After cutting last-minute deals on welfare reforms, drugged driving, a tax bill and the budget, Democratic leaders closed the books late Saturday evening on the 2014 legislative session.
Gov. Peter Shumlin said the Legislature’s work on economic development, public education, raising the minimum wage, and mandating labeling for foods made with genetically modified organisms made the year a successful one.
“Together we have made this biennium one of the most productive, successful sessions in recent memory,” Shumlin said in an adjournment speech. “Thank you from the bottom of my heart.”
"Together we have made this biennium one of the most productive, successful sessions in recent memory. Thank you from the bottom of my heart." - Gov. Peter Shumlin
Lawmakers failed to take any significant action on the key issues of property tax reform and health care financing. But House Speaker Shap Smith and Senate President John Campbell said the Legislature’s successes outweighed its failures.
Campbell said the spotlight Vermont put on its opiate addiction problem in recent months might have earned the state some bad press. But he said lawmakers’ commitment to addressing the problem has already begun to yield results.
“What’s terrible for Vermont is that we have a problem,” Campbell said. “The one thing that’s not terrible is that we’re willing to face it.”
Much of the action on the final day of the session centered on an education governance bill that emerged as one of the sleeper issues of the 2014 session. The consolidation mandate that the House passed in early April – it would have shrunk the number of districts in Vermont from nearly 280 down to about 60 over the next few years – had long ago lost momentum.
But a watered-down compromise that included more than $6 million in financial incentives for voluntary mergers clung to life Saturday as Democrats looked to summon enough votes to override a procedural maneuver that House Republicans wanted to use to kill the measure.
Democrats failed to muster the votes in the end. Woodbury Rep. Peter Peltz said the defeat was symbolic for him of an eight-year legislative career marked by a lot of talk but little action on education issues.
“This is my last day in the Statehouse after eight years,” said Peltz, who won’t run for reelection in November. "And we have made very little change with regard to the great issues of quality and cost. Whether this was the perfect bill or not … I’m sorely disappointed that it didn’t pass.”
A last-minute effort to secure changes to the welfare program was more successful. Republicans agreed to a procedural move that allowed for passage of a compromise plan that aims to encourage low-income Vermonters to pursue better-paying jobs.
The so-called “benefits cliff” often means a net reduction in household income for welfare recipients who see benefits reduced when their earnings improve. The compromise reached Saturday will allow welfare recipients to earn an additional $50 per month without seeing a decrease in benefits. More importantly, advocates said, it softens the off-ramp from welfare by preserving the childcare subsidies for one year after people leave the program.
Both chambers of the Legislature easily passed the tax bill that negotiators agreed on late Friday night. The package raises about $5.5 million in new revenues, mostly through a new tax on employers who pay low wages and whose workers also qualify for subsidized health care. Chittenden Sen. Tim Ashe, who chairs the Senate Finance Committee, says the assessment will amount to a little more than $500 per year, per employee.
"When that person lands on Medicaid, taxpayers pay $3,000 and the employer pays zero. So we thought adding the employer assessment to those situations was a very, very fair thing to do." - Chittenden Sen. Tim Ashe, on a tax on employers that pay low wages and whose workers qualify for subsidized health care
“When that person lands on Medicaid, taxpayers pay $3,000 and the employer pays zero,” Ashe said. “So we thought adding the employer assessment to those situations was a very, very fair thing to do.”
The bill also includes a 13-cent per-pack tax increase on cigarettes, as well as higher taxes on smokeless tobacco products. Legislators also agreed to a statewide property-tax increase of four cents next year, three cents less than had been forecast earlier this year.
The additional revenues will help support increased spending on state colleges and higher reimbursement rates to Medicaid providers.
Administration Secretary Jeb Spaulding said Gov. Peter Shumlin isn’t entirely pleased with the deal.
“A 13 cent increase in the cigarette tax is not something that he’s happy about, but he recognizes that at the end of a legislative session, you’re going to win some and you’re going to lose some," Spaulding said.
The tax bill also includes a four-cent increase in the residential statewide property tax rate, to 98 cents per $100 of assessed value. The increase is three cents lower than had been forecast earlier this year.
Lawmakers made little headway this year on the key issues of property tax reform and health care financing. But Spaulding said he thinks history will regard the 2014 session as a momentous one. He said an economic development bill that includes $4.5 million discretionary fund –it’s to be used by the governor to lure or retain major employers – could ultimately preserve the livelihood of thousands of employees.
Lawmakers okayed the expenditure in large part over the uncertain future of IBM’s chip manufacturing plant in Essex Junction.
More than $8 million in new money to improve treatment options for opiate addicts, Spaulding said, has already begun to yield results. He said a deal to shore up funding for the underfunded retiree teacher health plan will save the state hundreds of millions of dollars in avoided interest payments in coming decades. And Vermont last week became the first state in the nation to require food producers to label products containing genetically modified organisms.
“When the dust settles, I think the press and the public will see this biennium as one of the most productive in memory, and this particular session has accomplished a lot,” Spaulding said.
House Minority Leader Don Turner said he doesn’t see it that way.
“I totally disagree with the secretary of administration – I don’t think it was a very productive session at all,” Turner said.
Turner said he doesn’t understand “all the hoopla” around an economic development bill that “does very little.”
And he said legislation boosting the power of organized labor – including one bill that will allow childcare providers to unionize – has diminished economic prospects in Vermont.
"If you were a union or a labor organization, you'd be very happy about the last session. If you're an employer in Vermont, I think you're going to be dissatisfied with the results of this session." - House Minority Leader Don Turner
Turner said the Democratic majority’s major failure came in the $5.6 billio budget, which he says continues on a growth rate that outpaces taxpayers’ ability to pay.
Turner said the use of $35 million in one-time funds delays the hard decisions that will be needed in order to bring spending in line with revenues. And with expenses forecast to rise 4 percent next year, and revenues projected to rise by 2.9 percent, turner says, the shortfalls will only continue into the future.
“So you’re looking at a projected budget gap of over $70 million once again (next year), growing to $75 million in fiscal year 2017, if we don’t raise more revenue. And that means taxes,” Turner said. “You can’t continue to spend above your means like this majority has done for the last four years and expect it to be sustainable going forward.”
