To the surprise of no one in Montpelier, Republican Gov. Phil Scott vetoed legislation Thursday that would result in an average statewide education property tax increase of nearly 14% next year.
Just hours after Democratic lawmakers delivered the so-called “yield bill” to Scott’s desk, the governor returned it with a four-paragraph veto message outlining his concerns with the Legislature’s plan.
“Vermonters cannot afford a double-digit property tax increase,” Scott wrote. “We must provide property tax relief now.”
Scott chided lawmakers over the course of the legislative session for their perceived inaction on property tax increases that he says pose an existential threat to the financial livelihood of working Vermonters.
Democrats in the House and Senate say the 13.8% average increase forecast under their bill is a significant reduction from the 18.5% hike that analysts had predicted in December. Lawmakers were able to buy down those rates by allocating surplus money to the education fund, and by increasing taxes on short-term rentals and certain kinds of software.
“There are very few ways to lower property taxes when we have local voters making local decisions about local school budgets. And that is how Vermont’s education finance system works.”Rep. Emilie Kornheiser
Brattleboro Rep. Emilie Kornheiser, the Democratic chair of the House Committee on Ways and Means, told Vermont Public Thursday that the final legislation represents “the best possible yield bill” the Legislature could craft under the circumstances.
“There are very few ways to lower property taxes when we have local voters making local decisions about local school budgets,” Kornheiser said. “And that is how Vermont’s education finance system works.”
House Speaker Jill Krowinski said in a written statement Thursday that the legislation establishes a commission that will set the stage for more structural spending reforms during the next legislative biennium.
“[The yield bill] represents a collaborative and forward-thinking effort to address the current and future needs of our education system and the affordability issues facing many Vermonters,” Krowinski said. “This commission will allow Vermonters to provide input on the state of our education system, make recommendations for a statewide vision and prepare us to take legislative action to support our children, teachers and Vermont taxpayers.”
Scott, however, said property owners need relief now. And he urged lawmakers to work with his administration between now and their June 17 veto session on a more aggressive reform package.
“This can’t wait for another study before implementing cost containment strategies,” he said in his veto message. “We must also reform our education funding formula to ensure sustainable spending growth and equitable opportunities, and prioritize funding educational opportunities that improve outcomes by reinvesting in the strategies that best serve kids over maintaining the status quo.”
More from Vermont Public: Here are the bills vetoed by Gov. Phil Scott
Scott is scheduled to meet with legislative leaders next week to outline his proposals. He declined to elaborate on the plan during a media briefing Thursday, but said it would be substantially similar to a concept he unveiled to House and Senate tax committees in April.
“You shouldn’t expect there’s going to be anything different than what we’ve been talking about — maybe a little bit of variation of some of what we’ve testified on in some of the committees,” Scott said. “But I think there’s a path forward, and I hope that they will take it seriously.”
Kornheiser said she and fellow lawmakers are eager to consider whatever the administration has to offer. But she said Scott’s previous plan, which effectively relied on loans to school districts to offset rate increases, amounted to “deficit spending.”
State Treasurer Mike Pieciak, a Democrat, panned Scott’s proposal at the time and said it could negatively affect the state’s bond rating.
“Everyone across state government and outside state government agrees that that was not responsible budgeting practice, and that it would actually wind up costing taxpayers more quite quickly,” Kornheiser said.
Kornheiser said she agrees with Scott that the state needs “significant education finance reform.”
“I agree that these property taxes are a significant ask of Vermont families. And I agree that we need to make change,” she said. “But the details of those changes are where the rubber hits the road. And I have not seen that from the administration. And we did our very best work to get to the point where we are.”
The veto comes three weeks before the end of the fiscal year for public schools in Vermont and sets up a potentially high-stakes negotiation as the clock winds down.
If lawmakers can’t override Scott’s veto, and they’re unable to reach a consensus plan with the governor before July 1, then Vermont will, under existing statute, revert to last year’s yield. Fiscal analysts for the Legislature say that will result in a property tax increase of 30% for all businesses and non-primary residences — double what non-homestead properties would pay under the bill that Scott vetoed. And they say it would open up a $93 million deficit in next year’s education fund.
Scott said Vermonters should not be concerned about that outcome.
“We’ll come to some agreement before that happens,” he said. “I’m confident of that.”
The House only began counting votes Wednesday, but people familiar with the process say they’re confident they’ll have the 100 votes needed to override the veto. Leaders in the Senate, too, say they think they have the 20 votes needed to override in that chamber.
Scott said the looming property tax increase is just the latest in a string of actions by the Legislature’s Democratic supermajority that have driven up the cost of living for Vermonters.
The Legislature increased DMV fees by 20% last year, enacted a payroll tax for child care subsidies that takes effect July 1, and approved emission-reduction initiatives for home heating fuels and electric utilities that Scott says will increase energy costs by billions of dollars over time.
Scott is confident that his opposition to policies coming out of the Legislature will resonate with voters in November. Sixty-six minutes after the governor’s press secretary issued a media release about the veto, his reelection campaign sent out a fundraising email highlighting the news.
“The governor tried to work with lawmakers to prevent this unacceptable tax hike, but they moved forward anyway,” the email read. “We need your help to elect more legislators who agree that Vermonters have had enough and simply cannot afford to see their costs go up anywhere near this rate.”
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