Ask Bob: How 'Fiscal Chicken' Could Become A Government Shutdown

Jun 20, 2018

By June 30, Vermont needs a budget — otherwise there could be a government shutdown on the first day of the state's new fiscal year.

For what this would mean for Vermonters and possible ways to avoid a shutdown, we turn to longtime political reporter Bob Kinzel for another installment of Ask Bob.

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Has the state of Vermont ever faced a government shutdown before?

We've never seen it take place at the state level. So if it happens, we're going to be in unchartered waters. No one is quite sure what will happen.

Under the Vermont constitution, "No money shall be drawn out of the Treasury, unless first appropriated by act of legislation."

Now, both sides insist they do not want to have a government shutdown.

Adam Greshin, the budget commissioner of the Scott administration, thinks it's a mistake to even be talking about a possible shutdown.

"That belief comes from the reality that it doesn't benefit the governor and it doesn't benefit the Legislature to shut down state government," said Greshin. "I would also add that it doesn't benefit the state of Vermont for all this conversation and all this hype over a government shutdown. We have not mentioned that ... because we don't think it's going to happen."

But the Democrats say there needs to be a focus on a possible shutdown because the consequences are so great:

"I think it would be a massive embarrassment to the state of Vermont," said Senate President Pro Tem Tim Ashe. "It would undermine our state's very strong financial reputation and it would probably result in a lowering of our bond rating, so it would be pretty unthinkable."

What would a government shutdown mean for Vermonters?

The state parks would be closed down. The operations of the state police would be shut down. The Department of Motor Vehicles, the tax department, the state's judicial system would be shut down. The corrections department would be shut down. Vermont's food stamp program known as 3SquaresVT would be shut down, as would many elements of the Medicaid program.

So you can tell it would be a mess. A lot of people would be affected.

And that's why it's just unimaginable that lawmakers and the governor would let this take place.

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A dangerous game of "fiscal chicken"

This is one of the few times a split-the-surplus compromise won't work. Because if they split the $34 million surplus, the governor will still be facing a small increase in the nonresidential statewide property tax rate. And Scott has said all along he will not support any tax increase, period.

Now, the Democrats are going to argue they've made some concessions already — they've agreed to use more of the one-time surplus money to ensure there would be no increase in the residential tax rate. And yet Democrats say they see no movement on the part of the administration.

The administration counters and says that it's willing to negotiate over elements of the governor's five-year plan to reduce education costs. But they are not going to negotiate over tax rates.

Are there any other solutions being considered that would satisfy both sides?

Here's one  —

Most of the one-time surplus money is the result of unanticipated activity in the Vermont personal income tax: A bunch of folks made income tax changes this year to reflect changes that will be put into place with the new federal tax law, next year.

So instead of putting the money toward paying for a different project, why not use the surplus money to help the Vermonters who raised it?

You could do that by reducing Vermont's lowest income tax rate just for a one-year period.

That's a rate that's applied to everyone's initial amount of income. All Vermonters who file income tax returns would benefit. Business owners would benefit.

The only people who don't benefit are out-of-state second homeowners.

This approach moves the debate away from the property tax question and becomes a tax cut for all Vermonters. All sides win and the stalemate is broken.

Everyone at the Statehouse is aware of this option. This is not an original thought and why it isn't being taken more seriously is really a mystery to me.

Will there be a resolution to this budget stalemate before the deadline?

I believe there will be because there are no winners if Vermont state government gets shut down.

I think the reaction from most people is going to be quick and very angry. The public isn't going to buy into this idea that somehow one side is more guilty than the other.

I think it could cause a crisis in confidence in state government. People might start viewing Vermont government in the same negative way that they consider politics in Washington, D.C.

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Want more answers from Bob? Check out our previous installment of Ask Bob