Editorial: Dems have better policy, but Gov. Scott holds trump card

It’s widely anticipated that Gov. Phil Scott will veto by Thursday evening (after this paper has gone to press) the Legislature’s recently proposed budget, just as he did the Legislature’s first budget proposal. In both instances, his rationale, that he won’t pass a budget that raises any new taxes, violates another tenet he used to endorse for the numerous years he served in the Legislature — not to use one-time money to temporarily postpone tax increases.
Deferring payments for tomorrow that you incur today, as any fiscal conservative knows, is a fool’s errand.
It’s an odd role reversal in which the Democratically controlled Legislature is being more fiscally prudent than the Republican governor.
How so? First, the Legislature would increase taxes modestly to pay for education expenses incurred, and then take an estimated $34 million and apply it to the teachers’ pension fund, which is critically underfinanced. That would save Vermonters $100 million over the next 20 years in interest payments. The governor, on the other hand, is advocating that the state take out what is essentially a loan against a one-time buy down of the tax rate, and pay that back over the next five years through a variety of state-imposed taxes and mandates ordered by Montpelier.
That violates another conservative principle: to avoid state shut-down management of local affairs. If Gov. Scott’s intention is to dictate school funding policy from on high and take school funding away from local governments, then he ought to say so upfront and engage the Legislature, local school boards and the tax-paying public in that discussion.
He won’t do that not only because he would upset a lot of Vermonters, but because he doesn’t have to.
He’s fortunate to have a strong state economy that is, at the moment, creating budget surpluses. At current count, the state’s budget is running about $55 million ahead of projected revenues with the month of June still to be counted. And since the current squabble between the Legislature and governor amounts to about $34 million, there seems to be enough money in the till to satisfy both the governor’s desire to hold the property tax rates from any increase (with a one-time buy down of tax rates) and the Legislature’s desire to pay down some of the teacher pension fund.
Case closed. Put money in the voters’ pockets, avoid difficult questions and go home. Except, Democrats are balking because they want the public to realize what’s happening; to think about what Scott is proposing.
If you’re a fiscal conservative and agree that expenses should be paid as incurred and not deferred through fancy shenanigans, then you’d support the Democratic Legislature’s position.
And if you’re a moderate or liberal who believes that the public approved those school budgets expecting modest tax increases, then you’d also support the Legislature’s budget and approach. (Rep. Peter Conlon has an excellent take on this issue in a legislative update on Page 5A; please read it.)
So why is the governor playing like he’s Mr. Trump doling out a one-time tax break as if he’s buying votes for the coming election? Not because it’s good policy, but because it appeals to voters.
What the governor’s team knows is that taxpayers (aka, voters) prefer money in their pocket today over good policy that helps them tomorrow. This approach works for two other reasons: Vermont’s school-related taxes are among the highest in the nation, and what we get from those high tax rates is less than stellar.
Gov. Scott has reinforced that message by hammering home a single point: Vermont spends $1.7 billion a year to educate 76,000 students, down from 103,000 students 20 years ago; that’s the highest per-pupil spending in the country and double the national average, yet our students’ test scores are only two percentage points higher than the national average.
The Legislature may have the better policy approach, but to the average voter Scott holds the advantage by putting dollars into their pockets — and Democrats know that. That’s why they agreed, in this latest budget, to hold residential property tax rates stable. Still, the governor refuses to compromise; he wants the Legislature to capitulate and he’s using this voter payoff as leverage.
While that’s disappointing, it’s also hardball politics. What’s more discouraging is that we’re overlooking the bigger issues.
Gov. Scott is right to recognize that the state can’t continue to keep spending more money on fewer students pre-K through 12. He’s right to push greater funding for early childcare and higher education. But while Scott says his focus is not to cut spending, his policies don’t reflect that. His five-year plan anticipates a $300 million “savings” from fiscal 2020-2024, but the savings turn out to be budget cuts and property tax increases.
While Scott’s 5-year plan has major shortcomings, the idea of longer-term planning should be a goal for both sides. It’s highly inefficient, almost absurd, to operate a $1.7 billion operation on a year-to-year budgeting process held by hundreds of local schools and orchestrated by volunteer boards (along with school officials) with no long-term budget planning.
Democrats, on the other hand, need to look further forward. Their essential argument has been to maintain the status quo; to allocate the spending voters dictate and not advocate for change. While we believe they have the better short-term policy on paying for spending as it is incurred, and using one-time surplus funds to pay down past debt to achieve greater savings going forward, they neglect to engage the governor on policy initiatives that must fundamentally change the status quo. Instead we’re squabbling over how to allocate a budget surplus, while the administration has proposed mandating teacher/staff ratios and increasing penalties to small schools that often have little control over unexpected expenses — both petty and distasteful threats.
Still, there is room for compromise: At a minimum, the mandated pupil-staff ratios and increased penalties should be off the table. That might get the Legislature to concede the political appeal of also keeping non-residential property taxes as close to flat as possible, while still paying down the teachers’ pension fund. Then both sides could agree to address creating a rolling five-year education finance plan that would, hopefully, lead to more cost-efficient use of the money we spend on education.

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