As Vermont House passes budget, Republicans pan spending plans

By SARAH MEARHOFF

VTDigger

Published: 04-01-2024 3:29 PM

“Out of control,” “off the rails,” and “bizarre”: These are just a sampling of the insults Republicans in Montpelier have lobbed at Democrats over the past week leading up to the House’s approval of an $8.58 billion state budget Friday morning.

On the defense against the GOP’s accusations, Vermont’s Democratic leaders have retorted: Their Fiscal Year 2025 bottom line surpasses that which was proposed by Republican Gov. Phil Scott earlier this year by merely a fraction of a percentage point.

The House passed that budget, H.883, via voice vote Friday morning, after a preliminary 104-39 vote Thursday night. It now will be sent to the Senate for inevitable edits.

“This particular budget, unlike last year’s, is a lot trimmer and is within the revenues of the state in a pretty tight box,” House Appropriations Chair Diane Lanpher, D-Vergennes, told reporters on Thursday. “I think it’s really important to see that this (budget) that the House is bringing forward has a difference from the governor that is so minute in its totality that it’s almost not even a decimal point.”

Fiscal Year 2025 marked budget writers’ return to pre-pandemic normal revenues, without the cushion of ample federal aid dollars. According to Lanpher, the House largely stayed within the spending confines of the budget presented to lawmakers by the Scott administration in January — albeit while reducing funding to some of the administration’s favorite programs.

But drawing the most controversy in the Statehouse in recent days is what has been left out of the House’s version of the budget: proposed tax hikes on corporations, high earners and expensive property transfers, recently advanced by the House in three separate bills.

“You’re going to say, ‘Well, geez, governor, the budget they’re presenting is about equal to yours. What are you complaining about?’” Scott told reporters at a press conference Wednesday afternoon. “My answer is, they cut everything out of what we need in terms of housing, including a few things of their own. Now they’ve got four or five other bills that have spending attached to them.”

By excluding major spending and taxing proposals from the budget, or so-called “big bill,” Scott accused lawmakers on Wednesday of bypassing the typical state budgeting process, “making it less transparent, more difficult to keep track.”

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One lawmaker, Rep. Anne Donahue, R-Northfield, unsuccessfully attempted to bring those transparency concerns to the floor Friday morning. She proposed an amendment that would have incorporated into the 2025 budget the almost $26 million in new taxes that three new bills would usher in this coming fiscal year. The amendment failed.

The administration has also raised the question: Come next year, what’s stopping legislators from taking those future revenues and allocating them elsewhere, instead of where they promised?

Lanpher pushed back on the governor’s accusations of obfuscation. The purpose of the budget bill, as she sees it, is “keeping the lights on, functioning of government.” If all of the new revenue proposals are lumped into the budget, she said, “It gets blurred.” Attaching revenues to specific policy proposals allows legislators to be more prescriptive in how the new money is spent, she said.

“We’re specifically spending or looking at revenue to support an area where Vermonters need us to act,” Lanpher said. “They’ve asked for us to do a lot. And it’s a lot. So it’s going to take a lot to do a lot.”

As for the fear that legislators down the line could opt to spend the money elsewhere, Lanpher conceded, “I cannot tie the hands of the future legislature, although I can leave a long trail of what our legislative intent is.”

Policy bills, taxes attached

Under particular scrutiny by Republicans this week are three bills advanced through the House Ways and Means Committee, which would raise an estimated combined $130 million in state taxes annually. The bills are largely set to take effect next fiscal year.

H.721 seeks to expand Medicaid and Dr. Dynasaur eligibility. H.829 establishes a 10-year plan to address the state’s housing crisis and to transition Vermonters out of homelessness. H.880 would fund dozens of new positions in the state’s judicial system, with the hope of making a dent in the state’s stubborn court backlog. 

Both H.721 and H.880 have passed through the House and are on their way to the Senate. H.829 has been preliminarily approved and awaits one more House vote, expected next week, before it heads to the upper chamber.

At their core, they’re policy bills. But attached to them are taxing mechanisms to cover their multi-million-dollar price tags.

If approved as written, both H.721 and H.880 would be paid for by increasing Vermont’s corporate income tax rate to the highest in the nation — a potential ranking that is “nothing to be proud of,” Scott said Wednesday.

H.829 would be funded by establishing a new marginal personal income tax bracket, at a rate of 11.75%, on Vermonters who earn more than $500,000 annually, as well as an increase to property transfer taxes for real estate purchases exceeding $750,000. 

In a national economy shaped by historically high inflationary pressures, and in a state already reckoning with an anticipated $240 million property tax hike due, Republicans are waging a fierce fight against the House’s tax proposals. In an election year, they’re taking the opportunity to jab at Democrats’ theoretically veto-proof supermajority in the state Legislature.

“The supermajority is off the rails and out of control, and Vermonters have had enough,” House Minority Leader Pattie McCoy, R-Poultney, told reporters at a press conference Wednesday. 

“Vermonters are struggling. They are stretched thin, trying to make ends meet. They have been stressed for years, with Vermont’s already high cost of living,” McCoy continued. “Inflation has made it even more difficult, and this supermajority has made it even worse.”

House Ways and Means Chair Emilie Kornheiser, D-Brattleboro, said such criticisms overlook who would bear the brunt of the tax increases: corporations and the wealthy.

Kornheiser told the House Democratic Caucus on Tuesday that the new, high-earner personal income tax bracket alone would raise nearly $75 million in Fiscal Year 2026, while impacting only the top 1% of taxpayers.

“I think this caucus believes … that investments in people and investments in our state and investments in our communities pay off, both indirectly and directly,” Kornheiser said at the time.

When asked by reporters on Wednesday whether he would veto the House’s three tax bills, Scott demurred, though he has for months drawn a line that he would not support any increased taxes. Should he veto the bills — or the budget, as he did last year — the 150-member House requires a two-thirds majority, or 100 votes, to override his veto.

Despite its entanglement with the other tax proposals approved this week, the budget itself appears safe from a potential Scott veto, at least in the House, garnering 104 ‘yes’ votes Thursday night. 

The futures of the three tax bills — H.721, H.829 and H.880 — are less certain. None of them garnered 100 ‘yes’ votes in their respective roll call votes, though more than a dozen members were absent for each of those votes.