The most significant news out of Montpelier over the last few weeks was the passage, by the House, of the fiscal year 2016 budget, a tax bill to help make it work, a Clean Water bill and the Education bill.
Addressing a $113,000,000 budget shortfall for 2016 was not any easy task. The House knew from the beginning that a combination of spending reductions, one-time money, and additional revenue would be required to balance the budget. In the end I voted nay to both the tax bill and the budget bill as I felt we raised taxes too much and didn’t restrain ourselves enough on spending. Our General Fund increase year to year was 4.8 percent, which is much greater than the anticipated revenue. It was funded in part by a $33 million tax increase. The tax bill eliminates the ability to deduct state and local taxes (if deducted on the federal 1040, Schedule A). It also restricts itemized deductions to 2.5 times the federal standard deduction. This limitation could have a negative impact on charitable deductions. These tax increases will only impact people who itemize, which is about 30 percent of all filers.
The House passed an Education Reform Bill and a Clean Water Bill in the first days of April. I supported both bills. The Clean Water Bill was a priority for me. It moves us in the right direction towards cleaning up Lake Champlain and our rivers and streams. We will raise over $7 million a year by increasing the property transfer tax on property sales over $100,000. I supported this tax bump, as Vermonters will get a real benefit out of these new dollars dedicated to clean waterways. The federal government is contributing over $60 million to the effort. While we have broad agreement on areas to focus on in order to improve water quality, the total cost associated with clean up and some of the science raise questions. It is likely that this subject will surface again in the coming years as we continue to work toward clean water solutions.
The Education bill was debated and amended for the better part of two days. Consolidation, spending caps and triggers represented the most controversial parts of the Education bill. I felt there was enough flexibility within the bill to allow existing schools, within a supervisory district, to maintain their current governance structure, with voter approval, and with the blessing of the State Board of Education. I am not a fan of caps. Caps are akin to price controls, and price controls do not have a good track record for long-term cost savings. Having said that, there is a study group charged with looking at amending our education funding formula that is expected to offer an alternative for the long term. The Education bill is complex, too complex, but it represents an attempt to get greater efficiencies in education and it likely will control short-term education costs. It is my hope that in the not too distant future we will find a long-term solution to education funding, while at the same time offering our youth excellent educational opportunities.
It is great being on the committee of Commerce and Economic Development. It is the only committee that is dedicated to improving our economy and, as a result, raising the tax base. We have started building an economic development bill. This bill has multiple facets. One is making sure capital is available to businesses small and large. The second is developing a skilled workforce that meets our employers’ needs. We are also concerned about affordable housing for that workforce. Some of the specific ideas we are working on include angel investment tax credits, employee relocation tax benefits, lowering the electric rates for our manufacturing base, eliminating the cloud tax, and mapping all workforce training and development programs to create a single coordinated workforce development effort. We expect to introduce a bill before the session ends to deal with those measures that can be handled short term. It is likely that it will take several years to introduce all the ideas our committee feels have merit.