Legislative Wrapup: It Could Have Been Lots Worse

by John McClaughry

The 2011-2012 legislature has given up and gone home, and pretty much on schedule to boot.

A major source of contention, traditionally, is the General Fund appropriation bill for the coming fiscal year (FY2013). To the lawmakers’ credit, the spending issues were resolved rather easily, and several non-germane policy riders were rebuffed..

The General Fund budget is balanced and the budget stabilization reserves are filled to 100% of their statutory requirements. General Fund spending is slated to increase by 5.4% over this year’s amount. The FY2014 budget deficit is estimated at $5-44 million.

At the end of FY2013, the legislature prescribed that half of any General Fund surplus will be restored to the Education Fund to reduce the $27.5 million snatch Gov. Shumlin engineered a year ago. If this happens – not highly likely – property taxpayers would be relieved of having to pay for at least part of the Shumlin sleight of hand.

An election year gimmick proposed by Sen. Jane Kitchel (D-Caledonia) – to rebate any possible surplus to residential school property taxpayers only – fell by the wayside. Despite repeated efforts by Progressive legislators, the legislature declined to increase higher bracket income tax rates to cope with “growing inequality”. The administratively-created use tax on “cloud computing” products was happily stalled at least for a year, to the relief of businesses like dealer.com that were considering relocating to more friendly climes rather than absorb the unexpected tax hit.

In a post-adjournment news conference, House Speaker Shap Smith promised to push next year to expand the sales and use tax to include services. That, he said, would allow a rate below the present 6% on the broader tax base. He didn’t say how long it would take for revenue-hungry legislators to push the rate back up to 6%.

Strong majorities in both chambers expressed outrage at the Shumlin administration’s deal with Gaz Metro to merge Gaz-owned Green Mountain Power with CVPS. That deal allows CVPS to disregard the required refunding of $21 million to ratepayers who were forced to underwrite a 2001 bailout. Instead, the governor wants to let CVPS hand over the $21 million to such favorite Shumlin causes as the Clean Energy Development Fund.

Heavy pressure from the governor’s office persuaded House Democrats to back off from even a resolution of disapproval, and refuse to accept a 27-3 Senate-passed provision to change the applicable law to require the refund.

The Shumlin version of a Health Benefits Exchange, prohibiting small businesses from buying insurance plans outside the Exchange, won passage on party line votes. The Exchange, costing millions of dollars to set up, will disappear in 2017 when the governor expects that the Green Mountain Care single payer plan will terminate health insurance altogether.

A public school choice bill will allow small numbers of high schoolers to transfer to other public high schools that will have them. Curiously, the sending school won’t lose any of its budgeted funds, and will continue to count the departed student as attending for property tax computation purposes.

The receiving school will get nothing for taking on the additional student. Independent schools were dropped from the bill when they refused to accede to government tuition controls. It’s hard to see how this will be much of a step forward.

Among the good news was the last minute death of the PSB-designed Renewable Portfolio Standard, by which the government would force electric ratepayers to pay $311-435 million to subsidize the renewable industrial complex over the next 30 years. Also good news was the failure of the heavy-handed American Federation of Teachers effort to get the legislature to force unionization of private child care providers.

To sum up: the budget is balanced, there were no significant tax rate increases, and several really bad ideas fell by the wayside. Given the complexion of the legislature and the ambitions of the governor, this can be viewed as far from the worst outcome.

However the special interest pressure for ever more renewable energy subsidies persists unabated, and Vermont continues to march down the road toward government-run single payer Green Mountain Care, the costs of which the Shumlin administration will keep secret until after the November election.

John McClaughry is vice president of the Ethan Allen Institute (www.ethanallen.org).