Lawmakers: Tax hikes and cuts loom

MIDDLEBURY — Local lawmakers served notice on Monday that they will need to raise revenues and cut some programs in order to draft and pass a responsible fiscal year 2014 state budget.
At a Legislative Breakfast at the American Legion in Middlebury, Rep. Willem Jewett, D-Ripton, said this is the toughest financial year he has seen since being elected to the House 10 years ago. The House majority leader noted the federal government was able to cushion some of the financial blow of the recession through millions of dollars in stimulus funds.
But now that money has dried up, leaving Vermont and other states with a challenging financial picture.
“We are still dealing with the effects of the longest recession in memory,” Jewett said.
At the same time, he said many school boards are advancing budgets calling for spending increases of more than 5 percent, even as student enrollment is dropping.
“We don’t make those decisions in Montpelier, but we do set the tax rate that allows for that (school) money to be raised,” he said.
Jewett also reported receiving calls from constituents asking for no increase in the state’s gas tax.
“And I have to ask them, ‘Do you want the roads and bridges fixed?’” Jewett said.
Jewett and Rep. Diane Lanpher, D-Vergennes, noted Vermont has an opportunity to access $40 million in additional federal transportation aid to help fix the state’s infrastructure. But that would mean raising a state match in times when most Vermonters are disinclined to endorse tax increases.
Looking closely at the economy, Jewett said people earning below the state’s median income of $53,000 have seen no wage growth. People about that median income level have seen “plenty” of growth, Jewett said.
Cutting the Earned Income Tax Credit (EITC), as Gov. Peter Shumlin has proposed as a means of funding more early child education subsidies (see more below), would not be advisable for low-wage earners, Jewett said.
“Cutting the EITC is really nothing more than a tax on those people who can least afford it — the poor,” Jewett said.
He predicted a combination of revenue increases and some programs that “don’t go forward” as a result of the tough budget picture.
“In the end, everyone is going to be mad,” Jewett said.
Rep. Dave Sharpe, D-Bristol, and member of the House Ways and Means Committee, said his panel passed a property tax bill last week that would be voted by the full House this week. The bill proposes to raise the base education property tax rate by 5 cents, and it raises the base calculation rate from 87.23 cents per $100 in property value to 91.51 cents. He said the financial impact of the rate increase will be minor (around $18 per $100,000 in property value) for school districts that keep spending level.
But the trouble is, most school districts on Town Meeting Day won’t be pitching level-funded budgets, Sharpe noted.
“We have some communities that are raising their per-pupil spending rates 16 percent and 18 percent,” Sharpe said. “When you start raising your per-pupil spending rate like that, it affects every community in the state.
“Statewide, the increase in education spending is $60 million,” Sharpe said. “How we can spend $60 million with fewer students baffles us.”
Rep. Paul Ralston, D-Middlebury, is a member of the House Commerce and Economic Development Committee.
“The important thing to remember is that we are still in a recession,” Ralston said. “The fact that we are still in a recession is the root of the financial problems we are talking about today. We are looking for new sources of revenue, shifting revenue from one program to another program.”
Adding to the problem, Ralston said, is the lack of growth on towns’ grand lists. This is limiting towns’ property tax revenues.
“With escalating costs, those costs have to be borne by the same amount of property value,” he said. “It is a simple math equation, unfortunately.”
Ralston suggested placing more emphasis on creating new businesses and “getting people working again, getting them to a place where they are again contributing to the different taxes that we already have — the income tax being the primary one.”
Another topic of discussion at Monday’s breakfast was the End of Life Choices legislation (S.77). The state Senate last week fielded S.77, which outlined a process for terminally ill patients — in consultation with their physicians and families — to voluntarily take a lethal dose of medication to hasten their demise. But after more than two days of emotional debate, the Senate (in a tie vote that had to be broken by Lt. Gov. Phil Scott) gutted the measure and passed a bill that would legally indemnify physicians in cases involving terminally ill patients who overdose on prescribed medications.
S.77 moved to the House, where it faces an uncertain future. Some House members want to restore the original intent and provisions of the bill, while others would like to see the bill remain dormant. Other House members are not sure they want to invest the legislative capital in a bill that does not have enough votes to pass in the Senate.
Sen. Claire Ayer, D-Addison County, was disappointed the original version of S.77 did not pass. She said testimony revealed compelling arguments on both sides of the issue and acknowledged that many physicians don’t want to take a position on S.77.
“It is a very, very difficult issue,” Ayer said.
The bill, Ayer said, is aimed at giving terminally ill patients “another option.”
Some participants at Monday’s breakfast urged lawmakers to completely drop the bill, protesting the legislation on moral and religious grounds while others argue that the state has no business being involved in a citizen’s life-or-death decisions.
“This is a very dangerous bill,” said North Ferrisburgh resident Donna Scott, adding the legislation could muddy the waters for families seeking to collect death benefits from insurance companies.
Reporter John Flowers is at [email protected].

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