State budget well in the black for fiscal year 2012

Members of the legislative Joint Fiscal Committee were pinching themselves on Thursday. After four years of revenue downgrades (lower than expected tax receipts) and upward pressures (unanticipated increases in budget expenditures), representatives and senators who serve on the off-session money committee for the Legislature were pleasantly surprised to find that projections for fiscal year 2012 are sunny for a change.

Though the sudden good fortune isn’t expected to last – officials say tax receipts will remain at pre-recession levels for several years — compared with previous sessions in which the state faced hundreds of millions of dollars in potential deficits, the shift toward black ink was a welcome, if temporary, relief to lawmakers on the Joint Fiscal Committee.

State tax revenues for the year are up $40 million above the original income forecast. Medicaid spending meanwhile is down by $44 million. The $84 million can be used for adjustments in the budget; much of the money would be applied to a list of budget priorities outlined by the Legislature.

Jim Reardon, the commissioner of Finance and Management, said state revenues are still well below 2008 tax receipt levels and the increases the state experienced this year will not be ongoing. That is because the national economy is limping again in the face of the debt ceiling crisis, poor job recovery and devalued housing stock. There is also a distinct possibility that the federal government will cut funding to states for the Low Income Heating Assistance Program and other programs.

As Reardon put it, there is still a lot to be cautious about.

The estimated revenue gap for fiscal year 2012 had been roughly $70 million. The Joint Fiscal Office and the Department of Finance and management will be revising the gap figures in the next few weeks.

The good news, however, is temporary, state officials say. They expect tax receipts to remain low or falter over the course of the next 12 months.

Overall, the preliminary estimates show that revenues went up by $120 million in fiscal year 2012, according to Reardon. In fact, there is enough money in state coffers to meet unanticipated needs for next year and consider socking more money away for a future rainy day, according to state budget writers.

Lawmakers should keep the revenue increase of $40 million in perspective, Shumlin said. While revenues are up $120 million in fiscal year 2012, the overall projected revenues of $1.157 billion are 4 percent below pre-recession General Fund levels, Shumlin said.
The Legislature reinstated the so-called waterfall. When additional revenues come in, they are already slated for a list of prioritized programs, payments and reserves.

The state is setting aside $7 million for anticipated federal funding reductions; $3.6 million for interest on the state unemployment insurance debt (the actual cost is $2.5 million); $3.88 million for a revenue shortfall reserve and $25.42 million for the human services caseload reserve.

State officials project a total of $17 million in budget adjustments including: $4 million for disaster assistance; $1 million for loans to businesses damaged in the spring floods; $1.7 million to compensate for computer server savings that were not realized; $3 million for additional litigation costs incurred by the office of the Attorney General; $3.3 million that will likely be absorbed if the Vermont State Hospital is not recertified by the federal government and $2 million in workforce reductions through a new furlough program that were not achieved.

As part of those adjustments, the state will not make cuts to Choices for Care the long-term care program designed to keep elderly Vermonters at home and out of nursing home facilities, officials said. The waiting list for the Choices program has been eliminated.

Gov. Peter Shumlin suggested that lawmakers agree to bank any other leftover revenue or savings this year in the state stabilization reserve fund (rainy day funds). He wants to raise the 5 percent reserve level, or about $54 million, to 8 percent, or about $90 million, of the General Fund budget.

Any additional monies beyond that, he said, should be used to build a replacement facility for the Vermont State Hospital. Reardon earmarked about $15.9 million for the project.

Other Shumlin administration spending suggestions include $3 million for health insurance costs for teachers retirement; $10 million for information technology projects, including the all-claims Medicaid database and a corrections case management system; and a $2.9 million minimum set aside in the budget stabilization reserve.

The state has already set aside $61 million in the Agency of Human Services caseload reserve, which the state uses to draw down the federal Medicaid match.

Medicaid expenditures, meanwhile are projected to be $44 million less than originally budgeted.

Stephanie Barrett, a budget analyst for the Joint Fiscal Office, told lawmakers that anticipated enrollments in Medicaid programs were lower than expected. The actual number of Medicaid patients is 3,500 below the original estimate. In addition, utilization of state-sponsored health care services has fallen. The estimated actual budget for Medicaid expenditures in fiscal year 2011 was $1.354 billion; the total is $1.446 billion in fiscal year 2012.

Reardon told lawmakers he thought the base Medicaid spending should be lowered for the 2013 budget.