tone: "It is imperative that we avoid a government shutdown. As I noted in my May 18 memorandum, a shutdown would prevent State agencies from providing the critical public services to Vermonters. A shutdown would result in real and permanent costs, such as foregone and irrecoverable revenues and the additional costs of agency disruption and contingency planning. Even the threat of a shutdown can reduce the public’s faith in government, impose additional costs to fund a special Legislative session, and jeopardize the State’s high credit rating."
Pearce concluded her letter by saying: "As state officials, we have an obligation to Vermonters to serve them in a responsible and proactive manner that does not undermine their faith in government. It would be a truly Pyrrhic victory for one side to “win” a budget argument this year at the cost of a potential credit downgrade and millions of dollars of increased debt service costs for years going forward. I urge the Administration and the Legislature to swiftly come to an agreement that results in a structurally sound budget that fully funds our reserves and continues the operations of government in serving Vermont taxpayers."
Young’s and Pearce's memos were CC’d, among others, to Speaker Mitzi Johnson and President Pro Tem Tim Ashe.
This is not the first time Pearce, a Democrat, has clashed with the governor and legislators. She was steadfast in opposing Governor Peter Shumlin's desire in 2016 to divest carbon-related stocks from the state's investment portfolio because of what she considered the negative impact on the state financially.
