Bureaucracy meets Occupy?

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

For the first time, the state is pulling back the curtain on the budgeting process.

Last year the Vermont Workers Center, a citizens advocacy group, pushed for a new statute that requires the state to seek public participation in the development of the appropriations bill — before the Shumlin administration presents its annual budget proposal.

In two hearings, one scheduled this evening, officials will explain how the budget is created. The forums held tonight and on Nov. 19, will be livecast through Vermont Interactive Technologies at locations around the state.

The idea is to give ordinary citizens more of a say in how the governor develops his budget — before his formal presentation of the spending proposal in January. Typically, Vermonters get a chance to react to any administration’s spending proposal after the fact. Now, thanks to a change in the law, governors must publicly air their spending priorities before they have fully developed the budget and take into consideration what members of the public want.

Jeb Spaulding, the secretary of the Agency of Administration, will moderate the two-hour plus forums. Public comments will be considered, he says, during the construction of the governor’s 2014 budget recommendations.

“A lot of people don’t understand the budgeting process,” Spaulding said. He sees the forums as an opportunity to educate the public and to give people an opportunity to comment. Nevertheless, the governor’s budget is the governor’s budget, he says. That is to say, “it is the governor’s proposal and it needs to reflect the governor’s priorities. I think it’s understood that the budget they propose reflects what they want to do. On other hand, this gives people the opportunity to make suggestions and help set priorities. It’s a good thing.”

Jim Reardon, the commissioner of the Department of Finance and Management, will begin each of the meetings with a 15-20 minute presentation explaining how the state generates tax and other revenue and how the administration prioritizes appropriations for services and programs. He will also talk about the state’s budget challenges.

“This is a new process and we’re taking it very seriously, and we hope that we’re successful,” Reardon said. “It doesn’t mean going forward we won’t need to tweak it based on feedback from those that participate to improve on the process.”

Paul Cillo, founder of Public Assets Institute, a think tank in Montpelier that specializes in budget and tax policy, helped the Vermont Workers Center push through the provision in statute last year which, in addition to the public participation requirement, includes a statement of purpose for the state’s budget that highlights the economic well-being of Vermonters.

Perhaps more importantly, Cillo says, the new law initiates a different approach to budgeting, using a “current services” model that calculates the state’s expenditures based on what it cost the previous year to provide services to Vermonters. The budget gap — the difference between revenues and expenditures — would then be based on actual need as opposed to an arbitrary calculation, Cillo says.

This year’s budget gap is $50 million to $70 million, according to recent Joint Fiscal Office calculations.

In the past, the budget has been built on a 3.5 percent growth model. Cillo advocates for a 2 percent plus inflation growth rate.

Cillo says over the past 20 years, governors have taken a “manage to the money” approach that starts with revenues and “that’s what guides the budgeting process” instead of conducting a needs assessment to determine “what Vermonters need first.”

“There has been a perception among some in the Legislature that the budget has not been cut,” Cillo says. “If you didn’t cut the governor’s budget, then you didn’t cut the budget, but there is no way of knowing if a governor cut the budget before he even brought it to Legislature. We haven’t been able to discern that because we don’t have a current services budget.”

Building a budget in uncertain times

Just how does Reardon build the state’s $5.3 billion annual spending proposal? Very carefully. Much of the budget — about a third or $1.8 billion — is based on federal money. Education spending and human services, including the state’s correctional system, make up 72 percent of the state’s spending.

Last year the Shumlin administration recommended a General Fund increase of 5 percent. About 2 percent of the increase was used to cover lost tobacco settlement money, one-time carryforwards, a change in the federal participation rate in Medicaid and foster care maintenance payments, among other expenditures.

This year the Shumlin administration has asked departments to level fund their budgets, which in budgeting parlance, Reardon says, “could be construed as a budget cut.” If the level fund holds, state agencies will have to cover upward pressures at current revenue levels.

The specter of federal cuts is the great unknown at this point. Reardon says there are three ways the so-called “fiscal cliff” could affect Vermont: 1. if there is no action in Washington and the federal government starts to bump up against the debt ceiling Vermont’s favorable bond rating could be jeopardized; 2. if federal funding is put through a sequestration process, “we’re not going to be in a position to backfill and there will be some reductions in funding”; 3. action or inaction from the federal government could slow the economy and adversely impact General Fund revenues from personal income taxes.

Tonight’s hearing is from 5:15 to 7:30 p.m. at Vermont Interactive Technologies locations in Bennington, Lyndonville, Newport, Rutland, St. Albans, White River Junction, Williston and Montpelier. For more information, go to http://www.vitlink.org.

The second hearing will be held from 4:45 to 6:45 p.m. on Nov. 19 at the aforementioned VIT locations, plus Brattleboro, Johnson, Middlebury and Randolph Center.

Both meetings will have live streaming; the link will be posted on the Finance and Management’s main webpage at:  http://finance.vermont.gov/home.