New projections from the Joint Fiscal Office indicate Vermont could have an operating budget gap of $50 million to $70 million in fiscal year 2014.
At the end of the legislative session in May, the state projected a $44 million gap in fiscal year 2014. Since then the state’s revenues have been downgraded by $16.5 million.
The new estimates were part of a legislative update on the state’s finances from the Joint Fiscal Office, the research arm of the Legislature, and Shumlin administration officials.
Jim Reardon, commissioner of the Department of Finance and Management, said the administration has not yet reached consensus with Joint Fiscal on the target number.
The Joint Fiscal Office gap analysis points to short-term budget problems and long-term structural issues, including federal cuts, contributions to retirement funds for teachers and state workers retirement, retiree health care costs, the state’s continued reliance on one-time carry forward balances, the depletion of the tobacco fund, Irene recovery costs and projected transportation infrastructure needs that the JFO says “are significantly higher than current state and federal revenues.”
State officials anticipate significant pressure on the budget from federal funding cuts next year, but it’s unclear exactly where those pressure points might be.
Two programs will see definitely level funding or a slight reduction next year.
Low Income Heating Assistance Program funds from the federal government will remain flat, which means the state will need to invest about $8.4 million in the program this year and next to ensure that Vermonters receive aid.
The state could have to come up with as much as $22 million in additional money for Medicaid in the next fiscal year. The state’s utilization rates are down, but the federal match rate for the program is dropping by 1 percent.
FEMA, insurance reimbursements uncertain
FEMA funding and insurance reimbursements for the replacement of the Waterbury State Office Complex and the Vermont State Hospital, which were damaged in Tropical Storm Irene last year, remain up in the air.
Jeb Spaulding, the secretary of the agency of administration, told lawmakers that the federal government has obligated $130 million in public assistance to the state. Spaulding said FEMA had initially indicated the total projection for public assistance to Vermont could be $200 million. More recently, federal officials have said 98 percent of the public assistance obligation has been met, according to Spaulding.
“Some might read the tea leaves and estimate how much is left for the state hospital and the state office complex,” Spaulding said. “We are told these are not limits, they are just projections. If the numbers are higher or lower, that’s what they’ll be.”
The state’s match for FEMA public assistance is 10 percent. Federal officials have not said whether the state hospital and parts of office complex proposal from the Shumlin administration will meet eligibility criteria for public assistance. Spaulding said the state’s insurer will give the state $50 million to $60 million for stabilization costs for work that has already been completed ($25 million to $30 million) and damage coverage for the Waterbury facility. The state will likely receive about $15 million to $20 million for the new state office building.
The state has about $11 million in surplus monies and $18 million in capital bill funding for the projects. In addition, the state has $12 million set aside in the Emergency Relief Assistance Fund.
In all, about $60 million could be available in state and insurance monies for the projects.
The total cost of the projects, is $170 million, including the state hospital and new facilities at community hospitals for psychiatric patients.
Internal budget pressures
The state also faces internal budget pressures that could surface in the administration’s budget adjustment act proposal in December. Reardon red-flagged areas where the budget could be higher than anticipated, including funding for the state’s prison system and subsidized childcare programs. The state will also likely have to decide whether it will come up with $10 million to $12 million for the Vermont Veterans Home, which faces federal decertification and the loss of federal Medicare and Medicaid funding. Entergy Corp. filed a lawsuit with the state last week over a $7 million increase in a generating tax on Vermont Yankee. It’s unclear how the state will now collect the revenue.
Reardon told lawmakers he will be issuing budget instructions for the fiscal year 2014 budget in the next few weeks. Last year, as part of the annual exercise in belt-tightening, the commissioner asked for across the board reductions of 4 percent.
In anticipation of shortfalls and possible federal cuts, the state has set aside $138 million in eight separate reserve funds. The three largest funds are for the General Fund Stabilization Reserve ($58.11 million) and the Human Services Caseload Reserve ($18.5 million, part of the General Fund), the Transportation Budget Stabilization Reserve ($10.77 million)
It’s this cushion that earned the state praise from Standard and Poor’s, a Wall Street rating agency that on Monday bumped up its outlook on the state’s AA+ rating from stable to positive, according to Steve Klein, executive director of the Joint Fiscal Office.
The $110 million IT project
The Joint Fiscal Committee, which is comprised of lawmakers from Senate and House budget and tax committees, approved 23 new temporary positions for implementation of a new health care information technology system for Medicaid eligibility and management. A matching grant will pay for 66 new positions in all.
The $110 million Health Services Enterprise Systems will replace the 30-year-old mainframe ACCESS system. The federal government will pay for 90 percent of the cost of the project.
The new positions are for the design, development and implementation of the program, which includes the Medicaid eligibility and enrollment, the Medicaid Management Information System and the State Medicaid Health Plan.
Most of the new “limited service” workers will be hired to test the new eligibility system.
In addition, the state has applied for funding for the creation of an information technology system for the health care exchange. The grant would pay for 66 positions for the implementation of the system.
GMP discount program for the poor to be implemented
The Joint Fiscal Committee approved plans for the following budget changes:
The Economic Services Division of the Department of Children and Families will begin identifying Vermonters who are eligible for a reduced-electric rate program. Green Mountain Power is required to offer the service. The division will hire eight new workers to handle the program. The positions will be paid for by the utility. David Yacovone, commissioner of DCF, said the program will be offered to Vermonters whose incomes are 150 percent or less of the federal poverty level. He anticipates 22,000 residents will qualify for the 25 percent discount. Each household will save an average of $252 a year on power bills. The program will also reimburse eligible Vermonters for any electric bills in arrears.
The mosquito control program of the Agency of Agriculture faces a deficit of $280,000. Reardon proposed that the state shift money from a boat registration fund to cover most of the shortfall in anticipation of more pesticide spraying in the spring to ward off West Nile virus and Eastern Equine Encephalitis.
The Department of Buildings and General Services surplus program will begin accepting credit card payments through its web portal. The Vermont Information Consortium, which runs the portal, will receive 1 percent of all transactions; 2 percent will go to credit card vendors.
Two members of the committee voted against the proposal, Sen. Dick Sears, D-Bennington, and Rep. Dave Sharpe, D-Bristol.
Editor’s note: This story was updated at 6 a.m. and again at 6:34 a.m. Sept. 20.