Campaign for Vermont blasts growth in government spending as “unsustainable”

Tom Pelham. Photo by Nat Rudarakanchana

Tom Pelham. Photo by Nat Rudarakanchana

Campaign for Vermont, a 501(c)4 “nonpartisan” advocacy group, is criticizing state government spending trends as “unsustainable” over the long term, calling for a renewed political focus on fiscal stability.

In a 30-page report analyzing state budget trends from 2008 to 2012, the group highlights a $908.7 million or 22 percent increase in the state budget compared to 2008 levels.

The report targets the Agency of Human Services. Tom Pelham, a group co-founder and former state tax commissioner, told reporters at a Montpelier press conference that despite a 29 percent increase in human services spending since 2008, life for poorer Vermonters hasn’t significantly improved. Pelham presented charts and statistics which he said showed a widespread political failure to carefully control spending or reform state services for efficiency.

“It’s very clear, I think, to most observers that we do have a structural imbalance in our state budget, between what is going on in spending and what is going on in the underlying economy and the demographics in Vermont,” Pelham said.

Increases of more than 10 percent in state spending, in sectors like education, health care and human services, are disproportionate, Pelham said, compared with small percentage increases in population and median household income.

“We basically have double digit spending growth and an underlying economy over a five-year period that is growing in the low single digits at best,” he said.

Pelham argued that the state’s stagnant economy didn’t justify those spending increases. “If we stay on this course, this unsustainable course, we will be in trouble,” he said.

Doug Racine, secretary of the Agency of Human Services, said the economy the Shumlin administration inherited had been influenced partly by Pelham, who served in the Douglas administration as a “key player,” from 2008 to 2010.

“When the Shumlin administration came in, we found a lot of problems, and thought that Vermonters were not getting the same quality of services they were getting previously,” Racine said.

Racine cited improvements to the Adult Protective Services division, oversight of contracting, and the mental health system, as ways his agency had improved the lives of Vermonters.

“Perhaps it’s a fair criticism to say that over those five years, Vermonters weren’t doing better,” said Racine. “But I’d say there was a downward trajectory when Gov. Shumlin came into office, and an upward trajectory now.”

Racine said declining federal revenues and increasing caseloads together accounted for the rise in human services spending. In a struggling economy, he said, residents tend to rely more on state services.

“That’s the conundrum we face in human services,” said Racine. “Generally, when the [state] revenues are the lowest, the needs are the highest. … The need is great out there. Middle class folks are struggling with costs of health care, housing, fuel, and all of that, so we’re seeing increased demands to help people struggle with the necessities of life.”

“We took $8 million from a reserve, in the winter, and put it into fuel assistance, so that people can get the fuel they need so they don’t freeze in the winter,” he said. “That’s some increased spending.”

Pelham said Govs. Richard Snelling, Howard Dean and Jim Douglas all kept spending increases at a sustainable level, but he fell short of criticizing Gov. Peter Shumlin for being fiscally irresponsible.

Responsibility for increased spending and little reform rests with lawmakers from both parties in recent years, he said, who failed to make tough spending cuts. Pelham says generous federal stimulus funds totaling more than $920 million from 2009 to 2012 made the Legislature complacent.

Significant human services cuts are widely expected to be unveiled in the governor’s budget later this week. Despite pointing out the 29 percent AHS budget increase as a cause for concern, Pelham said he wouldn’t necessarily back cuts to AHS.

Pelham says he prefers saving money through efficiency reforms, but cuts must remain an option.

Campaign for Vermont wants Shumlin to limit this year’s spending increase in the budget to inflation plus population growth, or about 2.55 percent. The group also urges the governor to improve the state’s benefits management system and to end cost shifting.

Link to the Campaign for Vermont budget white paper.


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Comments

  1. rosemarie jackowski :

    Question…what percent of the 29% went to the people who need it – and how much went to administrative costs.

    It is very clear that the quality of life for many Vermonters has decreased. Everything has gotten harder for many families and the elderly. Health care, transportation, even dental care is now considered an unattainable luxury. Meanwhile the school tax is going up 19%. Now some will lose their houses.

  2. John Greenberg :

    2008. Hmm. Rings a bell. Oh yeah, Wall Street Crash followed by “The Great Recession.”

    There wouldn’t be any relationship between the worst recession in more than half a century causing massive unemployment and an increase in human services spending, would there? Nah.

    • Lance Hagen :

      John, before you ‘blow it off’ and blame it all on the ‘The Great Recession’, keep in mind that from FY’01 to FY’11 the AHS budget grew by 216% (~$1B in FY’01 to ~$3B in FY’11).

      Add to that, since 1991 Vermont’s enrollment in Medicaid has increased by 115% as of 2009 (compared to the US at 67%) and now has earned the second highest enrollment in Medicaid (only Washington DC beats them)

      So discounting Vermont’s increasing dependency on government services as part of ‘The Great Recession’ is incorrect. It has been going on for a long time.

  3. Jason Farrell :

    “Pelham said Govs. Richard Snelling, Howard Dean and Jim Douglas all kept spending increases at a sustainable level, but he fell short of criticizing Gov. Peter Shumlin for being fiscally irresponsible.”

    “Pelham said he wouldn’t necessarily back cuts to AHS.”

    “Pelham says he prefers saving money through efficiency reforms, but cuts must remain an option.”

    Now there are some awesome examples of this group’s “nonpartisan” advocacy. Way to go out on a limb and take every position possible in the argument, Mr. Pelham.

    While I sincerely appreciate Mr. Pelham’s commitment to public service in the state of Vermont, I believe this administration would do well to look for answers to our challenges from someone other than the gentleman who served as Deputy, and then Commissioner of Housing in the Snelling Administration (1989-1991); the Deputy, and then Commissioner of Finance and Management under Governor Howard Dean (1991 to 1994 and 1994 to 2000); the Tax Commissioner for Governor Jim Douglas (2003 to 2009); and finally, Governor Douglas’ Secretary of the Vermont Agency of Administration (2009-2010).

    I believe it’s imperative that Vermont’s political leaders seek out different voices and new viewpoints to our challenges than those the Campaign For Vermont is offering if we’re to meet the challenges of the coming decades.

  4. kevin ellis :

    Greenberg is right. And to blame implicitly the current legislature for this spending is ridiculous. The current Speaker is hardly a runaway spender. Likewise, the governor, who is cheaper than the Speaker in his spending practices and unwillingness to raise taxes. Tom’s beef should be with the forces unleashed during the Bush years via unfunded wars and tax cuts and unrestrained Wall Street chicanery. The legislature and the governor do what they must to protect people and keep society moving ahead. To try and tag them as spenders will never sell.

    • Tom Pelham :

      Kevin…given your standing as an inside the Montpelier beltway lobbyist, I can understand your solicitousness of the Speaker, the Governor and the other powers that be under the Golden Dome. But I hope, for your clients’ sake, that behind closed doors you offer them a more thoughtful and realistic profile of what’s going on in Montpelier other than the lame bromide of it’s the “Bush years”.

      All the data in our report came from sources routinely used by state leaders, including the JFO, the state Department of Labor, the new Department of Financial Regulation, the Consensus Forecast of the JFO and Administration, Tax Department statistics, among others. This data clearly reveals that state spending and state cost shifts have grown substantially over this 5 year period while the underlying economy and demographic profile of the state has been quite stagnant. This is unarguably true. Such a separation of the state budget from the underlying economy may be recoverable if occurring for a year or two, but five years of such a divide results in a substantial gap that pushes the state’s fiscal affairs toward the danger zone.

      Your statement as to whether or not the Legislature and Governor are “spenders” requires a relational benchmark. You can see from the data in the Campaign for Vermont analysis that the spending growth rate in the six years prior to 1991 was 9.2%, but in the 8 years following 1991 had dropped to 2.6%. Given this, it’s clear that the Legislature and Governor are not “spenders” of the order of the Kunin Administration, but I don’t believe their frugality matches that of Governor Dean and the Legislatures of his era. You can see from the Becker polling data in our report that as the spending grew in the pre-1991 period, the favorability ratings of Governor Kunin plummeted, I believe because the spending was too much, and not too little.

      In the 2010 budget process, then Senator Shumlin and Speaker Smith led the charge to override the Governor’s veto. The general fund equivalent difference between the Governor’s budget and that of the Legislature was $94 million. Whether this additional spending makes them “spenders” I don’t know. I do know that if our base spending today was lower by even half that amount, the budget woes we will listen to on Thursday from Governor and Legislature would be severely diminished; maybe even allowing him to pay for child care without raiding the Earned Income Tax Credit.

      Or maybe you might consider the use of the $437 million in federal one-time “stimulus” funds received from 2009 through 2011 to cushion the effects of the recession. Rather than use these funds to bridge the worst of the recession, the Legislature also used it to ramp up spending. For example, the substantial increases in LiHeap and 3 Squares eligibility during this period, then supported by “one-time” federal stimulus money, must now be supported with state funds, adding to the budget woes you’ll observe on Thursday.

      Whether or not the Governor and Speaker have, as you describe, an “unwillingness to raise taxes” also requires a bit of forgetfulness. In 2010 they passed increases worth tens of millions in the income tax by almost eliminating the capital gains exclusion and limiting state, federal and sales tax deductions to $5,000. Then, in 2011 there’s the $27 million raid on the education fund, pushing property taxes up along with the multi-million laundry lists of tax increases in Act 45, including taxes on hospitals, nursing homes, home health agencies, cigarettes and insurance claims, among others. Plus, don’t forget the $56 million increase in Medicaid cost-shift onto hospitals. So all this adds up to be a substantial increase in burden on Vermonters. But, I guess if one were the Speaker and the Governor who raised all this revenue, it would be a relief to know there are folks like you Kevin who didn’t notice, thus offering more opportunity for further tax increases to close the current budget gap.

      And finally, there are the missed opportunities. During recessions, families and businesses alike have to figure out how to do more with less; but not so much our state government during this recession. Both the Legislature via its Challenges for Change process and the Administration via Tiger Teams and its proposals for education reform put forth numerous ideas that could save money to redirect to priority areas of need. But, with that boatload of “one-time” federal stimulus funds in the pipeline, it was much more politically expedient to avoid the messy business of change that often upsets the status quo and its special interests. So, these reform opportunities are not in place today to help address the budget woes we’ll listen to on Thursday.

      One conclusion that can be drawn from the information in the Campaign for Vermont’s report profiling the pre-1991 spending trend relative to the post-1991 spending trend is that our leaders are not victims of circumstance. The Kunin folks chose to spend at the excessive rate of 9.6% and the Dean folks chose to spend at the more frugal rate of 2.6%. To blame our current circumstances on the “Bush Years” is rather bush-league, don’t you think? Especially in view of the events at the state house profiled above.

  5. Lance Hagen :

    All the commentators here want to play the ‘blame game’ ….. being it Dean, Douglas, Shumlin, the legislature, Bush, Wall Street, wars and list goes on.

    But no one can deny that the populace of Vermont has become very dependent on government services at a rate that is higher than the rest of the country

    • Lee Russ :

      I’d love to see the data on that claim.

      One thing that comes immediately to mind is that many states, especially in the south, simply do not provide much help for their poor and starving citizens. When that policy gets translated to financial statistics, I’ll bet it means that these states are considered to have nobly prevented their populace from becoming very dependent on government services.

      As I said, I’d love to see your data.

      • Lance Hagen :

        Lee, you want data sources. Here you go

        For Medicaid enrollment:

        http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Data-and-Systems/Downloads/2011-Medicaid-MC-Enrollment-Report.pdf

        http://www.statehealthfacts.org/comparetable.jsp?ind=199&cat=4&sub=52&yr=92&typ=2&sort=a

        The must have updated the data on Medicaid enrollment since I last pulled the data. Vermont is still #2 on the list at 29% of the total population (was 23.3% when I last looked), but Washington DC has been replaced by California at 30%). Note that our neighbors to the east, NH, is at 12%

        For the state spending on AHS (or any other areas of state spending) you will need to wade through archives in the ‘Joint Fiscal Office’
        http://www.leg.state.vt.us/jfo/appropriations.aspx

        • Jane Stein :

          Making health care available to poor people is baaadd juju why?

          • Craig Powers :

            It is not a bad thing Jane…it is just the constant lies from Montpelier that our premiums will be lower, etc. Kind of like Obama saying Obamacare would cut premiums by $2500 when in fact they are much higher and the taxes are steeper!

        • Lee Russ :

          The first link r.e. Medicaid is irrelevant. The second link does show that VT is second in terms of percentage of its population that receives Medicaid, but that really doesn’t tell you how much the state spends compared to other states. This link:
          http://www.statehealthfacts.org/comparemaptable.jsp?ind=183&cat=4

          shows how much the states spend per person on Medicaid, with separate figures for recipients who are aged, disabled, adults, children and, finally an overall figure. In none of those categories is Vermont the highest or particularly close to being the highest.

          As for the AHS spending, the web site you sent me to only has budget info from 2010 forward, and even that info isn’t arranged very usefully.

          Based on these sources, I don’t see a lot of support for a claim that “the populace of Vermont has become very dependent on government services at a rate that is higher than the rest of the country.”

          • Lance Hagen :

            Mr. Russ,

            My statement had to do with the number of people that have come dependent on government services. Your counter seems to focus on how much $ they are receiving for these services. This is an entirely different argument.

            If I use enrollment in Medicaid as my metric, in 1991, 10.8% of the Vermont population was enrolled. In 2009 that number has increased to 29%. Compare that to the US, which was at 9.9% in 1991 and 20% in 2009. Comparing Vermont’s numbers to the rest of New England, they were at a level of 10.4% in 1991 and in 2009 they are at 20% (which is the same as the US 2009 number).

            So my statement on the ‘number of people that have come dependent on government services’ is valid, unless you can produce numbers the counter this statement.

            Since you brought up the amount $ received for these services, you should consider another set of numbers.
            Look at the ‘Total State Expenditures per Capita, SFY2010’ for each state
            http://www.statehealthfacts.org/comparetable.jsp?typ=4&ind=32&cat=1&sub=10&sortc=1&o=d
            As you can see, Vermont is ranked 8th, when ranked from highest to lowest per capita expenditures.

            The second thing you need to look at is whether the State has an economy that can support its state expenditures. If one looks at the ratio of the GSP (Gross state product) to State spending and compares this to other states, Vermont does not look good. If ranked, Vermont was 43rd out of the 50 states. If you compare Vermont to the rest of New England, they are in a better position than Vermont by a factor of 52%. So this means that more states have an economy that can support their level of state spending than Vermont.

            So my message is, that if you want to increase state spending, you better build a economy that can support it. If you don’t, you are traveling down the path of ‘unsustainable’ state spending.

          • Lee Russ :

            Mr. Hagen,

            While the amount of benefits doesn’t directly affect the speed at which the number of recipients is growing, the amount certainly does affect the overall burden to the state, and the sustainability of that burden.

            There are a lot of statistics in your last post, but only the state expenditure per capita has a supporting link. That figure, of course, is for total state spending, not just human services. Note that most of the states ranked above and near Vermont are also rural, which certainly does tend to drive up spending per capita.

            The data on Medicaid enrollment by state for 1991 and 2009 would be interesting, but there’s no link. The same goes for the ratio of state spending to GSP.

            In any case, the real issues seem to me to be:

            1. Is Vermont spending its budget wisely? That includes an analysis of both human services expenditures and human services needs, of where else the state is spending, and where the state is foregoing revenue through the various tax credits, rebates, reductions, and forgiveness.

            2. What is wrong with the economy of the country as a whole, and of the state in particular, that so many citizens (of VT & of the country as a whole), are unable to support themselves without help?

            3. How much of the increased state spending here and elsewhere is a function of the decades-long efforts to cut federal spending, forcing states to pick up the slack?

            4. What do we–the state and the country–do about a foundational shift in the world economy which has send millions of US jobs overseas, and seen millions more created overseas which would have previously been created here, producing what appears to be record corporate profits and individual wealth while taxing that wealth at rates far lower than historical precedent?

            No one wants an unsustainable state or country. But the analysis of our problems needs to be a lot broader than looking just at state expenditures, and certainly broader than looking just at state human services expenditures.

          • Lance Hagen :

            After ‘railing’ on me for not providing links to the data I used

            You make positions statements, without any supporting data, much less links.

            I am getting the feeling that any data or analysis is not of any interest to you.

          • Lee Russ :

            Mr. Hagen, I didn’t “rail on you,” I said I’d be very interested in data. I’ve followup up every link you provided, read the info at the link, and tried to respond reasonably to the data I found there.

            I made no “position statements” at all as I understand that term. I stated what I believe (and clearly indicated it was a belief, not a statement of fact) to be the questions that I think need to be answered by all of us.

            I’m not sure why you seem to be upset.

  6. Lee Russ :

    I think the report blew any semblance of trustworthiness and objectivity with its claim that the slow growth of Vermont’s population was “a key fact acting to constrain the growth in demand for services.” Really? How disingenuous. As others have pointed out, the segment of the population needing help to stay alive has grown considerably thanks to the financial meltdown and decades of extreme (mostly federal) policies on taxes, business and financial regulation, and the desirability of transferring millions and millions of jobs overseas. THAT is what drives the human service budget growth, not the expansion of the total state population.

    This “nonpartisan report” is very partisan and, frankly, not much of a report. Had Mr. Pelham really been interested in compiling useful information, he could have done so. This report, however, lacks definitions of many crucial terms and categories, and lacks consistent parallel comparisons that might actually be useful.

    It does make it possible for media to headline some scary claims, and certainly provides fodder for other partisan groups who want to take isolated pieces of “information” from this report that suit their agenda and present them as legitimate facts from a presumably authoritative and neutral “report.”

    In other words, it allows people who don’t like government spending to rail against government spending and, by doing so, to add public pressure on the current governor and legislature. I doubt that the timing of the release–days before Governor Shumlin’s budget address–is coincidence. And for all of Mr. Pelham’s attempts to appear open to health care and similar changes, this “report” will add pressure to provide health care on the cheap.

  7. Scott Mackey :

    I agree with the fundamental premise of Mr. Pelham’s argument, which is that spending pressures in Vermont exceed the ability of our economy to pay for them. We’ve been able to paper over this problem with borrowed money from a bankrupt federal government, but this federal largesse must come to an end our else the US economy is going to collapse under the weight of debt.

    If you look at the trends in revenue collections, there should be cause for concern whether you are a fiscal conservative who agrees with Mr. Pelham or whether you are a liberal who supports even more state spending. Even with relatively low unemployment, personal income and sales taxes are growing very slowly slowly right now. Vermont’s very progressive income tax structure typically produces a lot of money during periods of low unemployment.

    I live in Waterbury, and we (property taxpayers) are about to be hit with 8-10% increases in school spending, debt repayment for the new fire stations plus a possible bond for new town offices, and a very expensive upgrade to our sewage treatment plant that will increase our water and sewer bills. I suspect that local property taxpayers, not just in Waterbury but across Vermont, are going to be hit hard this year. This leaves less tax capacity for new state taxes and programs (like a 10 cent increase in heating oil for weatherization, for example).

    I have very real concerns about the growing level of dependence of Vermonters on state and federal programs. The state I grew up in — proud, self reliant Vermonters — no longer exists. The 10 part series about the Kingdom that Digger ran over the last month really tells the story. I don’t blame the people struggling in poverty for the structural changes in our economy. But I do think that the ease with which Vermonters can get on public programs can sometimes hinder people from working or moving to places (in Vermont or in other states) with more economic opportunity.

    However, it doesn’t matter what I think. People that agree with my views are now in the minority in Vermont, and we’ve elected a legislature that is committed to providing a generous welfare state. I’m fine with that.

    But all of us need to make sure that our economy can support school spending that is among the highest in the country; an extremely generous social services safety net; a new single payer health care system; a transportation system that allows Vermont to attract employers and does not destroy our vehicles after a few years on our roads; and all the other programs that advocates want to spend public dollars on.

    If not, then all the good intentions in the world are not going to generate the revenues to sustain the spending path we’re on. And by the way, I hope that I’m soon proven wrong
    and Vermont’s economy begins to grow the way it did in the late-80s and mid to late 1990s. But I’m afraid federal fiscal policy and our debt crisis are going to be a drag on the Vermont and US economies for years to come.

  8. I wish to address RAcine’s remarks re fuel assistance. This is often given out to those who do NOT need it, ie welfare recipients who rent housing with heat included. I am one of those landlords providing not only heat but quality heat. See our website listed above. I just had a tenant quit paying me rent, broke their lease, owe me $1800 plus,just had her second illegitiamte baby on welfare, ie medicaid, and was counting on the extra welfare dollars for the baby starting in springtime. What a racket. Why are folks who have heat included given fuel assistance to then spend. This tenant of mine was getting fuel assistance last year while living iwth her boyfriend at her parents’ house?What kind of fraud is VT running? I think it is called bleeding the taxpayers for the lazy lying slugs. These tenats of mine left a pile of 23 bags of trash when trash removal weekly is included, yet they were just too lazy to get it out there. They also stole my fire extinguisher and took the hooks out of the kitchen closet! They left a pigsty of the place, destroyed stove plates and left a burned board inthe laundry room with lots of cigarette butts on the floor in a NON SMOKING apartment. These people are absolutely total leeches. They have no incentice to pay bills, get married and accept responsibility and be good tax paying citizens wo contribue rather than taking.VT makes me sick, adn needs some serious reform.I am tired of working for nothing to pay for thes slugs. Names-Alyssia Perry ad Clifford Plummer. Ech.

    • Lee Russ :

      I can’t possibly address the specifics your situation, obviously, but I can say this:

      1. If you know of abuse of any public program, by all means report it.

      2. I don’t know what fuel assistance program you’re talking about, but the LIHEAP program certainly doesn’t throw money around needlessly; these people desperately need help or they freeze.

      3. Are the individuals you describe typical of Vermonters who receive some form of public benefits? I doubt it.

  9. Dave Bellini :

    The bulk of the state budget is K-12 Education and Human Services. In Human Services, the cost goes up because the caseloads go up. In Corrections, the cost climbs as the number of offenders climbs. The DOC budget went down slightly last year as the inmate population leveled off.

    The outlier however is K-12 Education. The trend is less and less students BUT higher and higher spending. That’s just nuts. FOR EXAMPLE: I live in Montpelier, which has seen a dramatic drop in the number of students over the years. The cost continues to soar however. This year it will require two votes because spending is going up so much. Montpelier schools have had classes with as few a one student. We continue to run three separate schools, keeping the same footprint as we had in the 1960’s. There used to be more students in the high school than there is currently in the entire school system, yet we keep running three buildings. This is just one example, I’m sure there are other examples of waste in other districts. And while we all like to shout “local control”, we don’t shout “local pay.” So it’s local control but it’s widespread pay. There’s this denial that K-12 should shave costs. “It’s for the children!!”

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