Gov. Peter Shumlin made it clear in his second budget address that fiscal restraint remains one of the hallmarks of his administration as the state’s economy gradually pulls out of the four year recession.
His $1.3 billion General Fund budget includes no new income or sales taxes, and his proposal fills a $51 million shortfall, ending a long slog past year after year of large gaps in state tax revenues and expenditures. The proposal, which will be vetted by lawmakers, appears to sidestep further reductions to state programs, and for the first time since 2009, the state is reinstating 30 classified jobs.
Shumlin told lawmakers on Thursday that his budget makes the “necessary choices to match our spending with Vermonters’ ability to pay.”
“Last year, we made tough choices to close a $176 million gap,” Shumlin said. “Today, I present a budget that closes a $51 million shortfall without raising broad-based taxes on hardworking Vermonters who continue to struggle to make ends meet.”
Peter Shumlin addressing the general assembly. VTD/Josh Larkin
Under the plan, the state’s total budget, including federal funds, and state General Fund, education and transportation expenditures, will hit the high water mark of $5 billion, thanks in part to a large projected increase in federal funding for reconstruction after Tropical Storm Irene.
If Shumlin’s State of the State address last week was a celebration of Vermonters’ collective strength in the face of Tropical Storm Irene (complete with the “I am Vermont Strong” license plate and slogan), his budget address on Thursday was a sober assessment of the work yet to be done to help families, communities and regions of the state afflicted by the natural disaster on Aug. 28.
Irene recovery efforts made the top of the governor’s budget list and added a hefty sum to the bottom line. Federal funding for state highways will increase Vermont spending on roads by about $114.34 million. An additional $2 million will be made available through the Vermont Housing and Conservation Trust Fund as match money for landowners with flood damaged property in certain towns that are going through the hazard mitigation buyout program through FEMA. (VHCB’s funding would go up from $12 million to $13.6 million.)
Shumlin outlined a plan to invest $500,000 in downtown tax credits for municipalities that were flooded by Irene, and he claimed that “each dollar leverages 16 additional dollars in job creation and every million dollars creates 110 new jobs in our downtowns.”
The state will pay the entire share (5 percent) of the Federal Emergency Management Agency match for towns “whose storm damage completely overwhelms their ability to pay.”
His plan invests $45 million in state transportation funds toward paving and bridge projects post-Irene. He is also increasing the state contribution to town highway funds by $1.5 million, increasing the total to $26.5 million.
He asked the Legislature to expedite his proposal for replacing the 54-bed Vermont State Hospital, which was a casualty of the flooding that damaged the Waterbury state office complex. Shumlin wants lawmakers to approve long-term authorization of placements in regional hospitals and a 16-bed facility in central Vermont that he wants to begin construction on this summer.
“I am counting on you to put a bill on my desk by Feb. 17 that implements this plan and moves us from crisis management to quality care.”
The governor emphasized that his proposal would not only enable Vermont to rebuild after Tropical Storm Irene, but also improve job prospects for Vermonters who have seen a decline in personal income.
To that end, he called for investments in economic development efforts and higher education.
Gov. Peter Shumlin delivers his 2012 budget address. VTD/Josh Larkin
The governor has called for $30 million in bonding for the Vermont Economic Development Authority funding for loans to businesses in order to get credit to entrepreneurs “when they need it the most.” Shumlin said he would also fully fund the state’s tourism marketing plans.
A more predictable environmental permitting system is also at the top of his list. He proposed that the state abandon de novo hearings, which enable parties to bring their case anew to the Environmental Court. Instead, he asked the Legislature to require the court to use the commission’s record of the hearing to settle an appeal.
Gov. James Douglas, a Republican, proposed a similar change.
Education and job growth
Nearly a third of the governor’s speech focused on education. He told lawmakers that he would increase the General Fund transfer to the Education Fund by $6 million, and in the same breath praised local school boards for “holding the line” on spending, and “I urge them to do it again.”
“Rising property taxes continue to be a tremendous burden for Vermonters struggling in this recovery and a failure by local boards to hold the line again will result in unacceptable property tax increases,” Shumlin said.
The governor said he is a strong supporter of local control, but he asked lawmakers to consider a plan proposed by Sen. Kevin Mullin, R-Rutland, to consolidate the state’s 60 supervisory unions, which he estimates would save taxpayers about $9 million a year.
Shumlin cited the draft report on Vermont’s equity-based education finance system as proof that Act 68 “has found more success than any other state in converting the regressive property tax into fair education funding.”
Echoing the findings in the Picus report, which was released last week, he urged Vermonters to “move on from the old battles about whether our financing system works” and “do the more important and difficult job of enhancing creativity and quality for every student.”
Shumlin told legislators that elevating the commissioner of education under the purview of the State Board of Education to a secretary of education who would answer to the governor would be key to improving the quality of the school system in Vermont. He also said he wants to see an expansion of public school choice and programs that enable secondary school students to take college credit courses.
The governor called for an $8 million “innovation investment” in new programs at the University of Vermont and the Vermont State Colleges.
General Fund details
Though revenues are expected to grow by $70 million in 2013, it’s not enough to cover the $51 million budget gap and $66 million worth of growth in state General Fund expenditures.
The gap is bridged by a variety of savings in human services. Shumlin is proposing to delay Medicaid reimbursements for autism treatments for young children, which is purported to save $10 million. The Agency of Human Services is also reporting estimated reductions of about $20 million in Medicaid spending due to a drop in caseloads and utilization rates. The agency also has carryforwards of about $20 million in one-time funds, according to Jim Reardon, the commissioner of the Department of Finance and Management.
Lt. Gov. Phil Scott, left, and Sen. Bill Doyle lead senators into the House Chambers on Thursday. VTD/Josh Larkin
The proposal shows a $66 million, or 5.31 percent hike over last year’s General Fund budget. Shumlin officials say $26 million or 2 percent of that increase is the result of an increase in the state’s match for the federal reimbursement rate for Medicaid ($20 million) and a replenishment of the exhausted Tobacco Fund ($6 million).
The administration also taps $10 million from the Agency of Human Services caseload reserve to balance the General Fund budget.
After years of cutting the state workforce (about 660 positions were eliminated by Gov. Jim Douglas and the Legislature during the recession), the Shumlin administration is reinstating or adding jobs. About 30 new positions would be created: 16 temporary corrections officers would become permanent and one new housing coordinator will be hired in the Department of Corrections; an economic marketing position would be added to the Agency of Commerce and Community Development; four workers would be hired for the Agency of Agriculture; the Department of Public Service is looking to employ a chemist and an administrative assistant for a new Datamaster DUI detection system; and the Department of Vermont Health Access is poised to pick up six more employees, in addition to the 17 positions proposed in the fiscal year 2012 Budget Adjustment Act legislation under way.
Though the governor is not proposing income, sales or gas taxes, his plan includes:
* $9 million in new fees for transportation and environmental permits
* A continuation of the higher provider tax, which would go up by one-tenth of a percent to 6 percent and cost hospitals an additional $1.8 million
* A rebasing of the General Fund transfer to the Education Fund, which was put in place last year and permanently reduces the amount of the transfer by about $27 million and drives up local property taxes by nearly 3 cents per of $100 worth of property value.
Other initiatives
The governor made note of a handful of specific programs he wants lawmakers to set aside money for, including an $8 million investment from the Higher Education Trust Fund in projects at the University of Vermont and the Vermont State Colleges. The money came from an unanticipated estate tax windfall of $14 million. About $3 million will be spent on the state’s Low Income Heating Assistance Program.
UVM would receive $4 million for an international center of excellence in complex systems; a workforce re-entry program for science and engineering professionals, particularly women; and an expansion of university-industry partnerships.
The state colleges would receive support for an applied educational institute for agricultural production and food production, a consolidated Community College of Vermont and Vermont Technical Center program in downtown Brattleboro, and a program to enroll high school seniors in college courses.
UVM will not receive an increase in its annual allocation from the state this year, according to Jeb Spaulding, the secretary of the Agency of Administration. The administration has pegged support for the university at $40 million.
A few of the other investments include:
• $3.1 million in the budget stabilization fund, which represents a .25 percent increase in the amount the state would set aside (the rate is currently 5 percent). By the end of fiscal year 2013, the governor wants to have $64.87 million in the fund.
• $200,000 for child pornography investigations to be conducted by the Vermont Attorney General
• $1.5 million in additional funding for the Department of Fish and Wildlife, which has seen a decline in license receipts. The department previously received $900,000 in General Fund support.
• The Department of Corrections has seen a reduction in the number of inmates and Shumlin says the state has saved $2.5 million since last year. He is calling for a reinvestment of $1.25 million of those savings in programs for non-violent offenders.
• $14 million in additional payments toward state workers’ and teachers’ retirements
• $6 million in state payments for the Low Income Heating Assistance Program
• $2.7 million increase in Department of Public Safety expenditures for the Vermont Troopers Association contract and the cost of moving the Datamaster DUI lab from the Department of Health to the law enforcement agency
• $18 million in redirected Capital budget expenditures that would go toward the replacement of the state office complex
