Governor Scott presses Legislature on $26 million

Submitted by tim on Mon, 05/08/2017 - 05:23

This story was updated on Friday May 12 and Saturday May 13.

by Timothy McQuiston Vermont Business Magazine The Legislature is still in sessionin large part due, if not wholly due, to Governor Phil Scott's big push to form one health insurance risk pool for all of the state's teachers, which he sayscould save the property taxpayers $26 million a year. The House could reconvene on Tuesday (May 16) and the Senate will come back on Wednesday or Thursday to try and sort out what could turn into the governor vetoing the budget. In any case, the Legislature will miss its adjournment deadline, which had been anticipated for May 6.

Scott has been beating thedrum hard on the teacher health plan since the end of April and has the blunt instrument of using his veto power on the state budget if such an amendment is not included.

The Democratic leadership, at first caught off-guard by the plan and its general public favorability, came up with its own plan by Thursday that would retain local collective bargaining for teachers and save about $13 million by using generally the same formula, but applying the savings only to in-state residential property owners.

Both plans would reduce property taxes by 3 cents per $100 of property value.

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Using Treasurer Beth Pearce's formula that one-cent on the property tax would raise $8 million, 3 cents would be worth $24 million. Thus the $26 million would lower the property tax rate by about that amount. The savings to someone with a home worth $250,000 would be about $75 a year under both the governor's and the Democrats' proposals.

Currently, the teachers' union negotiates health insurance as part of the district-by-district collective bargaining process. The union is vehemently against Scott's profound change in such a large piece of its compensation package.

The Democratic Party initially dismissed the notion out of hand, and then aggressively, but in the last couple of weeks the legislative leaders have had to respond and sought some sort of compromise.

The options appear to be, keep the negotiations at the local level and either let the local districts decide on what to do with the $26 million, or turn negotiations over to the state, which would then apply the savings to the statewide property tax. Legislative leaders last week suggested the districts could retain the local control, but then turn over the savings to the state.

But the governor is dubious that there indeed would be any savings at the end of the day under that scenario.

House Speaker Mitzi Johnson and Senate President Pro Tem Tim Ashe's proposal later in the week would more directly save residential taxpayers that $13 million.

Along with the impact on the collective bargaining process and the loss of local control, opponents of the governor's plan, principally the National Education Association union, also question the metrics used in determining the amount of savings.

Those savings include assumptions about behavior and how much individuals will be willing to pay out of pocket for medical services, even with the lower premiums. The NEA says that the compensation range for teachers and aides is very broad, so some may put off going to the doctor because they can't meet the deductible.

Speaker Johnson won a victory last week when such an amendment was introduced, but only just. She had to cast the tie-breaking vote in the heavily Democratic House. Such a vote suggests that Scott could have a veto sustained if came to that.

This appears to be the biggest legislative battle since the twin vetoes that the Legislature overturned when Governor Jim Douglas vetoed the marriage equality bill ("gay marriage") and then the budget in 2009. That was the first time in Vermont history that a governor had vetoed the budget. The Legislature came back in June to override the veto. Douglas lost much political leverage in the gay marriage veto and override, which likely cost him during the subsequent budget debate and then second veto override.

But that involved seasoned leaders on both sides (Speaker Shap Smith and Senate President Pro Tem Peter Shumlin on one side with Douglas into his fourth and last term as governor on the other). Douglas announced the following August that he would not run for re-election and Shumlin became the state's next governor in 2011.

The leadership in the House and Senate are new and Scott began his first term as governor just in January.

Because of the Affordable Care Act ("ObamaCare"), virtually all teacher health insurance plans must be re-done to start a new plan on January 1, 2018. Scott's plan would have all the teachers under one state plan, which would save about $75 million in premiums. The premiums are significantly lower under the proposed new plan, but the out-of-pocket costs are higher. Scott said he would take nearly $50 million of the savings and apply against the out-of-pocket costs, so that the net for teacher health costs would be the same as it is now.

However, the teachers' union would lose negotiating power going forward. It also maintains that local school districts would lose some of their local control over their own budgets.

“The Governor is not willing to leave millions in taxpayer relief to chance when we have this once-in-a-lifetime opportunity to make Vermont more affordable – on an immediate and ongoing basis – without cutting programs for kids or asking teachers to pay more,” said the governor's spokesperson Rebecca Kelly earlier in the week.