Unexpected $44 Million Windfall Won't Ease Budget Tension In Montpelier

May 7, 2018

Elected officials in Montpelier learned Monday they’ll end the fiscal year with a $44 million budget surplus. But the unexpected windfall hasn’t ended the acrimony between Republican Gov. Phil Scott and Democratic lawmakers.

Audio for this story will be posted.

News of a major surplus in the waning days of a legislative session generally helps resolve partisan disagreements over the state budget. As Phil Scott noted Monday, 2018 is little different.

“It could simplify or it could complicate, depending on your perspective, the end game here,” Scott says.

How could a $44 million surplus complicate the budget standoff?

The Republican governor and Democratic leaders in the House and Senate have some sharp philosophical differences over how to spend the money.

Scott wants to use the surplus to buy down property tax rates next year, and avoid a 7 cent increase in the base rate for homeowners and businesses.

Elected officials had previously been anticipating a surplus in the range of $20 to $25 million. Scott says Monday’s news affirms the merits of his approach.

“Certainly, more money is advantageous to our position, where we want to make investments in the education fund,” Scott says.

But the surplus is one-time money. Funds the Legislature cannot count on again next year. And Senate Appropriations Chairwoman Jane Kitchel says lawmakers have some unwritten rules governing the use of one-time money.

“Really our mantra for the last couple of years has been not using one-time money for ongoing base expenditures,” Kitchel says.

Kitchel says the governor’s plan violates that mantra, because it uses one-time money to offset the tax impacts of ongoing base expenditures in public schools.

The Senate budget uses that one-time money instead to make investments in the opioid treatment system, pay off Medicaid obligations, and make payments to under-funded pension funds.

Kitchel says Scott’s plan, meanwhile, would require the state to go into deficit spending mode.

Not so, says Scott.

Balancing the budget with one-time money

“Maybe she didn’t get right to the end [of the plan], because it talks a lot about paying that back, and savings throughout the five-year plan,” Scott says.

Scott’s plan does, in fact, call for hundreds of millions of dollars in reduced spending in the education system over the next five years, mainly by reducing the number of staff working in public schools. And Scott says there would be more than enough money as a result of those savings to pay back whatever the state uses this year to buy down property tax rates.

But Kitchel says there’s no guarantee those savings will accrue.

“And I have the same worry that these theoretical savings, in fact, mean that we’re going to be paying a heavier price for short term expediency,” Kitchel says.

Disagreement with lawmakers over the issue of education spending prompted Scott to veto the budget last year.

As of now at least, it looks like lawmakers’ budget is destined for the same fate in 2018: Scott says he won’t sign a budget until lawmakers make the projected increase property tax rates go away, and lawmakers say they won’t use one-time funds to do so.

Lawmakers hope to send the budget to the governor by the end of this week, and adjourn the 2018 legislative session. And unless they find an unlikely accord with Scott between now and Friday, they’ll be back in again later in May or June, to try to get a budget in place before the current one expires on June 30.