Senate Ponders Last Minute Changes To Tax And Budget Measures

Apr 30, 2015

Senate lawmakers worked late into the evening Thursday debating the pros and cons of the budget and tax bills. But ‘yes’ votes on those pieces of legislation won’t come close to settling the issues, and 11th-hour intervention from the governor’s office has reignited a months-old debate over taxing and spending.

Late Monday night, the Senate Committee on Appropriations culminated weeks of long work days with a vote on its version of the fiscal year 2016 state budget. So it came as something of a surprise to Caledonia Sen. Jane Kitchel when Gov. Peter Shumlin summoned her into his ceremonial office on Wednesday evening to discuss some possible revisions.

Kitchel, the appropriations chairwoman, has served on the committee for five years now.

“I do not recollect ever having proposals made after we’ve passed the budget,” Kitchel said Thursday.

"I do not recollect ever having proposals made after we've passed the budget." - Senate Appropriations Committee Chairwoman Jane Kitchel

While Shumlin’s late-session intervention ruffled some Senate feathers, the third-term Democrat didn’t seem to understand the fuss.

“When the bills have been ready to go to the floor, you express what you agree with, what you don’t agree with, and you work with them to try to do what’s sensible for Vermont,” Shumlin said. “That’s what I was hired to do, and that’s what I’m trying to do.”

What’s “sensible” for Vermont, according to Shumlin, is another $10 million in reductions from the budget Kitchel’s committee passed Monday. The House and Senate had looked to be on about the same page when it comes to spending. Shumlin however now wants to cut back on payroll expenses and weatherization funding, among other things.

"My point is a simple one. I think we need to cut another $10 million and reduce the need for additional taxes by that same amount." - Gov. Peter Shumlin

“My point is a simple one. I think we need to cut another $10 million and reduce the need for additional taxes by that same amount, Vermonters do not want us raising every single tax that we can think of, and some that have not been thought of before,” Shumlin said.

Shumlin dismissed as “foolish” the revenue packages that House and Senate lawmakers would use for increased government spending next year. The dueling plans include expanding the sales tax to include soda, candy, and bottled water, and a 5 percent tax on satellite television services. Shumlin reserved his harshest language though for provisions that would limit the deductions that Vermonters can use to lower their income tax obligations.

The House plan puts a hard cap on income tax deduction, with a limit of about $15,000 on individuals and about $31,000 on households. The Senate proposal uses a $12,000 cap on the home mortgage interest deduction.

Shumlin earlier this year proposed eliminating only one deduction – it allows Vermonters to deduct from this year’s tax bill what they paid in state taxes last year. Shumlin’s proposal raises about $15 million in taxes; the House and Senate plans each raise approximately $35 million.

Even if he gets the $10 million in new reductions, Shumlin would still need to come up with $10 million more in revenue than his initial plan called for. Asked how he’d prefer to raise the money needed to pay for the new government spending, Shumlin offered this:

“Not taking away middle-class folks' ability to deduct their home interest when we want people to buy homes, and not by taking away seniors’ ability to deduct their catastrophic medical expenses when they get sick,” Shumlin said. “That’s just foolish tax policy.”

Lawmakers’ proposed changes to the income tax code hit rich taxpayers the hardest. Shumlin said he's open to considering some aspects of lawmakers' revenue plans, though he didn't specify which ones.

Though he’s seeking $10 million in cuts, Shumlin has offered up only $8 million worth in reductions so far. They include: $3 million in payroll reductions; $2 million from home weatherization subsidies; and changes to a pharmacy benefits program.

Kitchel says it’s no sure thing that Senate lawmakers will incorporate the governor’s recommendations into their own budget plan. She said the implications of additional labor savings are particularly worrisome.

“What the implications are in term of numbers of additional positions that would have to be reduced, and the workload – there’s no plan for it. It’s just, ‘take $2.9 million,’” Kitchel said.

Steve Howard, executive director of the state workers union, says his organization is already on the hook for $10.8 million in reductions. Those cuts alone could cost as many as 50 state employees their jobs. Howard says Vermont can’t afford to lose anymore.

“I think Vermonters would be outraged at the last-minute interjection of an idea that does not seem to be well thought out. They do not seem to have any reason or rationale behind it,” Howard said.

Senate lawmakers gave preliminary approval to the budget Thursday evening. The Senate Committee on Appropriations, however, will meet Friday to examine Shumlin’s plan in more depth, and to consider floor amendments that would reduce spending.