A budget showdown between Vermont’s Republican governor and legislative Democrats has ended with a compromise $5.8 billion spending plan that will avoid the state’s first government shutdown.

Gov. Phil Scott said he will let the legislature’s third budget proposal become law without his signature despite his objections in order to prevent a July 1 shutdown.

Phil Scott, a Republican, was elected Vermont governor in 2016.
“Legislators can expect that I will seek to achieve additional tax relief for Vermonters next year, and beyond," said Gov. Phil Scott. Phil Scott For Vermont

Scott, who had vetoed two previous budget bills because of objections to raising property taxes when the state has a healthy surplus, said the latest funding plan achieves about 75% of the tax relief he advocated.

“While I do not support raising any tax rates in a year we have a $55 million surplus, this debate has gone as far as it can responsibly go,” said Scott in a statement late Monday. “Make no mistake, however, that I will be fighting to address these tax rates, and others, in the future – especially as our economy and our surplus continue to grow.”

The final budget holds residential property tax rates at the previous year’s level through the use of one-time funding sources, but increases non-residential property tax rates by 4.5-cents. Legislative Democrats had previously pushed to allocate one-time funds for teacher pension obligations.

“The Legislature and the Governor are both outside their respective comfort zone and it’s now time for us all to move on,” House Speaker Mitzi Johnson, D-South Hero, and Senate President Pro Term Tim Ashe, D-Burlington, said in a joint statement. ”The Governor and Legislature were originally $57 million apart and the Legislature moved $37 million closer to the Governor.”

The budget also includes $30 million in income tax reductions, which Johnson and Ashe say will offset “unintended and negative tax implications” from the new federal tax bill that took effect this year. The plan eliminates income tax on Social Security for low and middle-income households.

Vermont is rated triple-A by both Moody’s Investor Service and Fitch Ratings. S&P Global Ratings rates Vermont debt AA-plus.

“Legislators can expect that I will seek to achieve additional tax relief for Vermonters next year, and beyond, because there is much more work to do to make Vermont more affordable and prosperous for families and businesses,” said Scott. “As we move ahead, I look forward to working with fiscally responsible lawmakers of all parties who understand the toll the tax burden takes on our economy and economic development.

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