Shumlin aide suggests give and take on FY2014 spending plan
By Peter Hirschfeld
Vermont Press Bureau | April 16,2013
MONTPELIER — Top aides to Gov. Peter Shumlin told lawmakers Monday that they’re willing to scale back on some of the administration’s more controversial initiatives, including proposed cuts to programs that benefit low-income Vermonters.
But Administration Secretary Jeb Spaulding said the Democratic governor will not abide the $70 million increase in taxes on sales, meals and income that House lawmakers would use over the next two years to fund the $5.2 billion budget they passed last month. And he introduced at least one new funding stream he said could be used to mitigate the need for increases in “broad-based” taxes.
In the first visible sign of compromise since Shumlin delivered his budget address in January, Spaulding unveiled a memorandum detailing a revised proposal that he says reflects the concerns of lawmakers vetting the governor’s plan. Spaulding said Shumlin is willing to dial back a proposed reduction in the earned-income tax credit — from $17 million to $12 million. The governor’s revised budget also concedes that the state won’t reap any savings next year from a plan to impose a five-year lifetime cap on welfare benefits.
But while Spaulding said the administration “is generally pleased” with the Legislature’s work on the budget, he said Shumlin continues to have grave concerns about the sources of revenues they’d use to fund government programs.
Spaulding continued to urge the Senate Committee on Appropriations to use a combination of reductions in the earned-income tax credit and a tax on “break-open” tickets to fill gaps the fiscal year 2014 spending plan.
“What we’re trying to demonstrate is there are ways we can pass a budget that meets our needs without raising all those taxes,” Spaulding said.
Among those solutions, Spaulding said, is a modest increase in the franchise tax on the five largest banks operating in Vermont. The proposal, unveiled for the first time Monday, would raise about $2.4 million next year.
Spaulding also wants the Senate to restore the so-called “Catamount assessment” that the House scrapped from its revenue proposal. That funding stream raises about $11 million a year by imposing penalties on businesses that don’t provide insurance benefits to workers. The House said that as the state works to decouple insurance from employment, it makes no sense to penalize employers for dropping coverage. But Spaulding said the assessment evens the playing field by offsetting the competitive advantage gained by employers that don’t offer health insurance.
Spaulding’s presentation Monday came as the Senate Committee on Health and Welfare prepares a formal rebuke not only of the reductions to the earned-income tax credit, but also the proposal to put a five-year cap on Reach Up benefits. The House watered down the 60-month limit, and delayed its implementation until next year. The Senate committee will recommend the elimination of the time-limit language altogether.
Sen. Claire Ayer, the Democratic chairwoman of that committee, said she isn’t opposed in concept to the limit. But she said she doesn’t think the administration has adequately vetted all the potential unintended consequences of the policy change. Ayer alluded to a study in Maine that blamed the imposition of time limits there on increased pressure on homeless shelters, food shelves and other human services programs.
“There are people who have probably been on (Reach Up) too long,” Ayer said. “But if it hasn’t worked for them by now, there’s no reason for us to think that they’re prepared to get off.”
As for Shumlin’s proposed reductions to the earned-income tax credit, Ayer dismissed them as a “nonstarter.”
Spaulding, however, will continue to lobby lawmakers for changes. The latest iteration of the plan would remove from the EITC chopping block anyone with three or more dependents, and would reduce the scope of the proposed cuts for people with one or two minor children.
Spaulding had harsh words for a bill passed by the House last month that revoked the sales tax exemption on things like soda, candy and bottled water, and altered exemptions in the income-tax code in a way that would extract more money from rich people. The House also proposed a one-year increase in the meals tax, though the Senate will scrap that provision from its plan.
Spaulding said the Senate can go a long way toward solving the revenue problem by adopting a scaled-back version of the governor’s proposal to tax “break-open” tickets. The governor had initially proposed a 10-percent tax on retail sales of the tickets. In recognition of concerns raised by service organizations that use the tickets for fundraising, he said the administration is now pushing a 6-percent tax. He said the revised plan would generate about $6 million — money he said should be used to fund heating assistance for low-income Vermonters.
“If you asked Vermonters, would you rather pay for (heating assistance) through your income taxes or sales taxes or meals taxes, or on a new charge on an unregulated and untaxed form of gambling … Vermonters would choose … break-open tickets.”
House lawmakers said they’re unconvinced the proposal raises anywhere close to the revenue the administration claims it will. Spaulding said additional “homework” conducted in recent weeks has served to confirm the accuracy of the administration’s projections.
While taxes have been the primary driver of controversy in Montpelier, Spaulding said the there are still differences to be resolved in the budget.
Spaulding said the $3.3 million the House had included for childcare subsidies was well below the figure needed to bring childcare to within reach for cash-strapped families with young kids.
He said Shumlin was lowering his request for subsidies from $17 million to $12 million, in recognition of concerns about cuts to the EITC. But anything less that that, Spaulding said, wouldn’t remove barriers to childcare that lower-income families now face.
However much lawmakers do end up deciding to allocate to childcare, Spaulding said, the money ought to come from dollar-for-dollar reductions in the EITC.
Spaulding also urged the Senate to eliminate the $9 million that House lawmakers had set aside for reserves. While the administration appreciates the value of increased reserves, Spaulding said, it doesn’t think it’s worth raising taxes to create them.