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Governor Scott draws line on tax hikes

GOVERNOR PHIL SCOTT

MONTPELIER — Like last year, the Republican governor is proposing a conciliatory approach to legislative initiatives and small-bore changes across state government. And like last year, his No. 1 issue is Vermont’s ongoing decline in workforce population.
But unlike 2019, in which Gov. Phil Scott proposed $18 million in new taxes and fees on e-cigarettes, out-of-state online retailers and online hoteliers, he has backed off additional taxes and fees in 2020.  
But that doesn’t mean no new revenues. The governor in his budget address at the Statehouse on Tuesday proposed $4 million in new lottery revenues from online sports betting and Keno, an online gambling game similar to bingo. Most of the proceeds would go to support state subsidies for child care.
There are no new major programs for Democrats to object to — instead the governor is promoting initiatives that appear to be tailor-made for moderate lawmakers: electric vehicle investments, baby home visits, downtown revitalization, innovation grants for businesses, and incentives for anchor companies.
As Scott has reiterated every year since he took office in 2017, he believes that “the state budget should not grow any faster than people’s paychecks.” Scott’s total budget, at $6.3 billion, including federal dollars, marks about a 2% increase from last year.
“Our goal should be to do our work in ways that help Vermonters keep more of what they earn, making it easier — not harder — for every family to live a secure and stable life,” Scott said in his opening remarks.  
Scott emphasized that his administration has examined “the true costs of every program we fund, rethinking old policies and outdated systems” in an attempt to measure the return-on-investment of “every taxpayer dollar.”
At $1.7 billion, the general fund budget is increasing 2.8% over last year. General fund expenditures are up by $46 million, while revenues are projected to increase by $18 million, according to state economists.
“Even with consistent revenue growth, each year we’ve had to make difficult decisions with reductions to agencies, departments, programs and services,” Scott said.
The governor and his cabinet started the budgeting process with a $70 million gap between rising state government costs and revenues.
In the budget presented Tuesday, Scott banks on $13 million in “efficiency savings” in the human services budget. Those savings partially offset general government expenditure increases for state worker pay ($14.2 million) and pension obligations ($8 million).
Scott blamed the state’s static economic growth on a declining population — especially in rural counties.
“Our demographic crisis is — without question — the greatest challenge we face as a state,” the governor said. “Confronting this crisis is the only way we’ll be able to address other critical needs, whether it’s human services, public safety, transportation or climate change and transitioning to a clean energy economy. Addressing this reality is crucial to Vermont’s future.”
The governor said the state would welcome immigrants to the state with open arms and said he would advocate for more legal immigration “as a way to bring more hardworking people to Vermont to contribute to our economy and grow our workforce.”
“As long as I’m governor, they’ll be welcome right here in Vermont,” Scott said to a standing ovation.
Scott’s potpourri approach to sprinkling incentives across state government includes a $1 million investment to support suicide prevention and mental health initiatives, $4 million in additional downtown revitalization tax credits, a new mobile response unit to reduce emergency room visits, pairing social workers with state troopers, and more tax increment finance credits for rural communities.
Scott’s capital bill features $2.8 million to finish the Lamoille Valley Rail Trail, and $1.5 million to revitalize “the hole” on Newport’s Main Street that has been left vacant for the past five years in the wake of the EB-5 scandal.  
The governor sets aside $800,000 in additional renter rebates for low-income Vermonters and $1 million for a “community investment package” that provides incentives to rehab old homes into energy efficient rental properties.
“Leveling the economic playing field from county to county requires us to make it easier for every community to attract and keep more residents, from the young couple looking for a place to call home to the senior looking to downsize,” Scott said.
The governor also put in a plug for a $5.7 million boost to support OneCare Vermont, the state’s accountable care organization, which he believes will eventually save money.
“We’ve seen firsthand that there’s no quick fix or political promise to make health care more affordable,” Scott said. “But the early results give me reason to be cautiously optimistic.”
Scott ignored pleas from protesters of his State of the State address to take on climate change in any major way. His speech was light on initiatives related to climate change, which leaders in the Vermont Legislature have said they’ll tackle this session.
Going forward, Scott pledged to set aside 25% of all overall revenue surpluses to weatherization and vehicle electrification. Last year, he says, that would have amounted to an additional $10 million investment in initiatives to reduce carbon emissions.

DEMS LUKEWARM
The leaders of the House and Senate could not point to specific proposals from the governor’s address that they hope to work on with the Scott administration, and noted that they are still waiting to see the details of the budget, and how many of his initiatives are funded.
But Senate Pro Tem Tim Ashe, D/P Chittenden, said there are “thematic” areas where he sees potential for collaboration with Scott generally —expanding affordable housing, and improving workforce development and training programs among them.
Democrats however, appeared initially skeptical of one of the governor’s signature proposals: legalizing Keno and sports betting. 
House Speaker Mitzi Johnson, D-South Hero, was skeptical of the sports betting idea and pointed out that House lawmakers have historically opposed efforts to raise additional revenue from the lottery.
She said she is also concerned about using money that would otherwise go to the state’s education fund for additional child care subsidies.
“We’ll certainly wait and listen to the details. Expanding the lottery and stealing money from the education fund haven’t gone all that well in the House in the past,” Johnson said.
Ashe said that he was disappointed to hear that the governor’s budget address did not include criminal justice reform, or efforts to cut the state’s prison population, which has been one of Ashe’s priorities as Senate leader.
The governor also made no reference to efforts to reform the state’s prison system, which has been a goal of the Democratically-controlled Legislature and the Scott administration after Seven Days published a story about widespread sexual assault and drug use in the state’s women’s prison.
“We really didn’t hear much about providing the kind of community supports, transitional housing and so on — really that are prerequisites to try to draw down our inmate population. Nor did we hear anything about addressing the sad state of affairs at some of our correctional facilities,” Ashe said.
Democrats also said the governor didn’t go far enough on climate change.
“I’m glad to hear the governor put climate on the table as a problem and put it on the table as something he’s willing to work with us to try to solve. I want to make sure that we’re actually doing something more,” Johnson said.
Both Democrats and Republicans championed the governor’s efforts to expand mental health programs.
The budget includes more than $1 million to boost mental health care, including $575,000 to expand suicide prevention initiatives for veterans and a suicide prevention hotline. The budget would spend $600,000 on a “Mobile Response and Stabilization Service,” a pilot program in Rutland to help children, and families in distress “with support and intervention before emotional and behavioral difficulties escalate.”
“It’s a crisis not only in Vermont, but I think across the country,” House Minority Leader Pattie McCoy, R-Poultney, said of mental health issues.  “You see that we don’t spend enough.”
McCoy added that she was glad the governor’s budget is able to invest in new programs without straining the tax base.
“We have such a small base of money to do a lot with. So I’m happy to see we’re not raising money on the taxpayer, while providing these new initiatives,” she said.
Senate Majority Leader Becca Balint, D-Windham, said that while she understands the budget address should be optimistic, she was most struck by the governor’s silence on issues the state is facing.
“We’re expecting a pretty big cut to human services and so I noticed he didn’t mention that in the address, and I understand it’s supposed to be upbeat, but I think we have some really strong concerns about where those cuts are going to come,” Balint said.
Balint added she was glad to hear Scott stress universal after-school programming and child care assistance for struggling families, but she was left wondering how the governor plans to continue supporting people with substance use issues.
“We usually hear something about the check in about where we are with our opioid crisis, and we did not hear that,” she said. “We’re always having to balance the investments early on and prevention with these folks in our communities right now that are really struggling with this epidemic so I was surprised we didn’t hear anything.”
Sen. Anthony Pollina, P/D-Washington, said Scott’s reluctance to propose new taxes makes it impossible for the Republican governor to seriously address climate change or make housing and college more affordable for Vermonters.
“He is basically saying we’re not going to confront these issues that we need to confront,” Pollina said.
“He doesn’t offer much when it comes to solutions, and he has platitudes. He knows enough to touch on the ideas, ‘we’re going to touch on childcare, we’re gonna touch on climate change, touch on electric vehicles.’ But the bottom line is, ‘we’re not going to do very much about them,’” the Progressive leader added.
Sen. Randy Brock, R-Franklin, said he was happy with Scott’s decision to hold the line on taxes.
“We need to make Vermont more affordable and one of the first steps to do that is to not increase taxes. We don’t solve poverty by raising taxes on the poor,” Brock said.
Brock also championed Scott’s comments welcoming more refugees and New Americans to the state.
“He got a standing ovation from people from both parties,” Brock said. “We don’t think about that that much, but immigrants represent a potential community addition to Vermont, to deal with the jobs that we can’t fill.”

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