Republican Gov. Phil Scott vetoed a second budget bill Thursday night over property taxes.
In a letter to the state House clerk, Scott said he could not support the budget bill without a commitment from legislative leaders that the state "can achieve level property tax rates" or an amendment that would prevent an automatic nonresidential property tax increase.
"If the Legislature does not agree with my reasoning, the Constitution provides a mechanism — a veto override vote — to resolve the disagreement," Scott said in the letter.
In a joint statement, Democratic House Speaker Mitzi Johnson and Senate President Pro Tern Tim Ashe, a Democrat and Progressive, called the governor's veto "disappointing."
Ashe had said earlier that if Scott vetoed the budget bill, the Legislature would consider an override vote. If that failed, legislators would need to write a new budget bill. Ashe said in the event of a third budget bill, Democrats would need the support of Republicans to suspend the rules in order to fund state government by July 1.
Scott vetoed the first budget bill along with the property tax bill last month, citing his campaign promise to avoid any new taxes or fees. Scott wants to use $34.5 million of the state's surplus to pay down property tax rates. Democratic leaders said that money would be better spent paying down teacher pension obligations, which would save $100 million in interest payments over a decade.
Democratic leaders introduced the second budget bill as a compromise that would have kept the state funded while both sides continued to debate property taxes and the $34.5 million. Scott initially said he could support a compromise, but later came out against the bill because he said it still violated his pledge.
Scott has repeatedly said the default rate for nonresidential property taxes would represent a tax increase, which violates his pledge. Democratic leaders challenge this assertion, but said there is still time to consider the nonresidential property tax rate in another bill.
With less than three weeks to go before the beginning of the new fiscal year, Vermont does not have a budget. If one is not approved before July 1, the state government will shut down. Scott said his administration has not begun creating contingency plans for how the state government would operate under a shutdown because he remains optimistic it will not happen.
"I am confident we're going to come to an agreement in some way by July 1. We are not going to shut down the government," Scott has said.
But others in the state are beginning to question what a government shutdown would look like.
State Treasurer Beth Pearce sent a letter to legislators and Scott on Tuesday urging both sides to find a solution and approve a budget soon.
"Even the threat of a shutdown can reduce the public's faith in government, impose additional costs, to fund a special Legislative session, and jeopardize the State's high credit rating," wrote Pearce.
In a response, Scott's Secretary of Administration Susanne Young wrote Tuesday that anxiety among state employees can be attributed to the Legislature's sending Scott a budget bill "that he was clear he would not sign." Young added that Vermont's credit rating was not impacted by a last-minute budget deal last year.
"I think (Pearce) is more concerned than she needs to be at this time," Scott said.
The Vermont State Employees Association has questioned the administration about how a shutdown would impact state employees. And if the government does shut down July 1, many have expressed concerns that state park closures would hurt Vermont during the lucrative summer tourism season.
Scott said he will hold firm on his position and is hopeful that Democratic lawmakers will come to his side.