Shumlin, Lawmak ers Reach Budget Deal

Montpelier — Gov. Peter Shumlin and legislative leaders announced yesterday they’d reached a deal on a budget and taxes for the coming fiscal year that they say won’t require any additional tax increases, beyond one already in place on gasoline and diesel and another still under review on cigarettes.

The deal on taxing and spending under the state’s general fund in fiscal 2014, which begins July 1, was expected to clear a major part of the legislative logjam and raised hopes that lawmakers would finish their business and adjourn for the year by Saturday. Shumlin, House Speaker Shap Smith and Senate President Pro Tem John Campbell, all Democrats, said the no-additional-taxes agreement depended on members of a budget conference committee finding $10 million in cuts from a nearly $1.4 billion general fund budget. They expressed confidence the cuts could be found.

“We’re still cautious,” Shumlin said. “We’re telling you we’re going to make cuts and changes.”

The announcement followed Friday’s news that state revenues had come in much stronger than expected in April, another piece of evidence supporting Shumlin’s contention that Vermont’s economy is bouncing back after the recent recession. Vermont is expected to have a surplus of at least $16 million at the end of the year.

“We’re cautiously optimistic that Vermont is coming out of the recession in better shape than other states,” Smith said.

Shumlin also cited what state officials regard as good news from Washington: The U.S. Senate voted 69-27 on Monday to empower states to collect sales taxes for purchases made over the Internet, though the measure faces long odds in the House. Vermont and other states have complained for years that they’ve lost sales tax revenue to tax-free Internet shopping.

The tax deal was a striking change from a plan passed by the Vermont House to raise about $24 million in new taxes, partly by expanding the sales tax to cover soda and candy and limiting itemized deductions. A Senate version of the bill capped the home mortgage interest deduction at $12,000 and applied the sales tax not to soda and candy but to bottled water.

Shumlin, Smith and Campbell said yesterday that none of those increases will be needed.

Shumlin has argued that Vermont should not raise taxes this year beyond motor fuel tax increases tied to a transportation spending package. He continues to oppose raising the cigarette tax, which a Senate version of a separate health care bill would increase by 80 cents a pack from their current $2.62.

Indeed, Campbell said a cigarette tax, which is part of a health care bill, is still on the table.

“That’s more of a health care issue,” Campbell said. “It’s certainly not a general fund issue.”

Over the course of the debate, Shumlin continued to hold out on his proposal to divert $17 million from an earned income tax credit for working Vermonters to fund child care subsidies. Yesterday, he said it became difficult to explain to legislators his rationale for the plan, and it was not included in the final deal. But the governor said he will continue to lobby for it.

“Some of the pieces will take more time,” Shumlin said. “The earned income tax credit is one of them. I accepted that several weeks ago.”

Shumlin and legislative leaders say they still hope to see increased funding for child care and for the state’s clean energy fund.

In the remaining days of the session, the House and Senate Appropriations committee will turn their attention to reducing state spending through cuts, eliminating the need for tax increases.

— Kirk Carapezza of Vermont Public Radio contributed to this story.