Wednesday, April 29, 2015
H 489, the revenue bill and H 490, the budget bill are done and on the Notice Calendar. Action will occur Thursday and Friday; then both will go into conference with the House, hopefully late Friday. This sets adjournment for two weeks from Friday.
In H. 489, sections 33 and 34 contain the new fees that support the addition back of the 500K the administration wanted to cut. The language is on pages 29 to 35 of Addendum 1 to today’s Senate Calendar here:
Also, sec. 87 calling for a report from the Tax Dept. on extending the sales tax to services replaces the language we opposed yesterday in our testimony. Here is that section:
Sec. 87. SALES TAX PROPOSAL
(a) The General Assembly concludes that the structural deficiencies in
Vermont’s current revenue and budgeting structure, combined with a change in
the State economy from an economy based on goods to an economy based on
services, requires an examination and rethinking of Vermont’s current sales tax
(b) On or before January 15, 2016, the Commissioner of Taxes shall report
to the Senate Committee on Finance and House Committee on Ways and
Means on how the Department of Taxes would implement an extension of
Vermont’s sales and use tax to select consumer services, not to include
business to business services, most commonly taxed in other states. The
extension of the sales and use tax modeled in the report shall provide two
scenarios designed to raise both $15 million and $30 million in revenue in
Vermont on an annual basis. The report shall include a draft of proposed rules
which shall identify specific services by industry type that are taxable or not
(c) On or before January 15, 2016, the economists for the Legislative and
Executive Branches, with the assistance of the Joint Fiscal Office and the
Department of Taxes, shall file a joint report to the Senate Committee on
Finance and the House Committee on Ways and Means on the fiscal impact of
further extending Vermont’s sales and use tax to a broader range of consumer
services. The report shall analyze the short- and long-term economic impacts
to the State of Vermont of such an extension, and contrast those impacts with
the short- and-long term projections of Vermont’s current sales and use tax
revenues without the changes in the proposal.
In 490, read E. 204; this contains some of the "lighten the load" language the judiciary wanted. It also includes a statement of intent in E. 204.15 supporting filling the judicial vacancies. See pages 89-93 of today’s Addendum 2 to the Senate Calendar:
Here are the funding provisions for the judiciary in the Senate version (see Sec B. 204):
Sec. B.204 Judiciary
Personal services 35,212,260
Operating expenses 8,683,467
Source of funds
General fund 38,465,850
Special funds 2,667,462
Tobacco fund 39,871
Federal funds 473,301
Interdepartmental transfers 2,325,273
The Senate increased the funding by $758,000 over the total passed by the House. As I said above, we’re waiting for floor action tomorrow and Friday, followed by a committee of conference. It’ll be a while.
Thanks for reading.
Tuesday, April 28, 2015
So I just returned from the Senate Finance Committee where I was the first of 21 witnesses to testify about the latest draft of the tax bill. I commented on sections 49-54, the extension of the sales tax to services. I know some of you have already written to your senators stating your opposition and for that we thank you. I did not want to address the issue of the increased administrative burden on you if the tax is enacted. Instead, I went after language in the bill that I found confusing and troubling. Here’s some of what I said.
In Sec 49, the definitions section, “business to business” transactions are exempt. Over lunch today talking with a local lawyer he raised the following hypothetical. If he were to do title work, for example, for a husband and wife he would need to collect a sales tax. But if that husband and wife were to form an LLC or partnership, they would be exempt from the sales tax!
If “business to business” transactions are exempt that would mean that the tax would only apply to individuals who are perhaps the least likely to be able to absorb and afford such a tax. The tax would apply to a victim of domestic abuse hiring counsel to represent her. It would apply too a custodial parent trying to collect child support or enforce an order of the court. It would apply to the landlord trying to evict a tenant after going months without collecting any rent. Likewise, it would increase the cost to a tenant who needed representation in a case on uninhabitable premises. I told the committee that taxing Vermonters such as these is bad public policy and will only increase the number of self-represented litigants in an already overburdened court system.
Also, if you look at Sec. 54 there is troubling language that sets the tax rate at 4.75% “of the sales price charged…” Really? Is the tax on the amount billed or the amount actually collected? We all know those numbers are rarely the same.
Finally, I raised what I consider to be a constitutional issue in criminal cases. If I were to exercise my 6th Amendment right to “have assistance of counsel” in my defense, can the state tax me on what I pay my attorney? Isn’t that a tax on exercising my rights? Is it any different than taxing lobbyists and their clients?
In any event I think the committee will leave us in the bill as there is hardly time for deliberation, discussion and amendments now. The committee is hoping to vote the bill out tonight! Then it’s off to conference where I expect and hope the services tax goes away. The budget bill can’t be finished without knowing what the tax bill will raise. The capital bill can’t be finished until the budget is done. Stay tuned. As always, thanks for reading.
Monday, April 27, 2015
I received the following from the Chair of the Senate Finance Committee on Saturday. I am planning to testify at 1 PM on Tuesday but wanted all VBA members to be aware of what the committee will be discussing. Now is the time for each of you to weigh in if you have an opinion on this. Here is a link to the membership of the Finance committee; if any of these senators represent you please let them know how you feel about extending the sales tax to services. http://legislature.vermont.gov/committee/detail/2016/25
You are receiving this because you have expressed interest in this year's legislative revenue discussions as it relates to you, your organization or business, or your clients. Senate Finance has been taking testimony on and off all session on various tax considerations. As we move closer to a vote on a revenue plan, we have reserved two three hour time slots on Monday and Tuesday of this week for overall comment from interested persons on the draft bill, H.489. The meetings will be this Monday from 3-6pm and Tuesday from 1-4pm in Rooms 10 or 11.
We welcome specific or general comments about the FY2016 revenue plan, which primarily features the income tax revisions, and the FY2017 changes which primary relate to an expansion of the consumer sales tax and lowering the sales tax rate from 6% to 4.75%.
You can find Draft 4.2 here: http://legislature.vermont.gov/assets/Documents/2016/WorkGroups/Senate%20Finance/Bills/H.489/Drafts,%20Summaries,%20Amendments,%20and%20Fiscal%20Analysis/H.489~Peter%20Griffin~Draft%20No.%204.2,%204-24-2015~4-24-2015.pdf
You can find a plain English summary here: http://legislature.vermont.gov/assets/Documents/2016/WorkGroups/Senate%20Finance/Bills/H.489/Drafts,%20Summaries,%20Amendments,%20and%20Fiscal%20Analysis/W~Peter%20Griffin~H.489%20Section-by-Section%20-%20Draft%20No.%204.2,%204-24-2015~4-24-2015.pdf
Please let Charlie Enscoe know if you or someone you are affiliated with would like to book a slot before the committee. He can be reached at email@example.com
Monday, April 6, 2015
I apologize for having been silent on events in the legislature for the month of March. Due to a death in the family I spent the month in New York. VBA President Dan Richardson covered for me and devoted more time to our presence in the statehouse that he expected when he became President. The following summary on the judiciary funding issue is his.
As you all may already know, the House Appropriations Committee passed H. 490 two weeks ago that did three things affecting our conversation: 1) it created a study group that will work this summer to look to see how systematic changes can create the savings sought by the legislature and the administration; 2) It cut $500,000 from the judiciary’s budget but restored it for FY 16 with one-time money equal to $500,000; and 3) it implemented the proposed $600,000 pay act cut and the $900,000 in underfunding of existing judiciary obligations. Notwithstanding these cuts, the partial restoration of funds and the study group felt like a big lift from the house that was, as I explained at the last meeting, just ready to slash the budget and let the judiciary deal with it. These changes reflect a lot of efforts on the VBA’s part and on members’ part to persuade legislators of the problems.
Whether these cuts will stay in the Senate’s version is less clear. Last week, I testified in Senate Judiciary, and the Committee seemed supportive of walking back these cuts. Senator Tim Ashe, in particular, was upset with the idea that the $500,000 being called “bridge funding.” As he put it, a bridge is supposed to take you across that chasm and not drop you in the middle.
The Judiciary is not happy with the budget because of the $500,000 cut to their base budget, which without this year’s one-time funding will become a hole for them next year and every year thereafter to fill or cut. In other words, the Judiciary understands that the one-time funding allows them to dodge a bullet this year, but it comes with a price tag that any budget discussion next starts with a base budget at this lower amount. That means, the Judiciary, under the House bill, has less than one-year to come up with a permanent $500,000 cut to its budget for next year’s budget process.
More importantly, the $1.5 Million in cuts to the pay act and from the underfunding remain, which pose a serious problem for the Court beginning July 1st. The Judiciary’s remaining focus for the year is to undo the $500,000 cut (more semantics than actual money swapping since the money is already there for FY16) and to fight to restore the $600,000 through a mixture of fee increases and restoration of some pay act funds. If successful, that would keep the Judiciary where they are now, underfunded and relying on vacancy savings but able to fund its current operations. As I pointed out to Pat Gabel, the Chief, and Judge Grearson the problem is that now the Administration and the House are lined up behind this budget and the Judiciary will not only have to persuade the Senate to disagree these cuts but take the fight to the house and the Administration. It is a tall order.
The judiciary is supportive of the summer study/working group.
Despite opposition, the videoconferencing arraignment pilot project looks like it will be going forward. The House bill provides funding for a pilot project, and the Judiciary has begun to move forward. They have also heard the message from several corners, including the VBA, that they need to work with the various partners on this project.
The big news according to Pat is that the Administration has made it very clear that they want the long-term cuts to come from courthouse closures. Pat has stated in no uncertain terms that the Court does not support closing courthouses and will fight to keep them open, but that the Administration sees closing some courthouses as a necessary budget cut. Pat reported to me that the Administration made no bones about it, and that they would keep the budget pressure on the Judiciary until it closes courthouses. The important thing to keep in mind is that when we are talking about closing courthouses, we are also talking about laying off the court staff.
Judge Grearson is making out next year’s trial court rotation schedule, and he reported that with the four current vacancies unlikely to be completely filed by September 1st, the rotation schedule is going to have a lot of holes in it. These gaps will largely fall to the civil docket as resources will have to go to family and criminal. Even if the Governor makes new appointments, the new judges will take time to close their practices and receive training. Grearson estimates a 4 to 6 month process to put the new judges on the bench, hearing cases, after the appointments are made. On top of this, Judge Grearson indicated that there might be more vacancies coming in the late summer/early fall. So this is a problem that may get worse before it gets better.