“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.

For a greater understanding of this much-discussed “Challenges for Change” legislation passed by the House yesterday, consider the following objects (or perhaps concepts, or metaphors): the buckets, the silos, the function analysis, the Hail Mary pass.

The buckets were on the tables in the rooms where met the House “committees of jurisdiction,” which is Legislative jargon for the committees that deal with substantive stuff (natural resources, health care, education) as opposed to the functioning of government (appropriations, ways and means).

No, of course there were no actual buckets on the table. These were imaginary buckets, into which Legislative leaders urged committee members to place (imaginarily) the various proposals from the Douglas Administration. One bucket for the ideas the committee would accept, one for those it would reject, yet another for those in the “maybe” category.

Sure, it was a gimmick. But it seems to have worked. In a little more than two weeks, those committees went through the budget of almost every state agency, coordinated them with the “Challenge for Change” report from a consulting firm, and came up with a comprehensive bill designed to make state government work more efficiently, providing “more for less.”

Will it work? Nobody knows. It might not Even some lawmakers have their doubts, and worry that the end result will be little more than old-fashioned budget cuts which will reduce services for the poor, the sick, the elderly.

But “nobody knows” also means that the “Challenges” plan might work, at least to some extent. At any rate, what was evident in Montpelier yesterday – what has been evident there for the last two weeks – is that most legislators think it can work. Otherwise they wouldn’t have spent all that time and effort filling those “buckets.”

And fill them they did. The end result may be in doubt. The process was not. The lawmakers took their task seriously. They spent hours in long, boring discussions about “more effective delivery plans,” about “redesigning structure to improve outcomes,” about getting more people to file their income taxes electronically.

Perhaps because of the boredom,  reporters largely ignored the committee meetings. Maybe that’s why there seemed to be little posturing, political pontificating, or partisan wrangling. Speaker Shap Smith may have been self-serving when he said yesterday that the House had acted with “tri-partisan collaboration,” but he wasn’t inaccurate.

There were no actual silos in the Statehouse either. These are “funding silos,” and in a sense they are the problem the whole “Challenges for Change” project was designed to solve. Over the years, various programs – and the dollars to run them – have been put in different agencies even if the programs have the same goal.

Just to take one example, protecting the state’s water quality is handled by both the Agency of Agriculture, Food and Markets and the Agency of Natural Resources. Each has its own water quality “funding silo,” and while officials from the two departments co-operate, they don’t seemed to have eliminated duplication.

Legislators had hoped that the Administration, in making its proposals for implementing the “Challenge” bill, would try to combine or merge some of these “silos,” and at least some of the lawmakers were disappointed by the results.

“I had anticipated some creative responses,” said Sen. Virginia Lyons, the Williston Democrat who chairs the Committee on Natural Resources and Energy. “I haven’t seen that.”

Engineering her own creative response, Lyons invited Tanya Marshall of the Archives and Records Administration, a division of the Secretary of State’s Office, to appear before her committee Wednesday. Marshall has information relating to the silo situation, though she doesn’t use that term. She talks about function analysis.

“We take the whole, large, complex aspect of state government and break it down into simple components,” she said. “We track legislation, we track the agencies, we track the government functions over time and map them so we link the relationships.”

So, she said, if two agencies are duplicating each other’s efforts, “we’ll be able to understand how they’re connected and can help them achieve efficiencies.”

What Marshall’s office has is essentially a record of almost every function performed by most state agencies for years. A careful analysis of those records could, at least in theory, reveal where agencies were getting in each other’s way and replicating each other’s work.

Does that mean that instead of paying a consulting firm $286,000 for the “Challenges for Change” report, the Legislature and the Administration could have gotten the same results cheaper by calling Tanya Marshall?

Not really, she said, because some agencies don’t provide all their records; it’s voluntary on their part. But, she added, the analysis her office does often reveals “significant overlaps (in which) agencies working in their own environment don’t necessarily know where there are overlaps.”

Even though some subdivisions of the Agencies of Transportation and Nature Resources do not turn over all their records, Marshall said it was likely that there was some duplication in the process of approving permits for construction developments.

Whereupon we segue to the final metaphor – the Hail Mary pass.

As noted at the end of Wednesday’s post (scroll down) while most politicians talked about using the “Challenges” idea to “do more with less,” Gov. Jim Douglas wanted to use it to have the state government “do less with less.” He also had goals that went beyond the “Challenges” report, and he saw the report as a vehicle for accomplishing some of those goals.

So he attached part of his own agenda to the report.

No governor would do otherwise. Politicians (and everyone else) take opportunities when they see them, and Douglas saw the opportunity to accomplish two of his long-time goals: bringing down school spending and easing the permitting process for developers.

It was not only an opportunity; it was surely his last because he’s leaving office at the end of the year. With little to lose, he threw the long ball.

It was not a complete pass. His proposal to give the Education Department the power to consolidate the state’s 280 school districts to 50 or fewer went nowhere at all. His suggestion that most new construction projects be cleared under a “permit by rule,” which is essentially self-regulation, didn’t fare much better. The House Committee on Natural Resources and Energy did agree to allow that kind of permitting in two specific circumstances, and for one of them, even John Groveman of the Vermont Natural Resource Council said the consequences would be “benign.”

Groveman was less sanguine about the other one, allowing “permit by rule” for some projects in which industrial pollutants might endanger groundwater. But Rep. Tony Klein of East. Montpelier, the committee chairman with a strong environmental record, said the change was minor and posed no danger to water quality.

The changes, then, appear to be largely symbolic. But then so is the entire, seemingly unending squabble over “permit reform.” Sen. Lyons said she was “not sure there’s a permitting problem at all.”

There isn’t. It’s a tribal-psychological issue worth exploring another day.