$62 million “jobs bill” will soften Vermont’s budget woes slightly

Congressman Peter Welch, D-Vt.

The U.S. House approved a $26 billion state aid package on Tuesday that will bring a total of $62 million to Vermont in education and extra Medicaid funding.

The “jobs bill,” which Congress passed in a highly unusual emergency congressional session during the August recess, is designed to funnel $19 million into Vermont schools and $43 million in Medicaid and other assistance to the state.

The Education Jobs and Medicaid Assistance Act passed the House by a vote of 247 to 161. The law is designed to save 140,000 education jobs; in addition, states will receive $16 billion in “enhanced” Federal Medicaid Assistance Percentages funding.

Congressman Peter Welch, D-Vt., voted in favor of the bill Tuesday. Sen. Bernie Sanders, I-Vt., and Sen. Patrick Leahy, D-Vt., supported its passage last week, and President Barack Obama signed the bill into law Tuesday night. The money will be made available to states in 45 days.

Sen. Patrick Leahy, D-Vt.

“The recession has taken a tremendous toll on state budgets throughout the country, and Vermont is no exception,” Welch said in a statement. “These funds will provide necessary breathing room for states at a time when they are struggling to meet increased demand for essential services.”

The jobs bill is budget neutral — unlike the 2009 stimulus legislation. It is funded through cuts in the food stamp program that would go into effect in 2014 and through the elimination of a tax break for multinational corporations.

The news from Congress has spurred several political skirmishes over the funding already. An advocacy group questions the source of funding for the federal windfall. And the Republican candidate for governor, Brian Dubie, said using the $19 million in school funding to prevent teaching and other school staff positions from being eliminated is “reckless” and “irresponsible.” He said the state needs to cut property taxes.

Gov. Jim Douglas’ administration hasn’t decided whether it will apply for the education funding. Officials question the efficacy of using $19 million in one-time federal funding for schools on the heels of the Vermont Department of Education’s call last week for $23.2 million in education spending cuts under the Challenges for Change government reorganization plan.

State leaders are relieved

The state’s budget writers, including Vermont House Speaker Shap Smith, Sen. Susan Bartlett, chair of the Senate Appropriations Committee, and Rep. Martha Heath, chair of the House Appropriations Committee, all expressed relief that the money came through.

“I’m very pleased we’re going to get some FMAP money,” Smith said. “I think it’s definitely needed for some of the shortfalls we found at the end of last year, particularly for things that are one-time spending.”

At one point, lawmakers hoped to receive more than $60 million, but by the end of the legislative session, it looked as though the money might not come until November, if at all. Lawmakers did not build the Medicaid money into its fiscal year 2011 budget like many states facing enormous shortfalls. (Maine, for example, has a $1 billion budget deficit in the current fiscal year.) Instead, together with the administration, leaders cut the base budget and drew up a prioritized list of items to be covered, totaling $35.5 million, should the money come through.

House Speaker Shap Smith, file photo

About $35.5 million will cover the one-time spending recommendations, which include $10 million for the Vermont State Hospital; a $13.5 million reserve for the fiscal year 2012 Medicaid match; $5.85 million in investments in information technology; $2 million in grants for community programs to lower incarceration rates; $3.1 million in transitional housing and other programs for inmates; and $1 million in hospital outpatient funding, according to a spreadsheet from the Joint Fiscal Office.

The new federal funding will go a long way toward softening the blow, budget writers say, because all of the items on the wish list come with potential long-term savings.

Even so, the state faces a roughly $115 million deficit for fiscal year 2012, in addition to $72 million in Challenges for Change government restructuring plans, because economists say projected revenues, largely from income taxes, will remain depressed for some time as the economy slowly recovers. That means the state must make additional permanent spending reductions next year, on top of three years’ worth of budget cuts to programs and labor concessions, including the elimination of 600 state jobs, a 3 percent wage cut for state workers and an annual contribution of $15 million from Vermont teachers to the state pension fund.

“I don’t expect the gap can be made up through revenue growth,” Smith said. “I think, quite frankly, this may be the most difficult budget year we face.”

Robbing food stamps to pay for school lunches?

A Vermont hunger advocacy group says Congress funded the jobs bill in part from savings in the food stamps program, which was bolstered by an influx of stimulus funds last year. The boost in benefits was scheduled to be phased out by 2014, when Congress anticipates the economy will rebound, according to Sanders’ staff.

Though an estimated 40 million Americans are using the Supplemental Nutrition Assistance Program to make ends meet, food inflation is down. That means the funding is projected to stay at a higher rate through 2018 — four years longer than Congress anticipated, according to a recent report in The New Republic.

Congress is essentially borrowing against the “offset,” the projected 2014-2018 food stamps surplus, to help pay for the jobs bill and the Hunger-Free Kids Act, which puts more money into the school lunch program, according to information from Sanders’ office.

Read about the Hunger-Free Kids Act

Marissa Parisi, the executive director of the Vermont Campaign to End Childhood Hunger, says she is “deeply disappointed” to see Congress reduce funding for a “vital nutrition program.”

“Our Congressional delegation understands the importance of SNAP,” Parisi said. “They care about hunger, and we’re working with them going forward, but this is very disappointing. We wish there had been more of an effort to find a different funding source for this legislation.

“These cuts will put more of the most vulnerable Vermont families at risk for hunger,” Parisi said.

Parisi said Vermont is the sixth hungriest state in the nation, and 83,000 residents (40 percent of whom are children) used 3SquaresVT, the state’s version of SNAP, to buy food in fiscal year 2009, which ended last month.

Image from Vermont Campaign to End Childhood Hunger Web site

Before the recession began in 2006, about half as many Vermonters – roughly 46,600 residents relied on the program.

The benefit cut, according to the Campaign, is scheduled to go into effect “as early as 2013” and could, at that point, mean a loss of $47 a month for a family of three.

Parisi said SNAP puts about $10 million a month into the Vermont economy.

“We did make some modest gains in the Senate version (for) school meals,” Parisi said. “We feel it’s unfortunate that it (the Hunger Free Kids Act) was funded out of SNAP and has the potential to make children more food insecure when they go home.”

In future, she says, parents and children could be left to their own devices on weekends. “That $47 is a bag of groceries,” Parisi said.

Parisi said she had hoped Congress could have found another funding source for the two programs.

Ezra Klein, a columnist for The Washington Post, calls it the “Sophie’s choice” of budget decisions. He wrote that Democrats would avoid “cutting food stamps if they thought they could,” and he pointed to the Senate’s failure to pass an amendment proposed by Sen. Sanders that would have cut $35 billion in oil and gas subsidies, as an example of congressional priorities.

Sanders was unavailable for comment.

Welch told Bob Kinzel of Vermont Public Radio: “The Food Stamp cuts are really tough, and it’s an indication what new fiscal terrain we’re in. There was a commitment to pay for this. These cuts will go into effect by 2014. So folks like me who would never have chosen that as the preferred method are going to have the opportunity in the next few years to restore that Food Stamp money.”

It’s unclear at this point, according to Jim Giffin, chief fiscal officer for the state Agency of Human Services, whether the new law will have an impact on the state in the short term.

Federal education money, a help or a hindrance?

State officials say the $19 million in federal education money could buy Vermont schools more time over the next several years to plan for long-term budget changes, including administrative reductions, under the Challenges for Change government restructuring plan, which asks local school boards to reduce spending by $23.2 million in fiscal year 2012.

The reductions, however, are not optional. During the last legislative session, lawmakers and the governor passed the budget with a $23.2 million hole in the Education Fund for fiscal year 2012, which begins on July 1, 2011.

Jill Remick, spokesperson for the department, said in a statement that schools must also “absorb the inflationary and contract increases that occur each year in their budgets,” such as increases in costs for teachers’ contracts, heating fuel, supplies, health insurance and transportation. The department calculates inflation costs will add about $25 million next year to local school budgets statewide.

In all, she surmises, schools will need to cut budgets by nearly $50 million, in order to reach the Challenges for Change objective of $23.2 million.

“It is a reality that staff salaries are 80 percent of school budgets,” she wrote. “Therefore, it is impossible to meet those reductions without cutting staff. This $19 million will provide a temporary reprieve to districts as they develop budgets for FY2012.”

Crossett Brook School

The federal funding may be used over a 26-month period under a special provision, according to Andy Snyder, the intergovernmental affairs director for the Vermont Department of Education. That means the money may be used to defray cuts in the 2012 fiscal year, he said.

The money also comes with strings attached: States are required to use it to keep teachers and other school staff employed. The money may not be used for equipment, renovation or transportation costs, nor to pay down state debt or to bolster rainy day funds. According to the congressional delegation, the funding would cover the cost of employing 300 teachers at a rate of $50,000 a year.

Many states have fired teachers in the wake of the recession; so far Vermont has avoided cutting school staffing significantly, even though last year, schools voluntarily cut expenditures by an average of 2 percent, after Armando Vilaseca, commissioner of the Department of Education, and Jim Reardon, commissioner of Finance and Management, sent letters to every school district in the state last fall, urging boards to reduce spending. Even now though, Vermont has the lowest student-to-staff ratio in the country.

Vermont education experts anticipate that there could be teacher layoffs in the next few years as the state puts pressure on local school boards to cut spending further as student enrollments continue to decline across the state.

Last week, the Vermont Department of Education unveiled its recommendations for $23.2 million in reductions to the state’s 60 school districts under the state’s “Challenges for Change” government reorganization plan. The suggested cuts averaged 2 percent, and ranged from 0.5 percent (Elmore) to 2.35 percent (Colchester). (The department weighted the recommendations based on efforts that school districts had already made to reduce administrative costs.)

Read the district by district budget cut recommendations from the Vermont Department of Education.

The Douglas administration has expressed doubt about the efficacy of the $19 million in federal funding, which it alleges will artificially support the employment of 300 teaching positions that would otherwise be eliminated. David Coriell, the governor’s spokesman, said the federal money will merely “kick the can down the road,” echoing a statement from Lt. Gov. Brian Dubie, the Republican candidate for governor. The “can” he refers to is the need to cut education spending costs, which he said are driven by Vermont’s exceptionally low student-to-teacher ratio of 10 to 1. (Staff costs account for 80 percent of school expenditures, according to the Vermont Department of Education.)

Coriell said Vermont should move toward a 13 to 1 ratio, and could do so through teacher attrition. (In an earlier vtdigger.org story, we reported that the Vermont Department of Education has determined that in order to reach the magic number 13, the state would need to eliminate as many as 1,500 teaching jobs.)

Coriell declined to say whether the administration would refuse to apply for the funds. “We haven’t made any decisions yet,” Coriell said. “We’re trying to figure out how this money should be applied.”

Even if the administration chooses not to ask the U.S. Department of Education for the money, however, the funding can be distributed directly to school districts, according a summary of the legislation.

Lt. Gov. Brian Dubie, Facebook photo

Dubie said in a statement that “simply sinking this money into the Education Fund would be reckless and short-sighted.”

He suggested that the funding be used for one-time expenditures, such as school construction, or paying down the state’s “long-term liabilities,” including a $700 million obligation for teachers’ pensions, instead of maintaining school staffing, the express purpose of the federal act.

Kate Duffy, his campaign communications director, elaborated further. She said Dubie believes the $19 million should be used to reduce the property tax burden for Vermonters, not on $19 million more in school spending.

Duffy pointed to voluntary school consolidation (one local school closing and combining with another in situations where school enrollments are very low) as one way of reducing education spending, though it was unclear how investments in school construction under that scenario would work.

Darren Allen, spokesman for the Vermont-NEA, said putting the federal money into the retirement system goes against the intent of the legislation. He also rejected the idea that the teacher retirement system is in jeopardy.

Teachers have agreed to contribute $15 million a year, he said, to shore up “an already secure retirement system.”

“One of the most common misconceptions that politicians who are hellbent on taking away defined benefit programs for public employees is to say we have these unfunded pension liabilities, but what they fail to tell us is that these jaw-dropping numbers are a pinpoint in actuarial time,” Allen said. “It’s a guess at what the system would be if we shut it down today. Teachers are still contributing 5 percent into the system, and they’re working longer. Teachers have done their part and will continue to do
their part. If we can get the Fifth Floor (the governor’s office) and the Legislature to keep doing their part, we will have a sustainable system.”

Democrats interviewed for this story did not see the federal money as a panacea for the state’s education system. Speaker Smith said the federal money will help schools transition to “what is going to be a different fiscal environment,” in which they will have to save money and “provide better service.” In his view, Dubie’s messaging about school spending is “resonating” positively with the public because it is a “real issue.”

Rep. Martha Heath, D-Westford

Rep. Heath, who is the chair of the Westford School Board, said the federal funding will be “extremely helpful.”

“It will give school boards more time to think about creative solutions about how they might work with other school districts to form consortiums and save money and to really be able to examine whether consolidation is going to save money,” Heath said. “This is one-time money, and our state funding problems aren’t going away. If it can be used in this way, it has to be talked about as a transition, and the need for school districts to look for ways to save money has to be clear. I would hope it might give some breathing time for people to come up with solutions that … won’t hurt the quality of education.”

Jeffrey Francis, executive director of the Vermont Superintendents Association, said the funding from the feds will retain jobs in the short term and will give schools temporary relief, but “the process of close examination of school budgets and the education delivery system has to continue.”

“I’m hoping the utilization of federal funds creates a different timeline and doesn’t result in rapid, potentially bad decisions,” Francis said.