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Vermont Legislature
Follow VPR's statehouse coverage, featuring Pete Hirschfeld and Bob Kinzel in our Statehouse Bureau in Montpelier.

Controversial Use Of 'One-Time' Funds Eases Budget Pressures

Lawmakers, administration officials and the media have spent months spotlighting the $70 million shortfall that was threatening to bust next year’s budget.

But Gov. Peter Shumlin on Wednesday outlined a fiscal year 2015 spending plan that will use previously undisclosed windfalls to balance the state ledger in a way that administration officials say won’t impact government services.

Along with $30 million in “one time” money – much of which derives from legal settlements last year with tobacco companies and Vermont Yankee – Shumlin has proposed using $29 million in unanticipated increases in “special and federal funds.”

Shumlin is also asking lawmakers to support $14 million in new revenue, money he wants to raise by assessing a 0.8 percent “assessment” on every private health insurance claim filed in the state. Shumlin wants to use the money to pay for ongoing expenses in the new health insurance exchange, called Vermont Health Connect.

The $1.44 billion general fund budget proposal from the governor represents a 3.56-percent increase over last year’s spending plan.

No new taxes?

Asked at a budget briefing Wednesday morning whether the revenue proposal violated Shumlin’s pledge not to raise new taxes, Administration Secretary Jeb Spaulding said the governor’s avowals have always come with a caveat.

“I think the governor’s been pretty clear that he doesn’t support broad-based taxes, and he usually goes: ‘such as income, rooms and meals, and sales,’ and (he) maintains his position that we shouldn’t be doing that,” Spaulding said.

"It invests in areas critical to our most vulnerable and to our future jobs growth while rejecting broad-based tax increases on hardworking Vermonters." - Gov. Shumlin on his proposed budget

The revenues will help support a spending plan that includes some big new expenditures, such as $10 million for substance abuse treatment, $4 million for anti-poverty programs, a $33 million increase for roads and bridges, and $840,000 for state colleges and the University of Vermont.

“It invests in areas critical to our most vulnerable and to our future jobs growth while rejecting broad-based tax increases on hardworking Vermonters,” Shumlin said in his budget address.

Reaction varies

Republican leaders at the Statehouse had a mixed reaction to Shumlin’s budget proposal.

House Minority leader Don Turner, R-Milton, said he was disappointed that the governor would propose a budget increase that’s larger than the rate of inflation. While the general fund budget, paid for by revenues generated in-state, are going up by about 3.5 percent, overall government spending would jump by more than 4 percent, to $5.6 billion.

“Proposing a budget that exceeds the growth rate of Vermont’s economy and the paychecks of taxpayers wallets is bad policy and not financially sustainable,” Turner said.

Turner said part of the problem is that many of the state’s human service programs are too generous.

“We do know that Human Services is the biggest area of the budget,” Turner said. “We know that eligibility requirements are very generous in those areas. So we’ll be looking at scrutinizing all those areas.”

On the positive side, House Transportation Committee Chairman Pat Brennan, R-Colchester, said he was very pleased that the budget includes an additional $33 million for the state’s transportation budget, a 5 percent increase over this year’s plan.

More for opiate addiction

Spaulding and Finance Commissioner Jim Reardon said the budget proposal will allow government to fulfill its human services obligations while keeping the general fund increase to a near-inflationary level. And Shumlin said Wednesday that his plan maintains a strong social safety net while heading off new fiscal shortfalls in the future.

“So our challenge in balancing the budget is not to eviscerate worthwhile programs serving Vermonters, but instead to curb the rate of growth and bring our programs back in line with our revenues,” Shumlin said.

The late-morning budget briefing included the revelation that the governor’s anti-opiate campaign includes $10 million in new spending on treatment and rehabilitation, not the $2 million that was reported by virtually every news outlet in Vermont after Shumlin’s State of the State address last week.

In addition to the $1 million for treatment facilities and $760,000 for intervention with newly charged criminal suspects, the proposal includes $8 million for the so-called “Hub and Spoke” system that aims to create regional networks of satellite treatment centers.

The venture is being funded largely by redirecting $6.7 million away from the Department of Vermont Health Access. Spaulding and Reardon said the reallocation won’t result in cuts to programs. Rather, they said the investments in opiate addiction treatment will reduce pressure on subsidized health care services paid for by DVHA, obviating the need for the $6.7 million.

While the budget outlined Wednesday doesn’t create any new programs, it does include increased expenditures on existing government initiatives, including:

- $500,000 for the Vermont Rental Subsidy program, doubling that budget

- $300,000 for emergency shelters

- $800,000 for child care centers

- 2 percent increase in the reimbursement rate to Medicaid providers

- $10.5 million to cover new demand for developmental services

Teacher retirement funds

The budget also lays out the beginning of a plan to solve a burgeoning problem in the fund used to cover the health care benefits of retired teachers. State Treasurer Beth Pearce said Vermont needs to come up with another $20 million annually to ensure the fund’s long-term stability. But negotiations between teachers, towns, Pearce and the administration have yet to yield a cost-sharing agreement.

Shumlin’s budget proposal includes an additional $2.5 million in general fund allocations to the retiree health care fund, which would bring the state’s annual contribution to about $8 million. Spaulding said the state will continue to negotiate with teachers, and that the administration will consider using up to $10 million in one-time money – to be pulled from a property tax relief fund – to “phase in” the heightened retiree expenditures in a way that doesn’t impact tax rates next year.

Shumlin touted his administration’s focus on job creation with an economic development plan that includes:

- 5 percent increase in the Working Lands Enterprise program

- 9 percent increase in funding for the Vermont Housing and Conservation Board

- $500,000 in downtown tax credits

- 2 percent funding increase for higher education

Reardon said the entire package reflects an ongoing effort to bring expenditures in line with revenues.

“We tried to meet the demand, not have to cut programs and services, but do it at a trajectory that starts to slow down a little bit the growth rate,” Reardon said.

In a written statement, David Sunderland, chairman of the Vermont GOP, dismissed Shumlin’s proposal as a “laundry list of continued policies from the past, with no real solutions for our future.”

Sunderland said Shumlin’s inaction in the face of double-digit percent increases in the statewide property tax rate over the next two years is especially concerning.

“Staggering and ever increasing property tax rates are out of control,” Sunderland said. “Gov. Shumlin’s solution is to increase the statewide property tax rate by over 7 percent, more than twice the increase most Vermonters will see this year in their paychecks, and blame the flawed funding formula on local school boards.”

Governor: voters can cut school budgets

Shumlin dedicated a portion of his speech to the issue of property taxes, and indicated his willingness to consider reforms to the education funding system. But he said that if voters are upset by the size of their property tax bills, the quickest route to relief is through their local school boards, not the Legislature.

“I urge Vermonters at town meetings across our state this year to carefully scrutinize schools budgets that increase per pupil spending and grow faster than our incomes,” Shumlin said. “Remember, you have the power to determine your school budgets, but you can’t make a difference if you don’t participate.”

Sunderland also faulted Shumlin for failing to disclose to Vermont a plan to pay for the publicly financed health care system he’s promised to deliver by 2017.

Shumlin didn’t bring the house down with his speech Wednesday. But he didn’t upset many people either. And after a budget plan last year that included proposals that alienated the political left, Shumlin looks to have won back his base. Burlington Rep. Chris Pearson, head of the Progressive Party caucus in the Vermont House, said that at first blush, the governor’s spending plan looks good.

No surprises

“There were a lot of great priorities that he talked about today and it was nice to see that, and it was particularly nice compared to last year where we had some unpleasant surprises,” Pearson said.

That unpleasant surprise in 2013 came in the form of proposed cuts to a tax credit for the working poor. Shumlin this year is proposing new money for emergency shelters, rental subsidies and affordable housing.

Chris Curtis, a staff attorney at Vermont Legal Aid, said it’s a welcome, if overdue development.

“This year for the first time in a long time these investments are being made and they’re not coming at the expense of other vulnerable families in human services,” Curtis said.

Shumlin said his budget, with its downtown tax credits, increases in higher education, renewable energy subsidies, doubles as an economic development plan. He said he was particularly excited about seizing on the emerging “legacy insurance” sector. He said Vermont, given its history and experience in the captive insurance market, is well positioned to capitalize on this new insurance area.

But Shawn Shouldice, Vermont director of the National Federation of Independent Businesses, said the governor’s plan fell well short of business leaders’ expectations.

“He nibbled around the edges without really getting to the problems that concern small business owners,” Shouldice said in a written statement. “Vermont is regarded nationally as one of the least competitive states in America because of its taxes and regulations and he really offered nothing today that would change that perception. This budget proposal grows spending at a faster rate than our economy.”

The budget heads next to the House Committee on Appropriations, where legislators will hear from supporters and opponents of various proposals.

Bob Kinzel has been covering the Vermont Statehouse since 1981 — longer than any continuously serving member of the Legislature. With his wealth of institutional knowledge, he answers your questions on our series, "Ask Bob."
The Vermont Statehouse is often called the people’s house. I am your eyes and ears there. I keep a close eye on how legislation could affect your life; I also regularly speak to the people who write that legislation.
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