Lawmakers to return to Statehouse for financial briefing

House Speaker Shap Smith. VTD/Josh Larkin

Legislature to hold daylong session Nov. 10; Joint Fiscal Office and Shumlin administration issue consensus budget for FY 2013

They’ll be back, after all … on Nov. 10. Lawmakers are invited to come to the Statehouse next month. Not for a special session, mind you, but a purely informational “briefing” session.

Legislators will be attending on their own nickel (except for mileage and meal reimbursement) to hear about the havoc Tropical Storm Irene has wreaked on the state’s infrastructure, towns and private homes and businesses – and the state budget. Members of the Shumlin administration will give updates on proposed plans for replacing the Waterbury state office complex, the Vermont State Hospital, and funding and planning for extensive road repairs in the flood-damaged region in the state.

The daylong session will also include a rundown on the state’s tax revenue outlook from Tom Kavet, the legislative economist, and the budget forecast for fiscal year 2013 from the Joint Fiscal Office and the Department of Finance and Management.

Every legislative session has a dominant theme. Two years ago it was the shutdown of Vermont Yankee; last session was the year of health care reform. The coming session will inevitably be the year of Irene. The revenue and budget impacts of the state’s biggest natural disaster since the Flood of 1927 have yet to be determined. One thing is for certain, though: The numbers, the impact and the subsequent challenges to the Legislature will be monumental.

The legislative rendez-vous doesn’t come without some political baggage. The Vermont GOP has derided the Democratic leadership for not holding a special legislative session. In response, Gov. Peter Shumlin has said that in the age of the Internet even informational sessions of the Legislature are unnecessary.

Such briefings, natural catastrophe or no, however, are standard operating procedure for the Legislature in the off-election years. And this year, with the daunting post-Irene costs, lawmakers need time to gather information from the powers that be (as opposed to second hand from the press). A number of committees – housing and general affairs, institutions, transportation and ways and means – have or will have met before Nov. 10, but the legislative leadership decided that the whole General Assembly needed to get on the same page, particularly with regard to Irene, well in advance of the January session.

At this point, the preliminary grand total for Irene damage is $1 billion, and about half — $500 million — is for the state highway system. The state’s share (depending on what percentage the federal government makes available) could be as little as $80 million and as much as $500 million, depending on whether the federal government invests in long-term emergency relief funding for long-term highway damage in Vermont.

Tax abatement for homeowners and business owners who have lost their properties in the natural disaster will also be addressed by state officials at the briefing session. Lawmakers will likely address the 1,200 Vermont households that are now, for all intents and purposes, without permanent housing because of the flood damage Irene caused.

Speaker of the House Shap Smith expects the primary focus of this coming session will be Irene. The development of policy around, say, the federal health care exchanges and the comprehensive energy plan, will be sideshows to the main drama: How to pay for the impact of Irene on the state’s transportation system, private housing, businesses and essential infrastructure like the Waterbury state office complex.

“I think that the message from my perspective is this is going to be another challenging year made more difficult by this really profound natural disaster,” Smith said. “We have some opportunity to shape the policy of Vermont for the long term in our rebuilding effort.”

Commissioner of the Department of Finance and & Management Jim Reardon. VTD/Josh Larkin

Smith said lawmakers and the Shumlin administration should be asking questions about how the state workforce can be utilized, what facilities we really need and how we are going to best serve Vermonters with severe mental illness.

The transportation committees in the House and Senate are generally ignored by the press in a typical year until the final budgets are announced on the floor of each body. This year, reporters will likely dog those committees because of the finance issues at stake.

Smith said the financial implications for the state’s long-range transportation planning are “significant should we be in place where the federal government isn’t helping us out to the fullest extent possible.” “Should that happen, our transportation plan would change dramatically and we will have to put a lot of focus on that,” Smith said.

The state has faced daunting budget challenges over the last three years, and the coming year will be no different. A new consensus budget forecast from the Shumlin administration and the Joint Fiscal Office (the two parties didn’t come to the same budget conclusions until October, as opposed to August as they typically do) includes a $75 million budget gap – and that figure doesn’t include the impacts from Irene, anticipated cuts to the state’s share of federal funds for programs (should Congress pass a budget), the low-income heating assistance program, a new collective bargaining contract with the Vermont State Employees Association and the state’s plans to replace tens of millions of dollars in information technology.

The budget gap projection is a preliminary number that is subject to change. That’s because the state is constantly revising the numbers to reflect changes in federal funding, tax revenues and administrative decisions that reflect the governor’s policies.

In fact, the current projected gap is about $30 million more than the last projection, according to Jim Reardon, commissioner of the Department of Finance and Management, which represents the administration’s point of view, and Steve Klein, director of the Joint Fiscal Office, which reports to the Legislature. The federal Medicaid participation match rate rose slightly, by eight-tenths of a percent, so the state is likely to lose $19.6 million in funding. At the same time, “upward pressures,” or increased utilization of Medicaid- funded programs, have pushed budget costs up by $16 million.

The numbers remain fluid because Joint Fiscal and Finance and Management have not yet finished a joint Medicaid projection.

A $15 million carry-forward from the fiscal year 2012 Agency of Human Services caseload reserve fund will be used to cover costs associated with Irene.

Only $7 million has been set aside to cover anticipated federal budget cuts that have not yet been articulated by Congress. The so-called Super Committee is supposed to release details of its proposals for reducing the federal deficit by Nov. 18.