McClaughry: Playing thimblerig in Montpelier

Editor’s note: This op-ed is by John McClaughry, vice president of the Ethan Allen Institute.

The street game of thimblerig, more commonly known in this country as “the shell game”, has a long and fascinating history. But wherever found, it invariably has one objective: to separate a “mark” – a gullible bystander – from his money through sleight of hand.

The “shell man” sets up a folding table with three walnut shells. As a crowd gathers, herded by the “shills”, the operator performs some slick hand movements, and invites the mark to win his bet by picking the two shells which do not cover the pea. Actually the pea has migrated into the operator’s palm, to magically appear under the shell not chosen. Sorry, pal, you guessed wrong.

This ancient game has reappeared on State Street in Montpelier. The chief shell man is the dexterous Gov. Peter Shumlin. He is aided by numerous shills in the large building called the Statehouse.

A year ago Shumlin badly needed for other purposes the $27 million General Fund dollars assigned by law for transfer to the Education Fund. If he diverted it to other General Fund purposes, a $27 million shortfall would appear in the Education Fund. The only way of making it up would be to increase the two education property tax rates, for the first time since Act 60 was enacted in 1997. Not popular!

So rather than doing that, Shumlin came up with a subtle plan called “rebasing”. It permanently redefined the transfer formula base downward by $27 million. That way he could divert the money arguably without breaking the law.

But that of course ensured that the Education Fund would suffer the shortfall. To cure that, the Miscellaneous Tax Bill now pending before the Senate raises the residential school property tax rate from 87 cents to 89 cents per $100 of Grand List, and the nonresidential (business and second home) school property tax rate from $1.36 to $1.38. That will shift more school costs onto property tax payers who are not likely to figure out what was being done to them. Sorry, pal.

Last month the House, to its credit, acted to replace the $27 million Shumlin took by “rebasing”. But the Senate Appropriations committee, chaired by Sen. Jane Kitchel (D-Caledonia), has a very different idea.
Kitchel declared that the House proposal for “putting the money in the Ed Fund doesn’t guarantee any relief to Vermont property taxpayers.”

She might have added, but didn’t, “besides, we have lots of things we would rather spend it on than ship it off to the Education Fund.”

So Kitchel won’t support the House plan to repay the purloined $27 million, and at the same time she and the Senate’s Democratic majority will in all likelihood vote to raise both school property tax rates. To shift attention from these awkward facts, Kitchel offered this novel proposal: If there is a General Fund surplus next year, then half of that surplus would be sent back to residential property taxpayers, but not businesses or second home owners, sometime in 2013.

Sen. Robert Hartwell (D-Bennington) didn’t buy it. “This is a short term fix,” he said, correctly. “I disagree that putting more money in Education Fund won’t help property taxpayers.”

To believe that here’s actually a pea under this shell, you have to believe that there will actually be a FY 2013 surplus. With General Fund spending increasing by over five percent a year, there would have to be a breathtaking upsurge in the state’s economy to put the pea under the tax rebate shell a year from now.

In addition, the elephant in the Appropriations room is the fact that the two big state retirement funds are over $2 billion out of actuarial balance. Indeed, the retired teachers’ health care benefits are being drained out of the fund instead of being covered by annual appropriations.

Admittedly slicing a $1.3 billion state general fund pie among so many claimants is a challenging task. But the people of this state would be better and more honestly served if its budget operators swore off intricate shell and pea games like the Shumlin rebasing, and making empty election year promises of future tax rebates out of funds never likely to materialize.

As Wikipedia says of the old shell game, “the game should not be mistaken for an honest game. Through very skilled sleight of hand, the operator can easily hide the pea without the mark’s seeing him or her do so.” That’s why shell men always have to keep moving, one jump ahead of the law.

Comments

  1. Steven Farnham :

    If, as Mr. McLaughry suggests, it’s a “shell game,” then it can’t be the Governor’s prestidigitation is very sneaky, because even Mr. McLaughry figured it out. What’s more likely the case, is that here, as in the world over, budgets are tight, gaps have to be filled, and there are differing views on how to fill them.

    I don’t know why any self-respecting Republican would fault anyone for adding a couple pennies to the property tax. Prior to the passage of Act 60, a piece of legislation about which certain people still rant, Republicans loved the property tax. They did everything in their power (successfully, I might add) to prevent shifting education funding to the income tax. And rest assured, privately, Republicans still favour the property tax. They love all that is regressive, because it places more wealth in the hands of those who least need it–wealthy Republicans.

    But it’s not their man raising the property tax, so the gloves come off, and the guy in charge must be chastised for all sorts of high crimes and misdemeanours.

    That said, I do recall a certain Republican in Democrat’s clothing who was Governor at the time, who promised to veto any legislation which paid for Vermont education with anything other than “State-wide property tax.” This brought us the legislation the Democrats famously dubbed “half a loaf” that is Act 60.

    And as I recall, a certain junior Senator from Putney was particularly eager to carry water for then Governor I-need-to-appease-Republicans-so-I-can-run-for-President, probably so that if the latter had won the presidency, said Putney senator could ride the Screamer’s coattails to D.C. As it turned out, screaming was determined to be rather “unpresidential,” and said screamer was rubbed into one of the skid-marks or history.

    Could it be that our current governor has his own Presidential aspirations for say, 2016, or 2020? I could hardly say, but I’d say that it definitely is likely that certain invisible, Sylvesteresque hands guide the Governor’s actions (hence his apparent love of the CVPS-GMP merger–and his re-kindled love for the property tax). So there you have it: One Republican calls the shots for Gov. Shumlin, and another tirelessly berates him for doing it. Gee, wish I could be Governor.

    I personally do not favour all that Governor Shumlin does (said CVPS-GMP merger being a prime example), but it sure is tiring to hear the Republicans grouse about him when he is doing their bidding.

  2. David Bresett :

    Typical of right wing think tanks, I hear name calling and maybe some finger pointing, the latter is just imagined. McLaughry’s proposes no solution here other than an underlying message that spells cuts. More cuts from the right. The cuts, which started with the George Bush administration unfunding state municipalities in his early term in office. That’s a fact. And here we are now still trying to make up these draconian cuts up, for the rich to have more. Not to smart.

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