Senate passes $1.08 General Fund budget, kills rainy day amendment

Sen. Susan Bartlett, D-Lamoille

The Vermont Senate passed the $1.08 billion General Fund budget Tuesday, 23-6, after hours of debate and a Democratic wrangle over an amendment that would have required the state to use surplus rainy day funds to fill a potential $20 million gap in the Challenges for Change government restructuring plan.

Sen. Doug Racine, D-Chittenden, pitched the amendment requiring the administration to use up to $20 million from the state’s stabilization fund. A similar proposal from Sen. Tim Ashe, P/D-Chittenden, took the backup plan even further. He asked senators to consider tapping as much as $38 million from the fund (the full amount removed from the budget under the Challenges law) if need be. Ashe’s substitute amendment failed, 18-11, and shortly afterward, Racine withdrew his own proposal.

In arguments on the Senate floor, Racine said he couldn’t support a budget with such a large hole in it, and he urged the Senate to use the rainy day funds. After three years of budget cutting, he said, the state has no option at this point but to use the state’s surplus, or be forced to cut essential services – including programs for the elderly, disabled children and Vermonters with mental health problems.

Administration officials have testified that in some cases the reorganization of state programs under the Challenges plan will amount to cuts, Racine said. It would be irresponsible, in his view, to adjourn without identifying the reductions in funding to programs, benefits and services for vulnerable Vermonters.

“This budget assumes $38 million (under Challenges for Change). It says if we don’t find it, we’re going to walk away and allow the administration to make cuts. (Using the rainy day funds) is not a solution of first resort; it’s a solution of last resort.”

“We should vote on a budget that is balanced and complete, and I don’t believe it is,” Racine said. “I propose we use $20 million from the rainy day funds. That doesn’t preclude the administration from keeping working on this. This budget assumes $38 million (under Challenges for Change). It says if we don’t find it, we’re going to walk away and allow the administration to make cuts. (Using the rainy day funds) is not a solution of first resort; it’s a solution of last resort.”

Proponents of the Challenges plan, which is supposed to save $38 million in fiscal year 2011 and $72 million fiscal year 2012, say the restructuring will reduce state spending without cutting programs. In fact, the word “cut” is an anathema to adamant supporters of the government reorganization, including Sen. Diane Snelling, R-Chittenden, and Sen. Susan Bartlett, D-Lamoille, chair of the Senate Appropriations Committee and a candidate for governor.

But the fact remains, 10 days from the target date for adjournment, May 8, senators are scrambling to find the $18 million in savings that still have not been identified under the Challenges.

The House approved $20 million in Challenges reductions; the remaining $18 million of changes has not yet been identified by the senators who are discussing the administration and House proposals in committees of jurisdiction this week. The Senate is to vote on the Challenges next week.

In some cases, lawmakers see the savings as illusory. Sen. Dick Sears, D-Bennington, for example, told his colleagues on Monday that he had just found out $1 million they had hoped to wring out of judicial branch restructuring fell short by $270,000.

Still, the majority of senators were confident they could close the Challenges gap. They appeared to fear the prospect of a looming deficit next year of $100 million more than they did the missing $20 million in front of them.

Several senators saw committees of conference, the Joint Fiscal Committee and budget adjustment as fall-back opportunities for lawmakers to rectify problems that may come up after adjournment.

“Taking money out of the rainy day fund is the easy thing to do,” Bartlett said. “Changing the way we deliver services is the hard thing to do.”

Sen. Randy Brock, R-Grand Isle-Franklin, and a former state auditor, told members of the Democratic caucus that it would be imprudent to spend the state surplus funds now with the specter of even starker fiscal problems next year. The stabilization fund, he said, which is currently at $54 million, is about half what it should be in a down economy.

The money, which he said is excess state cash flow, rather than a rainy day fund or savings account, should only be used in an emergency, he said.

If the state spends the surplus cash flow now, he said, it might have to take out loans to pay its bills next year. Interest on short-term borrowing, Brock warned, would be costly.

Racine countered that if the state cuts $10 million in programs, it will lose $20 million in federal funds, and that that tradeoff is worse than the expense of interest on short-term loans. He said using less than half of the stabilization fund at this time is appropriate and responsible.

Bartlett, however, insisted that the Senate should “resist the temptation to do what’s easy, which is to use more one-time money.”

“Taking money out of the rainy day fund is the easy thing to do,” Bartlett said. “Changing the way we deliver services is the hard thing to do. In 2012, the deficit we’re looking at now is $111 million. If we fail to move forward with Challenges for Change to get in the vicinity of $38 million, that deficit could become $150 million to $160 million. I don’t believe there will be any more bailouts from Washington.”

Even though there are signs that the economy is starting to turn around, Bartlett said, it will take at least a year for state revenues to recover.

“If the economy has turned around then, whoever is here will have a cushion to fall back on,” she said.

Bartlett said raising taxes is also not an option at this point: “We’re being beaten about the head and shoulders for the $19 million we raised last year.”

Though the state could tax clothing (which would raise $22 million), put a surcharge on income taxes (1 percent raises $5 million), or introduce professional taxes for physicians or lawyers (which could bring in $31 million and $16 million respectively), all of these moves could have an impact on the state’s fragile economic recovery, Bartlett said.
The following senators voted against the budget: Racine, Ashe, Flanagan, Flory, MacDonald and McCormack.