Vermont Legislative Wrap Up: Exceptionalism Meets Brinkmanship

Special thanks to John Hollar and his team at DRM for this comprehensive Vermont Legislative Update. DRM works closely with nonprofit leaders to advocate on sector issues throughout the year.

The legislature adjourned at 12:18 a.m. on Sunday, May 13th, but with none of the finality that usually occurs with the banging of the final gavel. Montpelier has entered an “interregnum” of sorts as the governor and legislature are engaged in an unprecedented fiscal stand-off with no clear path to resolution.

Gov. Phil Scott has promised to veto both the annual spending bill and a related tax bill due to the legislature’s failure to use one-time funds to eliminate an increase in the statewide property tax. Lawmakers of both parties have balked at that request, citing a longstanding state commitment to avoid budgetary devices that create negative long-term fiscal consequences.

The governor has proposed to recoup the one-time spending with education savings over time, but that approach was undermined by last-minute fiscal projections produced by the administration that contained substantial errors, according to the legislature’s Joint Fiscal Office.

Legislative leaders argue that they offered the governor a compromise plan by submitting a balanced budget and a tax bill with a relatively modest increase to fund slightly higher school budgets. The amount at stake – about $33 million – is relatively small given a budget of $2.2 billion in state funds.

The brinkmanship is unnerving. Lawmakers and the governor have six weeks to make a deal before the state’s fiscal year ends and the government shuts down. That is an unlikely scenario, but even the discussion of a temporary closure is unprecedented. The stand-off raises the specter of Washington-style partisan confrontation and dysfunction that most Vermonters would find abhorrent.

The oft-touted notion of “Vermont Exceptionalism” can be overrated, but in the area of fiscal discipline the state’s record is admirable. Vermont has maintained a consistently high credit rating, and the legislature passes a balanced budget each year despite being the only state in the U.S. without a constitutional requirement to do so. State Treasurer Beth Pearce adheres to a long tradition of nonpartisan management of the state’s finances.

Scott intends to call lawmakers back on May 23rd, with a session he hopes will end two days later with an agreement in place. But he can only set the start date – when lawmakers leave will be up to them.

Both sides are now fully engaged in a battle for the hearts and minds of the public. Scott believes voters support his ironclad commitment not to raise any taxes or fees, and he is almost certainly right. Democrats believe voters won’t object to a modest increase in the statewide property tax rate since they voted for the increase with their local school budgets. They are probably right as well. The Democrats’ position is bolstered by the bipartisan support for the budget and tax bills in the final day of the session. The budget passed the Senate 29-0 and the House 117-14. The tax bill was approved by the Senate by voice vote and by the House, 89-43.

The governor’s decision to call a special session before a deal has been reached is somewhat surprising and raises the stakes for both sides. The prospect of lawmakers hanging around the Statehouse for days or weeks while each side berates the other poses significant risks for everyone. Legislators will be free to consider and pass any bills, and House Speaker Mitzi Johnson has indicated that at least a dozen that are opposed by the governor will be on the table.

Underlying the partisan collision is a unique lack of communication between the Scott administration and legislative leaders. The shuttle diplomacy that occurred during previous administrations – including Republican Gov. Jim Douglas – created quiet agreements that dismantled public confrontations. Those backroom negotiations appear to be entirely absent this year as the trust that existed between the two branches of government becomes a distant memory.

Special Session Called

Promising a veto of the just-passed budget and tax bills, Gov. Phil Scott has called lawmakers back to the Statehouse for a planned three-day Special Session starting May 23rd.

In his message to the General Assembly, Scott asked to limit action to approval of budget and education funding bills, but the legislature is entitled to take up any matter as a new bill. Action on bills introduced will follow existing rules, unless amended by a simple majority.

The session will not directly deal with sustaining any vetoes issued by the governor, since adjournment on May 13th was a final act of the 2017-2018 biennial session. However, the governor may veto bills enacted during the Special Session. A two-thirds majority is required to override a veto, according to the Vermont Constitution.

For more information about this Legislative Update, please contact Tricia Augeri at taugeri ‘@’ drm.com or 802-225-5501.

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