Vermont Governor Hears Update On State Revenues

Jun 14, 2018

Governor Phil Scott received an update on Vermont revenues from the state’s economist this week. He says there are enough revenues this year that his office and the Democratically-led legislature should be able to reach an agreement on the 2019 state budget.

Vermont’s Republican governor had invited Democratic leaders to attend a meeting this week of the state Emergency Board, which reviews state government revenue estimates with the administration’s and legislature’s consulting economists. The legislative members of the board declined to attend because they said they had already agreed with budget estimates released last week.  So the governor and others heard a review of updated revenue figures from administration consulting economist Jeffrey Carr, who said he was asked to update his analysis of revenues that would come in before the end of the 2018 fiscal year at the end of this month.  “I feel good about what the sales and use tax is doing and you know we had a pretty good winter tourism season and the e-commerce part of sales-and-use is performing much better than what we had anticipated. And sales-and-use is up almost $5 million over target.”
Governor Scott: “Anything lagging at this point?”
Carr:  “You know it’s really hard to find things that are lagging. But right now the most significant tax source in the General Fund that’s lagging are the securities registration fees. But they’re not lagging by a lot. And I think we’re going to have start talking about energy prices again soon.”

Commissioner of Finance and Management Adam Greshin notes that over the past few months nearly $164 million in extra money from tobacco settlement, surplus revenue and other resources has become available.  “There’s a fairly hefty portion of money that we did not anticipate going into the year.”

At the time of the meeting, Governor Scott said he was still considering vetoing the latest version of the budget approved by the legislature during the special session.  “I don’t see that I have any other choice in some respects because there’s no incentive for anyone to come back to the table. So I feel as though it’s the only tool I have to make sure that we continue with these conversations. Or let’s just say to start the conversations because we really haven’t had any at this point.”

The governor says there are enough excess revenues that a budget could be crafted that fulfils his goals and the legislature’s desires.  “In April $44 million came into the state coffers unexpectedly. None of us saw that coming. We have another $11 million solid that we didn’t expect to come in and we expect, as Jeff has said, that will continue to grow. So we have more than enough. This is taxpayer money. And I believe that we could both have what we want.  I want to buy down tax rates so that we don’t raise taxes and fees on Vermonters at this point in time. The Legislature seems to want to pay down the teacher retirement. So we both could have what we want if revenues continue to grow.”

Last month, the legislature passed a budget and adjourned its regular session.  Governor Scott vetoed the fiscal plan and called a special session. The legislature has passed a second budget, which awaits the governor’s review.

Thursday afternoon, legislative leaders issued a memo outlining which state programs and functions could not operate without a budget.

Memo from the Office of Legislative Counsel as emailed to media:


To:                   Peter Sterling

               Office of the Senate Pro tem

From:               Michael O'Grady; Rebecca Wasserman; LC Legal Staff

Date:               June 14, 2018

Subject:           H.13 Funded Programs

This memorandum is provided in response to questions regarding the State programs that will not be funded or that will cease if Governor Scott vetoes H.13, the veto is sustained, and no new appropriations bill is enacted prior to July 1, 2018.  Chapter II, section 27 of the Vermont Constitution states that “[n]o money shall be drawn out of the Treasury, unless first appropriated by act of legislation.”  The appropriations process necessitates drawing money from the State Treasury, and the Vermont Constitution provides that this can only be done by an act of legislation.

If the Governor vetoes H. 13 (the FY 2019 Budget Bill) and the veto is sustained, then the only funds available to spend in FY 19 would be monies appropriated in FY 19 in other pieces of legislation (such as the FY 19 Pay Act) and any appropriated but unexpended FY 18 funds that may be used pursuant to certain statutory authority, such as the carry forward, excess receipts and transfer authorities.  Although it is possible that these unexpended FY 2018 appropriations may be available for use in FY 2019, the exact amount would not be known until the close out of FY 2018 (approximately mid-July 2018).

Moreover, the carryforward, excess receipts and transfer authorities have all historically been restricted for use in the same manner as originally appropriated.  As a result of these restrictions, the amount of funding in FY 2019 would be very limited, and the Administration would need to prioritize the programs and services that would continue to receive funding.  Once the carry forward funds, excess receipts, and transferred funds are depleted, there would be no money to support government operations or make payments to other entities that receive State funding.

Whether H.13 should or should not become law is a policy question about which this memorandum expresses no opinion.  However, if the Governor vetoes H. 13 and the veto is sustained, most if not all State programs would ultimately lack funding to operate.  This memorandum lists on pages 2 through 4 some of the programs or Executive Branch functions that would lack funding, but many other programs and functions would also lack funding.

State Programs Funded by H.13

A.  Agriculture

1.   Agricultural food safety and consumer protection.  H. 13 Sec. B.223.

2.   Clean water grants for agriculture:  H. 13 Sec. B.225.5.2.

3.   Offset for dairy farmers participating in margin protection program: H. 13 Sec. C.1000.

B.  Corrections

1.   Correctional services:  H. 13 Sec. B.338.

2.   Corrections, out-of-state beds:  H. 13 Sec. B.339.

C.  Education

1.   Use of Next Generation Initiative Fund: H. 13 Sec. B.1100.

a.   Workforce education and training:  subdivision (1).

b.   Loan repayment:  subdivision (2).

c.   Scholarships and grants:  subdivision (3).

2.   Military education—existing National Guard programs:  H.13 Sec. E.215.

3.   Vermont National Guard Tuition Benefit Program (new):  H.13 Secs. E.215.1-215.4.

4.   Use of global commitment funds; individualized education programs:  H.13 Sec. E.500(a).

5.   Special education formula grants:  H.13 Sec. E.502.

6.   Flexible pathways:  H.13 Sec. E.504.1.

7.   State teachers’ retirement system; healthcare benefits:  H. 13 Secs. E.514-E.515.

8.   Vermont State Colleges funding:  H.13 Sec. E.602.

9.   Need-based stipend for dual enrollment and early college students:  H.13 Sec. E.605.1.

D.  Financial Regulation

1.   DFR licensing of affiliated reinsurance companies:  H.13 Sec. B.230.

E.  Government Operations

1.   State IT; Agency of Digital Services:  H. 13 Sec. B.105.

2.   BGS Security of State buildings:  H. 13 Sec. B.121.

3.   Secretary of State:

a.   Primary election (Aug. 14) and general election (Nov. 8): H. 13 Sec. C.1000(a)(8).

b.   Corporations/business registration:  H. 13 Sec. B.232.

4.   Vermont Veterans Home:  H. 13 Sec. B.342.

F.   Health and Human Services

1.   3Squares: H. 13 Sec. B.322.

2.   Reach up:  H. 13 Sec. B.323.

3.   Medicaid:  Secs. B.307-B.310.

a.   Dr. Dynasaur.

b.   Traditional Medicaid.

c.   Medicaid for the Aged, Blind and Disabled (MABD).

d.   Long-Term Care Medicaid.

e.   Choices for Care.

f.    VPharm.

g.   Healthy Vermonters.

4.   DCF disability determinations:  H. 13 Sec. B.328.

5.   Office of Child Support: H. 13 Sec. B.319.

6.   Child care subsidies:  H.13 Sec.  B.318.

7.   Multiple grant programs for mental health, aging, or disabilities:  H.13 Secs. B.313, B.330.

G.  Judiciary[1]

1.   The Attorney General:  H. 13 Sec. B.200.

2.   Defender general, public defense: H. 13 Sec. B.202.

3.   Judiciary—i.e. courts:  H. 13 Sec. B.204.

4.   State’s attorneys:  H. 13 Sec. B.205.

H.  Natural Resources, Energy, and Telecommunications

1.   State parks:  H. 13 Sec. B.705.

2.   Water quality programs: H. 13 Sec. B.711.

3.   Natural Resource Board—i.e. Act 250 permits:  H. 13 Sec. B.713.

4.   Public Utility Commission—i.e. CPG for regulated utilities, ratemaking:  H. 13 Sec. B.234.

5.   Discretionary emergency funding for CoverageCo (or other provider):  H.13 Sec. E.233.2.

I.    Public Safety

1.   Special investigative units—i.e. sexual and other serious crimes:  H. 13 Sec. B.206.

2.   State police:  H. 13 Sec. B.209.

3.   Fire safety, criminal justice, emergency management:  H.13 Secs. B.210-212.

4.   Sheriff prisoner transport:  H. 13 Sec. C.1000(a)(5).

J.   Taxation

1.   Revenue collection—e.g. property tax, sales tax, and meals tax collection.  H.13 Sec. B.111.

2.   Information for municipal tax collection—tax rates; income sensitivity.  H.13 Sec. B.111.

3.   Reappraisal and listing programs.  H.13 Sec. B.139.

K.  Transportation

1.   Town highway aid.  H.13 Secs. B.911-B.920.

2.   Money to maintain the State highway system.  H. 13 Sec. B.905.

3.   Public transit.  H. 13 Sec. B.908.

4.   Department of Motor Vehicles services:  H. 13 Sec. B.910.

5.   State-owned airports: H. 13 Sec. B.901.

6.   State rail: H. 13 Sec. B.907.

[1] Failure to fund the judiciary may raise constitutional concerns.  See Vt. Const. Ch. II, § 28 (The Courts of Justice shall be open for the trial of all causes proper for their cognizance; and justice shall be therein impartially administered, without corruption or unnecessary delay.)