OK, who won?

Now that the palavering, posturing, and pontificating of the 2010 session of the Legislature is over, it’s time for at least a preliminary evaluation as to who did and did not come out ahead.

Not just by the measurement of raw politics, either. This assessment will also taka a look at whether the day-to-day lives of regular folks were affected by what the lawmakers and Gov. Jim Douglas wrought these last four-and-a-half months.

The short – and possibly welcome – answer is: not too much. A large majority of Vermont citizens who are neither rich nor poor will note little if any change in their bank accounts, their job security, their children’s education, their retirement benefits, their recreations, or their passions because of any legislation passed and signed into law this year.

Welcome news indeed to those who remember the old phrase about how “no man’s life, liberty or property are safe while the Legislature is in session.”

But there were exceptions. No one should be shocked by this news, but in general, the very wealthy came out ahead, while the poor and near-poor did not, especially the poor and near-poor who are ill or otherwise in need of social services.

And some 7,700 middle and upper middle-income households will face higher property taxes, quite a bit higher in some cases.

The results do not mean that impoverished Vermonters are going to be begging in the streets, their open sores exposed to the elements. Legislative sessions, especially as they wind down are: (1) dramatic; and (2) insular. The drama takes place in an enclosed space in which the same relatively small number of people – legislators, lobbyists, reporters, administration officials — constantly interact with one another.

What happens then is that all disputes become magnified and the disagreements are assumed to be more polarizing than they really are. Had Douglas gotten all the spending cuts he wanted – and he did not – the state’s social services would not have evaporated, no more than business investment would have dried up had the Democrats blocked all those tax reductions.

The last dispute resolved, for instance, was over whether the capital gains tax would be cut by $1.5 million or $3.2 million. Not an inconsequential sum, but a tiny fraction of a $3.77 billion budget.

But let’s get to the raw politics, because it’s easy and it’s fun.

Douglas won.

Not everything, but a lot. For a lame duck governor, he showed that he still has a fair amount of clout. He did it by being stalwart (or stubborn, depending on one’s political preferences), betting that the Democratic leaders wouldn’t risk a repeat of last year’s budget veto and subsequent veto override vote.

Last year, they won that vote. This year, they might not have won it in the House of Representatives. And even if they had won it, they feared it might play into Republican political hands, allowing Lt. Gov. Brian Dubie to paint them as big spenders who raise taxes.

Which he’s going to do anyway, but a budget confrontation might have strengthened his case.

Under some circumstances, Douglas’s strategy might have been risky for Dubie and the Republicans, giving Democrats the chance to portray them as friends of the ultra-rich but indifferent toward the needy.

But those circumstances would exist only if a leading Democrat started making that argument a few weeks ago. There are five Democrat running for governor, but none of them stepped forward to make that case. That left Douglas and his allies free to set the parameters of the discussion.

That Douglas “won” does not really mean that the Democrats “lost.” In the final bargaining, they gave up more points to him than he to them. But first of all, this isn’t really a game. Besides, they held firm on education financing. There will be no mandatory school district consolidation, nor a required change in the student-teacher ratio.

In addition, both sides could claim “victory” in that they passed a budget despite starting the year facing more than a $150 million projected deficit. They did so in a collegial manner, and they could claim that the budget was “balanced.”

It might be.

Celebrating the agreement and his success, Douglas said that “while other states are cutting programs and raising taxes in response to the fiscal crisis, Vermont, I am proud to say, is moving in a different direction.”

Sounds good. Except that what he and the Legislature did this year was cut programs and raise taxes. They didn’t eliminate programs or raise the key income, sales, or property tax rates. But they raised some people’s taxes (while reducing others) and effectively reduced the quantity – and almost surely the quality – of many public services.

By how much? Impossible to say, because the “challenges for change” concept grants the Administration broad powers to cut spending. One of Douglas’s victories occurred when the Democrats gave up on their proposal to allow the state to dip into its “Rainy Day Fund” if the “Challenges” process did not save enough money.

It won’t (for reasons to be explored in a post coming soon). The result will be more cuts in services for the poor, the sick, the mentally ill. It was not a liberal Democrat, but Republican Rep. Anne Donahue of Northfield who said (in Thursday’s Times-Argus), the lawmakers are “pretending that we are restructuring services when in fact we will be cutting services.”

The higher taxes will be the result of some tinkering the Legislature did with the formulas for deciding who is eligible for how much “income sensitivity” in determining their statewide school property tax bills. The tinkering means that more people will benefit less from income sensitivity.

According to figures from the Legislature’s Joint Fiscal Office, some 7,700 households will pay an average of $662 more a year in property taxes, a total of more than $5 million.

The hardest-hit will be 423 households earning between $85,000 and $95,000 a year. Their property taxes will rise an average of $1,639 each. But some households with incomes of $40,000 or even less will pay a few hundred dollars more a year.

The money will go into the Education Fund, holding down the statewide school property tax rate. The beneficiaries here are households with incomes too high to qualify for any income sensitivity, and who pay solely on the basis of the value of their property.

Upper-income taxpayers will also reap most of the benefits from the partial restoration of a capital gains tax break. Under the new law, someone with, say, a $10,000 capital gain from the sale of business assets with a Vermont connection would pay taxes on only $6,000. Douglas wanted the exclusion to apply to all capital gains including stocks, bonds, and homes.

In the end, he accepted a partial victory, and the Democrats agreed, in the hope that lower taxes on Vermont-related capital gains would provide an incentive for more business investment which in turn would lead to more jobs.

The evidence for this assumption – or hope –is…is…well, it may not exist, a mystery worthy of detailed examination next week.

“Everything is resolvable at the end. Unless it isn’t.”

This time, it seems, it isn’t.

The words came from Shap Smith, heretofore known not as a Buddhist philosopher but merely as the Speaker of the Vermont House of Representatives

But it was that kind of day at the Statehouse Tuesday, a day of policy and politics; a day of hope and worry; a day, one might say, of now and Zen.

Occasional spurts of activity were followed by long periods of waiting around. The talk in the corridors was sometimes theoretical, sometimes practical. Optimism clashed with pessimism.

Oh, and Democrats clashed with Republicans.

Politely, to be sure. Everyone from Republican Gov. Jim Douglas to Democratic Senate President Peter Shumlin made sure to tell reporters that their discussions were courteous and friendly.

But by the time Smith uttered his mystical mantra, at about 4 PM, they had not resulted in agreement between Douglas and the Legislative leaders on the Fiscal Year 2011 state budget, nor on the taxes Douglas wants lowered. Without those tax cuts and more budget reductions, the Governor has implied, he might veto the budget bill as he did last year.

Nor was there any agreement by mid-evening, and Smith had made clear that with or without a deal with Douglas, the lawmakers would vote on a budget this week. Hence the possibility that Democrats would pass the budget they prefer, taking the chance that Douglas will veto it.

That’s what he did last year, only to have his veto over-ridden. This year, both sides said they wanted to work together, and at least they have behaved more civilly toward one another. In fact, negotiations continued into the night, both sides clinging to the hope that an agreement would be announced Wednesday morning.

Later in the night, though, negotiations broke down without agreement. It’s not quite the end. In theory, talks could resume Wednesday morning. In theory, everything remains “resolvable.” But the “isn’t” outcome seems more likely, as does a veto and a possible veto override session next month.

All day, in fact, there was conjecture, not all of it by Democrats, that Douglas actually wants to veto the budget bill to provide a political boost to Lt. Gov. Brian Dubie’s campaign for governor. According to this theory, a veto would dramatize the GOP argument that without a Republican in the governor’s office, Democrats would just keep spending more money and raising more taxes.

The fact that in its two-year life this Democratic-controlled legislature actually lowered income taxes – albeit minimally – on a large majority of Vermont taxpayers seems not to diminish the potential force of this argument. In modern America, myth and image outweigh mere fact.

The conjecture about Douglas’s political strategy was, of course,  surmise. But it gained some currency by the fact that all day long (actually, for the past several days), the Democrats kept giving ground to the Governor.

Who kept taking it. And asking for more.

By early afternoon, the Democrats had made so many concessions that one Republican lawmaker crowed, “the Democrats are caving on all the taxes,” and some liberal Democrats were grousing about their own leaders.

One of those Democrats said…well, his precise words are too indelicate for this web site. Suffice to say that he suggested that his party’s leaders were acting as though they were the Governor’s concubines.

But some of those Democratic concessions might have been more symbolic than substantive Take the capital gains tax dispute. Last year, over Douglas’s objections, the Democrats reversed a capital gains preference enacted in 2002. That change is expected to raise some $10 million in revenue in the coming fiscal year.

Smith said he thought a compromise could be reached by restoring the preference, but only on capital gains from investments in companies based in Vermont. Anyone who knew much revenue would be lost by such an amendment (Smith indicated he did) wasn’t revealing it. But probably not much. Wealthy Vermonters (and most capital gains taxes are paid by the wealthy) no doubt invest in diverse portfolios on the advice of financial consultants whose job is to make their clients richer, not to play in-state favorites. One of the great things about capitalism is that it is heartless, with devotion to neither person nor place, but only to money.

Nor would the Democrats be giving up much if they repealed the higher estate taxes they enacted last year. In a few years, the federal estate tax, the terms of which Douglas wants the state’s version to follow, might actually take in more money from wealthy estates (the only kind that are taxed) than Vermont’s. So if the Democrats can find a way to delay the revenue loss for a year or so, they might be willing to compromise.

And there seemed little doubt that the Democrats eagerly – if not desperately – want to compromise, while Douglas and his advisors appeared  willing to accept another veto confrontation. This could be because Smith isn’t sure he has the 100 votes needed to over-ride a veto. (Shumlin has a bigger majority in the Senate, and should have no problem). Perhaps significantly, the Speaker never claimed to have commitments from 100 representatives.

On the other hand, as long as today’s topic is political conjecture (not to mention meditation), here’s another possibility. Remember, Shap Smith knows how to play this game, too, as he proved last year when his House overrode two Douglas vetoes. If he has a problem this year, it would seem to come from a handful of his less liberal members. Continuing to give way on these liberal positions (the two taxes), only to have the Governor continue to rebuff him, might be just what he needs to shore up those votes for the veto override.

Again, conjecture, but, again, perhaps given some currency by another development. Most of those less liberal Democrats are from rural areas, where many influential voters are big landowners who oppose the changes to the Current Use system called for in a bill which has passed both houses, but in different versions.

Smith has been in no hurry to bring an amended bill back to the House floor. He could be holding it as a possible bargaining chip, dropping one or more of its most controversial provisions to placate those rural Democrats.

Log-rolling to please the forest industry. Something Zen there.

Around this time last year, the Democratic leaders of the Legislature outfoxed Gov. Jim Douglas. Using their big majorities, they passed a budget that cut spending (but not as much as Douglas wanted) and raised taxes (by more than he wanted, which was not at all).

He vetoed the budget. The Legislature overrode his veto, by a big margin in the Senate, by just enough in the House. Big win for House Speaker Shap Smith of Morrisville and Senate President Peter Shumlin of Putney.

Fade out. Fade back in to now. Douglas is outfoxing the Ds.

Maybe not for long. This is a play with several acts, and before it’s over, Shumlin and Smith could be singing a happy finale while the Gov, a la Tosca, leaps to his (political) demise off the top of the Golden Dome.

For the moment, though, Douglas is playing the part of the leading man (if not exactly a matinee idol) while the Democrats make like a slapstick comedy troupe. Friday morning, Shumlin and Smith said they were confident about ending the session by Saturday as they and their committee chairs neared agreement on taxes, school consolidation, and the “Challenges for Change” process. They were striding toward both adjournment and success.

Then Douglas pulled the rug out from under them.

He didn’t like what they had agreed on, he said, even though they had stripped out one small tax increase he opposed. While he didn’t exactly threaten another budget veto, he…well, he sort of threatened another budget veto.

The timing was interesting. Douglas didn’t express a single policy position he had not expressed before. From the beginning of the year, for instance,  he had called on the lawmakers to repeal the increases in the capital gains and estate taxes they passed over his veto last year. But until Friday, he had not hinted that he might veto the budget over this issue.

Now he did, using a more confrontational tone, perhaps because he no longer  had to be as accommodating. Earlier in the week, he and the Democratic leaders had agreed on a plan to shore up the state’s Unemployment Insurance fund. It was a compromise, but a compromise notably closer to what the Governor and the business community wanted than to what the Democrats and organized labor wanted.

So now it was no more Mr. Nice Guy?

No, that would be going farther than the evidence supports. So far, both sides are playing Mr. Nice Guy because it is in their interest. If Douglas seems to be strutting and bullying, he risks uniting the Democrats against him. To keep the support of some of their wavering members, the Democratic leaders have to appear to be willing to negotiate and compromise. That makes it easier for them to paint Douglas and the Republicans as the obstinate side in this dispute.

Still, while nobody was making predictions, Douglas seemed to be operating on the assumption that this time the Demos don’t have the 100 House votes they’d need to override a budget veto. (The Senate, with its 23-to-7 Democratic majority, would almost certainly override).

And for the moment at least, the Governor seemed to be right. Otherwise, the Democrats might not have agreed to drop the full implementation of the state’s share of a federal deduction for manufacturers, and then also give up on ending the sales-tax free status of dietary supplements. Democratic leaders of the House were walking around with sheets of paper listing the names of the Democratic members who might not support overriding the veto. These members, it can be assumed, were being pleased, prodded, placated, and pled with by those leaders.

But also by Douglas and his associates.

To override, the Democrats would have to get the votes of all 93 members of their caucus, all six Progressives, and at least one of the three independents. They can probably count on one of the independents, Rep. Paul Poirier of Barre, but at this point they are not sure about all the Progressives.

On straight policy grounds, the Progressives would be considered certain to vote with the Democrats. But Democratic leaders are wondering these days whether some of the Progs have political or personal agendas that might impel them to vote with Douglas, as much as they disagree with almost everything he does.

The Dems could give up on the depreciation and dietary supplement taxes because they wouldn’t produce that much revenue. But the bigger tax cuts the Governor wants in the estate and capital gains levies would be harder for the Democratic leaders to accept. Those taxes bring in some $21 million a year, and cutting that revenue would require more budget cuts than the ones already made under both the regular budget process and the “Challenges for Change” enterprise, which is supposed to make government more efficient, but which also requires some straight-out spending reductions.

So if you hear hints that Legislative leaders are thinking about even scaling back those taxes, you can assume they’re having trouble getting enough commitments to override.

But then it would also be a mistake to underestimate the extent to which all the statement pro and con are theatrical. This end-of-session positioning – not just in Montpelier, but also in Albany, Austin, Sacramento, Cheyenne, or the big one down in D.C. – is also posturing. It is, to use the term of Notre Dame political scientist Robert Schmuhl, stagecraft as well as statecraft, an artificial production in which the script calls for all performers to talk tough until they arrive at a harmonious compromise.

Or don’t.

Because no one should be surprised that Douglas and his associates are pushing their agenda as hard as they can. This is Douglas’s last budget, and therefore his last chance to advance his basic policy outlook: less government spending in general, less education spending in particular, lower taxes on business and upper-income earners.

Nor should anyone be surprised if, as many Democrats suppose, some of the Governor’s associates are pushing that agenda even harder than he is. They can’t be confident that Lt. Gov. Brian Dubie will hold the governor’s office for the Republicans.

For instance, in a detailed, 13-page letter to the Legislature on May 3, Finance and Management Commissioner James Reardon (pirated here from the valuable VT Digger web site; it seems not to be on the state government’s site)) claimed that the Legislature’s budget was based on “an unstable foundation of higher taxes and deferred spending decisions which threaten the long- term viability of the State’s economic engine.”

Referring to the tax increases adopted last year, Reardon wrote that “businesses have been clear that these taxes are hindering growth and the necessary reinvestment in our economy essential for its growth. Rolling back these taxes is a critical first step to getting Vermont on the path back to fiscal health.”

The reality that there is at this point no evidence that Vermont’s growth has been hindered by anything at all except for the nationwide Recession is irrelevant here. Reardon’s letter was a political document, part of the end-of-session theatrics, not a dispassionate fiscal report.

What seems not to have been part of the discussion is the possible broader political impact of this squabble, and here the Republicans might face worse consequences than the Democrats. In addition to insisting on repeal of those taxes, Douglas also wants the Legislature to require school districts to consolidate, as opposed to merely suggesting and providing financial incentives for consolidation, as the Democrats propose. There may be broad agreement that Vermont’s 280 school districts are too many. But imposing consolidation by state law violates the “local control” so central to the state’s self-image (even if it may not really exist any more, a subject for another day). And spending less on schools or on the mentally handicapped in order to cut taxes on wealthy individuals is always risky politics.

Media Note: This web site occasionally critiques Vermont’s major news organizations such as the Free Press or Channel 3 because they’re important and because they’re big boys; they can take it. It has not bothered with St. Johnsbury’s Caledonian-Record because it is neither and because critiquing it could be a full-time job.

But some entries are too ridiculous to ignore. Such was the Cal-Rec’s lead story on Saturday: “Angels Say Clyde River Hotel Houses Spirits.”

No, reporter Robin Smith did not claim to be quoting literal angels, just the owners of East Coast Angels Paranormal Investigations, a Connecticut-based outfit to whom the owners of Island Pond’s Clyde River Hotel seem to have paid American money (though only expenses) after hearing strange noises in the 144-year-old building.

There’s a good story in there somewhere, and the reporter did note that perhaps the owners are talking openly about their haunted hotel because they could use the publicity. But the minimum requirement here is at least a smidgen of skepticism that  anything ever really haunts houses (or hotels), or that the kind of “spirits” the East Coast Angels folks said they discovered actually exist. There was no such smidgen in the story.

Note to the Cal-Rec: Next time you quote a fellow bragging about his degree in “demonology,” you might point out that demonology is not a recognized academic discipline.