Budget Veto Looming As Legislature Adjourns Under Cloud of Discord

May 18, 2017

The 2017 legislative session has adjourned, but Vermont’s fiercest political fight in recent memory has only just begun.

The dispute involves health care benefits for employees of public schools, and it will likely have lawmakers back to the Statehouse for a veto session in June.

Each year, at the end of the legislative session, lawmakers escort the governor of Vermont into the House chamber for a farewell speech of sorts. These addresses tend to be celebratory affairs. The executive and legislative branches inevitably clash during the session. By its climax, however, everyone’s usually ready to praise their shared triumphs.

Late Thursday, as the midnight hour neared, Gov. Phil Scott walked into the House chamber to deliver his first such address.

“I’m sure you all want to get home to your families, Scott began, “so I promise I’ll keep this short.”

The words that followed were not as upbeat as in years past.

“As I stand before you tonight, it is unfortunate we have not been able to reach agreement on one significant issue, despite our best efforts,” Scott said.

That one significant issue is teacher health care benefits. Scott wants a statewide contract for teacher health negotiations, a move he says would save the state $26 million a year in education costs.

"Threatening to veto a budget because he didn't get what he wanted on a different bill is stooping pretty low. And that's not governing, that's petulance." — House Speaker Mitzi Johnson

Democratic leaders in the House and Senate say it’s an ill-conceived intrusion on the collective bargaining rights of public employees.

Weeks of talks failed to deliver a resolution. Senate President Pro Tem Tim Ashe says there’s a reason for that.

“It quickly became clear that it was not about giving taxpayers any money back, it was about breaking up the union,” Ashe said Friday.

Scott insists he’s no union-buster. Collective bargaining will continue, he says. It’s the table at which negotiators sit that would change.

But on a conference call with reporters Friday, House Speaker Mitzi Johnson says the dispute now transcends the issue of teacher health benefits.

“Threatening to veto a budget because he didn’t get what he wanted on a different bill is stooping pretty low,” Johnson said. “And that’s not governing, that’s petulance.”

It’ll be the line of attack favored by her and Ashe as the standoff with the governor intensifies between now and June 21, when the veto session begins.

“The idea of putting the budget at risk for something that has nothing to do with the budget is really an unprecedented, off the charts linkage to a policy proposal,” Ashe says.

What’s truly unprecedented is the governmental territory lawmakers and the governor are now traversing. In 2009, then-Gov. James Douglas issued the first budget veto in state history. But Democrats in the House and Senate had the votes to override that veto.

That is not the case in 2017, where 53 Republicans in the Vermont House will sustain the governor’s veto.

Vermont’s fiscal year begins July 1. And under rules set by the state constitution, if Vermont doesn’t have a new budget in place, no money can be spent on government operations.

Ashe says it’s unclear how or if Democrats and the governor will resolve their ideological divide.

“I can’t say with certainty that there will be a solution that presents itself,” Ashe says.

But a surprise reveal from Scott on Friday have given Democratic lawmakers one obvious option: do absolutely nothing.

“This isn’t D.C., and I will not shut down state government over this issue,” Scott said.

Scott says he wants to preempt fears of a government shutdown now.

“I don’t want this to turn into a rhetoric where I’m being perceived as a D.C.-type political operative where I’m holding the budget hostage and that we’re going to have this looming shutdown in state government,” he says.

Scott was asked if that means he’ll eventually sign legislators’ budget if they don’t alter their stance on teacher health benefits. He said it did.

"I don't want this to turn into a rhetoric where I'm being perceived as a D.C. type political operative where I'm holding the budget hostage and that we're going to have this looming shutdown in state government." — Gov. Phil Scott

“I know that’s not great negotiating skills to tell people that you’re willing to put aside your own preference for the benefit of the state,” Scott says.

Scott says he thinks pressure from regular Vermonters, not him, will guide lawmakers’ approach to the next round of talks.

Scott, Johnson and Ashe have been negotiating for weeks over the teacher health care issue, and hope for a resolution on the issue endured until late Thursday evening, with the three leaders huddled behind closed doors in search of a deal.

The divide was unbridgeable, however, and Johnson and Ashe emerged from the governor’s ceremonial office empty-handed shortly after 7 p.m. Rather than extend the session yet another week, the Democratic leaders decided it was time to move ahead with adjournment, with the knowledge they’ll likely be back again in June, after Scott vetoes their $5.8 billion spending plan.

In a speech to the Senate late Thursday night, Scott assured them that veto would be forthcoming.

“As I stand here tonight, it’s unfortunate we have not been able to reach agreement on one very significant issue, despite our best efforts. The last few weeks have demonstrated the challenges and frustrations that come with public service,” Scott said. “I’ve been clear that we have an obligation to taxpayers to ensure we have the mechanisms in place to maximize the education health care savings available without costing school employees more. And that has not been accomplished. Therefore, I cannot support the budget.”

Scott last month unveiled a plan to save $26 million in education costs by moving to a statewide contract for teacher health benefits. Scott says the plan would give his administration the ability to negotiate premium shares and out-of-pocket costs for public school employees that would reduce spending by $26 million next year, and lower the trajectory of health costs in the future.

Scott invoked his most powerful leverage to pull lawmakers toward his plan: If they failed to adopt legislation that ensured teacher health care savings, Scott said repeatedly in recent weeks, he would veto the state budget.

Ashe and Johnson, however, said they were unwilling to abide an “unprecedented last-second proposal” that, in their view, could potentially erode the collective bargaining rights of public employees.

On the Senate floor late Thursday night, Ashe said there was a singular principle guiding his approach to talks with Scott.

“We did not want to interfere with dozens and dozens of [teacher health care] negotiations that are in midstream,” Ashe says.

Ashe says the Legislature’s refusal to acquiesce to Scott was rooted not in blanket opposition to the concept of a statewide teacher contract, but in the fact that it arrived from the governor’s office too late in the session to scrutinize its impacts.

“This Senate and this Legislature frankly have to stand up for the legislative process,” Ashe said. “The fact is, if you don’t have a legislative process to review really complicated policies, what is the point of the legislative process at all?”

Ashe says lawmakers underscored their openness to Scott’s proposal by passing a bill Thursday that creates a commission to study a statewide contract for teacher health benefits.

Scott has said this year marks a “once-in-a-lifetime opportunity” to move to a statewide teacher health contract, since all those contracts are up for renegotiation this year.

It’s a rarity for all contracts to expire on the same year — districts generally negotiate plans of varying lengths. That’s why Scott says the state needs to strike now.

But Ashe and Johnson say the bill passed by the Legislature Thursday would require school districts to enter into health contracts that expire on Sept. 1 of 2019, thereby assuring, Ashe says, that the “once-in-a-lifetime opportunity” will resurface in two years. Between now and then, he says, the Legislature can assess Scott’s plan on the merits.

“We defer judgment, because we know our best thinking is when we step back, we’re not under duress,” Ashe says.

That plan, however, might not result in the outcome Democratic leaders say they’re hoping for. The mandate that contracts expire Sept. 1 of 2019 only applies to contracts that aren’t settled before July 1. Many districts could settle teacher contracts before then, meaning all contracts likely won’t be up for renegotiation in 2019.

Ashe and Johnson had, prior to Thursday night, put forth numerous counterproposals that ultimately proved unsatisfactory to Scott.

A plan passed the by the Senate would have required school districts to come up with $26 million in savings, but left it to individual districts to decide where in their budgets those savings would come from.

Johnson, meanwhile, floated a plan that drew the ire of the Vermont-NEA. It would have imposed strict parameters around teacher health negotiations, a measure Johnson said would ensure savings while keeping negotiations at the school district level.

Neither plan won favor with the governor, however, and it’s unclear whether either had enough support to make it through both the Senate and House.

The House and Senate Thursday ultimately landed on a far less aggressive plan than what they’d considered earlier in the session. The plan lowers residential property tax rates by 1.5 cents this year, by assuming that negotiations for teacher health benefits this year, with no government intervention, will yield $6 million organically.

Lawmakers’ exhaustive attempts to find consensus with Scott was the product of a defining political dynamic hanging over the talks: With 53 Republicans, as well as six Independents and even a number of Democrats backing the governor’s position, the House does not have the votes to override the governor’s veto.

It remains to be seen how Scott’s new negotiating tactic - revealing that he’ll ultimately sign the budget even if lawmakers don’t capitulate - will influence the next round of talks.

Update 4:45 p.m. This story was update to include new information and interviews.