Republican Gov. Phil Scott’s highly anticipated plan to lower statewide property tax bills next year is being panned by Democratic lawmakers as a "fiscally irresponsible proposal" that would compromise the state’s financial health for years to come.
Scott last week vetoed a bill approved by Democratic lawmakers that would see statewide property taxes rise on average by 13.8% next year. He then announced plans to present the Legislature with an alternative framework that could reduce the increase by more than half.
More from Vermont Public: Here are the bills vetoed by Gov. Phil Scott
Members of the Scott administration met with leaders in the House and Senate Wednesday afternoon to outline the package, which would empty the stabilization reserve in the education fund, and suspend Vermont’s universal school meals program, in order to buy down property taxes.
“I have to tell you, as someone who has dealt with budgets and short-term decisions that have huge long-term impacts ... it’s not a direction that I feel comfortable in going."Caledonia County Sen. Jane Kitchel
“The plan is not without risk or challenge, but the governor believes it’s worth it,” Administration Secretary Sarah Clark told reporters during a briefing with reporters Tuesday. “This is about trying to keep Vermonters from being crushed by a property tax increase this year, and creating a runway to make more strategic reforms for future sustainable growth.”
It’s a “risk” that Democratic leaders say they’re unwilling to take. Caledonia County Sen. Jane Kitchel, the Democratic chair of the Senate Appropriations Committee, told Vermont Public that the $47 million education fund reserve is a critical safeguard against unexpected economic downturns. Zeroing out a reserve fund in order to reduce taxes, she said, “is a practice that we never ever had considered, or would consider, as fiscally responsible use of a reserve.”
“I have to tell you, as someone who has dealt with budgets and short-term decisions that have huge long-term impacts, like the underfunding of pensions, it’s not a direction that I feel comfortable in going,” Kitchel said.
Senate President Pro Tem Phil Baruth pointed to a 2023 bond rating report, issued by S&P Global, that explicitly referenced reserve balances as a key metric of the state’s financial health. The “stable outlook” issued by S&P, according to the report, “reflects our expectation that Vermont will continue to realize structurally balanced operations with fully funded reserves and robust cash balances in the coming few years.”
Baruth said the Wall Street rating agency’s report is easy to decipher.
“Translated, that says, ‘If you spend down your reserves, we’re going to tank your bond rating,” Baruth said. “Any other policy proposal or program, Gov. Scott would veto a bill that spends down the reserves. But in the service of tax cuts, he’ s willing to let that go forward and call it appropriate, which I find very hard to understand.”
Administration officials say they have a five-year plan to replenish the reserve fund, though they acknowledge that money will ultimately come from property taxpayers. And they say lawmakers are failing to understand the severity of the looming tax hike if elected officials don’t undertake unusual measures to lower those bills.
“Not being able to afford rent. Increasing our homelessness population, especially given (Democratic lawmakers) didn’t pass the housing measures we asked for … Pushing more people into poverty. Causing people to leave the state,” said Rebecca Kelley, communications director for the Scott administration, on Wednesday.
Kelley said voter resistance to property tax increases is also compromising the financial futures of school districts, some of which have yet to get a budget approved by voters this year.
“We saw what happened this year – a third of school budgets going down and then schools having to then scramble to put together new budgets,” she said. “With our plan, we’re hoping they have the backstop and the time and the marker to plan for more strategically next year.”
Baruth said it’s “disingenuous” for the administration to argue that its tax relief plan would somehow spare homeowners, renters and businesses from whatever financial adversity they’ll experience as a result of the tax increases.
The property tax assessments that would be enacted under the Legislature’s “yield” bill raise funding sufficient to cover the costs of budgets that have already been approved by local voters, according to Baruth. Deferring payments on that spending doesn’t save taxpayers money, he said, it merely extends the time period over which they have to pay it.
“What that almost guarantees in my way of thinking is over the next five years, we’re going to have double-digit increases partially because of that move,” he said.
Administration officials say their proposal includes short-term cost-containment measures that will curb education spending in the coming years. Commissioner of Taxes Craig Bolio said the governor’s plan includes an “allowable growth percentage” provision that would impose financial penalties on most districts that propose spending increases in excess of 3.19% next year.
He said that approach would likely be a far more effective mechanism to restrain school spending than the “excess spending penalty” included in the Legislature’s bill.
Baruth said the Legislature is interested in pursuing the allowable growth rate concept, but he said it’s waiting on key modeling and analysis that won’t be ready until the beginning of the next legislative biennium.
“Let’s defer that until we have the data in January, and then we’ll do something like that next year,” Baruth said.
Baruth and House Speaker Jill Krowinski said they’d both been under impression that the governor would be attending the meeting at which they’d learn about his tax relief plan. He did not. And they say his absence was shocking and telling.
“After publicly discussing the importance of this meeting for weeks, his absence undermines the collaborative spirit necessary to address the critical issues facing our state,” Krowinski said in a written statement. “The governor has stated that he wanted to work together on this issue, but the fact that he did not show up to this meeting, it is impossible to see this as nothing more than election year politics rather than a true commitment to collaboration.”
Kelley said lawmakers didn’t say in advance of the meeting whether they would be willing to negotiate on a new property tax plan. And she said attending the meeting wasn’t a “valuable use” of his time.
“They could have told us up front, ‘We’re willing to negotiate.” But why should the governor … sit around in a meeting for them to say, ‘We’re just going to override you,’?" Kelley said.
Democrats have supermajorities in both chambers of the Legislature, and House and Senate leaders say they’re confident they have the votes to override the governor’s veto.
They’ll attempt to do so next week, when lawmakers reconvene in the Statehouse for a veto session at which they’re expected to attempt up multiple overrides.
Have questions, comments or tips? Send us a message.
_
