$20 million question needs an answer
By PETER HIRSCHFELD
Vermont Press Bureau | March 15,2013
MONTPELIER — There’s a new number in Montpelier, and it will finally lend some clarity to what has been a muddled budget picture.
House Speaker Shap Smith confirmed Thursday that he’ll seek $20 million in new revenue for the fiscal year 2014 general fund — $14 million less than Gov. Peter Shumlin had sought.
Those numbers do not include a gas tax increase that will raise money for the transportation fund.
The decision sets the stage for the final days of the House’s budget process, when at least some of the Democratic governor’s top policy initiatives will fall victim to the budget ax.
Smith said he arrived at the number after long conversations with the chairwomen of his top money committees.
“At some point in time there has to be some sort of number that both the Ways and Means Committee and the Appropriations Committee are looking at,” Smith said Thursday.
“We’ve talked about what we think would be an appropriate number for new revenue, and set a target of $20 million,” he said, “with the understanding that we are going to have to prioritize the investments that the governor had recommended and that we were unlikely to be able to meet all of them.”
While he knows how much revenue he wants to raise, Smith said he’s still unsure what new taxes lawmakers will use to generate it. One thing is clear: The House won’t rely on the funding streams preferred by Shumlin.
The governor would have raised the $34 million by assessing a new tax on “break-open” gambling tickets and by reducing an “earned-income tax credit” or EITC that provides cash to the 45,000 lowest-wage workers in Vermont.
Each proposal, the governor said, would raise $17 million annually.
Smith two weeks ago formally rejected proposed reductions to the EITC, saying the plan had no support in his caucus. Not only do House lawmakers appear unlikely to adopt the tax on break-open tickets, they say it would raise only about $6 million even if they did.
That leaves the House Committee on Ways and Means with a starting point of zero as it intensifies the search for dollars. Rep. Janet Ancel of Calais, the chairwoman, told committee members Thursday they’ll need to have the bill out of committee by the end of next week.
Revenue options up for consideration will include tax increases, or the elimination of tax loopholes, on everything from soft drinks to dietary supplements to bottled water to clothing.
Some lawmakers will push for higher taxes on the incomes of the very rich, or the elimination of exemptions that lower their tax bills.
Meanwhile, Rep. Martha Heath, chairwoman of the House Appropriations Committee, will lead her panel through a debate over where to allocate the dollars Ancel’s committee is going to raise.
On that count, Shumlin will be able to claim at least a partial victory. Smith said the programs in line for the new money will be chosen from the slate proposed by the governor.
Shumlin’s budget sought $17 million for child care subsidies for low-income parents, $6 million for low-income heating assistance, $6 million for home weatherization, and $5 million for renewable energy subsidies.
Smith said he doesn’t know yet whether the Appropriations Committee will look to give large allocations to one or two programs, or split the $20 million four ways.
Two other factors will tug on the House revenue plan, in opposite directions.
Smith said his chamber will reject a proposal by Shumlin to exempt software sold in the “cloud” from a 6 percent sales tax. Shumlin championed the exemption as a way to promote the technology sector. Smith said he’s of a different mind.
That will get the House about $2 million in revenue that would have otherwise not been sent to the Tax Department next year — money Smith said will be added on top of the $20 million going to the new programs.
Another variable, however, could diminish the House’s financial capacity for new programs.
Shumlin’s budget assumes $6 million in savings next year by capping the number of years for which Vermonters are eligible for welfare benefits. Smith said that proposal faces a very uncertain fate in his chamber and that his budget experts aren’t sure the administration’s savings projections are accurate anyway.
Smith said he will ask the administration if it’s willing to alter the savings projections in a way that might reduce the budgetary impact if the House opts to reject or revise the proposal.
Otherwise, Smith said, the House will be forced to subtract from its $20 million any money that disappears if the body alters the welfare reform package.