Midway through the fiscal year the General Fund budget is on track – despite the major blow Tropical Storm Irene dealt the state.
Jim Reardon, commissioner of the Department of Finance and Management, is recommending a $25.5 million mid-year adjustment in the General Fund budget this year, and all but $646,316 of that total is related to Irene recovery costs.
Reardon told the House Appropriations Committee on Monday that the unanticipated expenditures will be fully covered by a variety of funding sources, including a $7.3 million revenue upgrade, a $7.75 million transfer from the Agency of Human Services caseload reserve fund, and a smattering of funding from small sources that added up to $10.8 million.
The adjustments to the state’s $1.4 billion General Fund do not include anticipated expenditures in the transportation budget for damaged state and local highways or bonded funding from the Capital bill, which will likely be used to pay for infrastructure damage to the Waterbury State Office Complex.
“We have made every effort to meet the needs that we’re currently experiencing and at the same time preserve as much funding as possible for unknowns,” Reardon said.
Reardon said the state could face more financial exposure if insurers or the federal government don’t come through in the future with funding for Irene-related costs.
“This is based on what we know today,” Reardon said. “We’re making huge assumptions – whether we get insurance, whether we get FEMA money. There’s a lot to be fleshed out right now, but the state’s liability is a lot less than we thought it would be.”
As the state winds up the first six months of fiscal year 2012, the coffers are, under the circumstances, relatively full. The Shumlin administration has a nearly $100 million cushion for what could be another bumpy period as the state continues to ride out part two of the recession. Reardon said the Legislature and the Shumlin administration set aside $10.8 million in anticipation of federal cuts to programs; about $22.9 million remains in the Agency of Human Services caseload reserve fund; and the budget stabilization fund is at $58.11 million. In addition, about $18 million will be available in the ERAF or Emergency Relief Fund for costs associated with Irene.
Maintaining these reserves is crucial, Reardon said, as the state continues to weather potential volatility in the economy due to the European debt crisis and likely future federal cuts in programs.
“We need to position ourselves as best we can to react to some unknown events so we can allocate money where we need it … and address potential adverse impacts on the economy and the state budget,” Reardon said.
One of those unknowns is just how much the federal government will slash the Low Income Heating Assistance Program. President Barack Obama has proposed cutting the program, which subsidizes heating fuel for low-income Americans, in half at a time when fuel prices are up by 30 percent. Congress is expected to make a decision on funding for LIHEAP on Dec. 16 when it must pass the next Continuing Resolution, or short-term budget proposal. (The rancor in Washington is such that passage of a yearlong budget, as is per usual, has been impossible for the last year.)
Martha Heath, chair of House Appropriations, said the leaders of the House and Senate are sending a letter to Vermont’s congressional delegation, which has been fighting to extend LIHEAP benefits. She asked Reardon to outline the Shumlin administration’s stance on state support for the program.
Three House committees – Natural Resources and Energy, Ways and Means and Human Services – are meeting to discuss the LIHEAP shortfall in a daylong hearing today.
Reardon said the governor wants to continue to pressure Congress to provide sufficient funding to meet the need. He suggested that the Legislature wait and see what happens this week before it considers action. If the state begins to back fill for federal funding of programs for the needy, “LIHEAP is a lousy place to start,” he said. Substituting state money for federal funds in this instance, he said, would send a mixed message and could become business as usual for other federal reductions in future.
Into the details
The Budget Adjustment Act proposal is a complicated spreadsheet that lists all the “ups and downs,” or the areas in state government that haven’t met budget targets midway through the year and are therefore either costing the state more or less than originally anticipated when the Legislature passed the Big Bill, or the General Fund budget, last May.
The midyear correction often includes indicators of budget pressures that will also be addressed in the coming fiscal year. The Budget Adjustment Act for 2013, however, also includes a number of one-time costs associated with Irene.
A few of the Irene-related changes include:
• $20 million for the Emergency Relief Fund for unanticipated costs
• $800,000 for the Vermont Economic Development Fund to leverage loans for small businesses
• $2.972 million in 10 months of lost Fee For Space payments from the Department of Human Resources, the Agency of Human Resources and the Agency of Natural Resources
• $1.75 million for the Petroleum Cleanup Fund for above ground storage tank oil spills due to Irene
• $122,000 to subsidize a bus from Waterbury to temporary office spaces for state employees in Chittenden County
• $691,257 in reimbursements for Vermont National Guard and Vermont Air Guard emergency response supplies and equipment
Other budget adjustments of note:
• $1 million reduction in the homeowners’ property tax rebate
• $302,825 increase in renters’ property tax rebate
• $3.2 million increase in Corrections expenditures for 190 inmates housed out of state
• $1 million reduction in revenues for the Fish and Wildlife Department from hunting and fishing licenses
• A $3 million set aside for the State Liability Fund to cover anticipate legal costs associated with the Vermont Attorney General’s U.S. Supreme Court data mining case and other litigation
• $3.836 million in “unachieved” labor-related savings
• A $1.139 shortfall in revenues from Act 250 applications
Reardon said the increased corrections costs were largely due to an increase in detainees, fewer eligible inmates for the state work camps and a delay in the renovation of the state’s prison facility in Franklin County.
The finance commissioner said he was pleased that the state met $9.6 million of its $12 million target for labor savings.
“I view the cup as half full,” Reardon said. “You have to challenge yourself to hit the upper limit … that we’re coming up short is no big deal. It’s $9.6 million we wouldn’t have otherwise.”
Editor’s note: Additional material was added to this story at 5:48 a.m. Dec. 13, 2011.
