MONTPELIER — Tax and spending bills in the Vermont House received broad, tri-partisan support on the floor for the first time in many years as the body agreed to balance a projected state budget gap without raising taxes and fees.
Majority Democrats secured the support of Republicans and managed to hold onto left-leaning Progressives as they crafted a budget bill that cuts into existing services. The House gave preliminary approval to the annual tax bill on a 138 to 0 vote Thursday morning, followed by preliminary approval of a 2018 fiscal year state budget on a 143 to 1 vote later in the afternoon.
The House’s tax bill does not create any new taxes or fees, nor does it raise existing ones. It does raise about $5 million in revenue, however, by counting on better compliance from Vermonters, which was enough to gain the support of the entire GOP caucus.
The budget, meanwhile, closes a $72 million projected gap between revenues and expenditures in the 2018 fiscal year budget with significant reductions in spending, as well as additional federal funding. The plan was attractive enough to garner the support of the GOP caucus — except for Rep. Warren Van Wyck of Ferrisburgh.
“The past eight years we’ve just seen large increases in the budget. This is not increasing it substantially, but I believe the budget needs to go on a diet,” he said. “Obviously it’s lonely, but I think that’s the message that I think we need to look at. We are overweight and we need to be on a diet and I look forward to the administration looking at that.”
The sole no vote drew the ire of House Appropriations Committee Chairwoman Kitty Toll, D-Danville, who was animated as she confronted Van Wyck following the vote. She asked why he did not seek to testify in her committee or otherwise raise his objections.
“You never darkened my door. You never contacted me,” Toll said. “You didn’t ask to testify.”
Toll noted that Van Wyck was free to vote however he wanted, but her dissatisfaction that the vote Thursday was no unanimous was clear.
“Ten noes would have been easier than one,” She told Van Wyck after the vote.
Middletown Springs Rep. Robin Chestnut-Tangerman, who heads the Progressive caucus, said the House spending plan was “workable,” but said “there are areas that leave me dissatisfied.”
Still, Chestnut-Tangerman and other Progressives did not seek to amend the bill Thursday to stave off some of the cuts it contains.
“I do support this budget and congratulate the committee on their work,” he said.
Rep. Diana Gonzalez, a Progressive from Winooski, also commended the Appropriations Committee for its work but raised concerns about cuts to a program that provides motel vouchers to homeless and low-income Vermonters in inclement weather conditions. The budget cuts funding for the so-called cold weather exemption, but directs some funding to help create more temporary shelters.
Gonzales said she fears the cut “will lead to the untimely deaths of Vermonters as they freeze out in the cold.”
Rep. Matthew Trieber, D-Rockingham, said the committee studied the motel voucher system and found that more shelters would better serve needy Vermonters.
“We have looked at outcomes and seen that the best outcomes come from shelters. The last thing that any members of the Appropriations Committee would be looking for would be any Vermonters adversely impacted,” Trieber said.
The committee maintained enough flexibility in the motel voucher program “to ensure the scenario the member from Winooski talked about wouldn’t happen,” he said.
Rep. Janet Ancel, D-Calais, chairwoman of the tax-writing Ways and Means Committee, said the tax bill does not rely on any new taxes — a demand that Republican Gov. Phil Scott has maintained since taking office in January. But Ancel indicated the House was looking to reserve the ability to raise revenue later this year in a special legislative session, or next year, if the federal budget proposed by Republican President Donald Trump comes to fruition. It would lead to a significant loss of federal funding for the state.
“We have not raised taxes and fees in this budget. Instead we’ve worked to close the tax gap and in the process of doing that we’ve reserved whatever additional tax capacity we have in response to future budget cuts that come to us,” Ancel told her colleagues.
Ancel said the tax bill makes some significant changes, including preventing commercial bars from selling popular “break open tickets” unless they are selling them to benefit a nonprofit organization.
The bulk of the new tax revenue included in the bill will come from seeking better compliance with the state’s use tax. People who purchase goods online, from a catalogue or from out-of-state and do not pay sales tax on it are supposed to pay 6 percent of the sale price to the state on their yearly income tax returns.
“This has been a notoriously difficult tax to collect,” Ancel said.
The Scott administration asked the Ways and Means Committee to lower the amount Vermonters must pay and cap the total amount of use tax each person is liable for.
“They feel that by doing that they will get better compliance,” Ancel said, noting about $2 million is expected to be raised. “We are willing to support them in that effort. They will also do more education and outreach.”
The tax bill also directs the Tax Department to use new and existing collection strategies with third-party vendors like Paypal to collect tax due to the state. The state will be requiring such vendors to report to the state information about what taxes might be due by Vermonters. That is expected to raise nearly $3.2 million.
Each year about $150 million in uncollected taxes is on the books in Vermont, according to Ancel. “To think we can improve that by $5 million seems reasonable to me,” she said.
Toll, meanwhile, said the budget her committee crafted is about “sustainability, transparency, inclusivity, priorities and Vermont values.” It takes a large step toward aligning revenues with spending and is “a budget which includes measures to create sustainability in future years,” she said.
However, it also “makes reductions that will most certainly be felt by Vermonters,” Toll said.
“Reductions this year are necessary to address the financial health of the state,” she told her colleagues.
The committee also managed to maintain the state’s reserve funds above levels mandated by state statute as the state braces for potential federal funding cuts.
“We are preparing the best we can for uncertain times,” Toll said. “The budget before you is based on tough choices and based on compromise, but most importantly, the budget before you is based on values that we all share as Vermonters.”
The most significant debate on the budget Thursday concerned a study of the state’s education system. Rep. Heidi Scheuermann, R-Stowe, decried the study and urged lawmakers to take action on reforming the state’s education financing system, which relies on the statewide property tax.
“We’re here to do a job, folks, and we haven’t done that job. Let’s not kick the can down the road and do another study,” Scheuermann said. “Let’s do our job. We have committees already in place to address this and yet, we haven’t done it.”
“Let us just bite the bullet. Let us focus ourselves as a body, as committees, and focus on education funding,” she added.
Scheuermann’s motion to strike the study from the budget failed on a 42 to 86 vote.
House Minority Leader Don Turner, R-Milton, noted that his caucus found itself in a new position for the first time in years — supporting a budget crafted by majority Democrats.
“Today, we have a different message and I think that all of us understand that that message, although the majority is carrying it this afternoon, … is really the result of good leadership under the governor and with all of the work of (the GOP caucus) saying, ‘We cannot afford, Vermont cannot afford, to continue on this path of spending more money,’” he said.
Still, Turner noted that the budget only encompasses “one year.”
“One year does not fix multiple years of overspending. So, this puts us in a better place but it doesn’t fix all of the problems,” he said. “Vermonters have to know and understand that this one budget is not going to fix all the state’s problems financially going forward.”
Turner said the GOP caucus would be presenting an amendment Friday before the House takes its final vote on the budget. That amendment will look to fund some of the governor’s priorities that the Democratic majority did not include in the plan.
The amendment will seek to use about $3.5 million in cuts the governor included in his proposed budget in January to housing programs, economic development and a scholarship program for Vermont National Guard members.
Turner said the caucus would not be seeking one of Scott’s biggest initiatives — capturing millions of dollars in savings expected from new teacher health care plans to fund early and higher education.
The House plan does not include many of the Republican caucus’ priorities, Turner said, but it meets many of their larger goals.
“This budget grows at a rate of less than 2 percent and revenue is projected to grow just under 3 percent with no taxes and fees,” Turner said. “That was important. The structural trajectory has turned some, but it’s not the cure forever. We have a lot more work to do.”
“I can’t stand here and oppose a budget that structurally puts us in a better place, something that I’ve been passionate about since I’ve been leader,” he added.
The House will look to give final approval to its spending plan Friday. It will then head to the Senate for its consideration.