Preliminary consensus figures from the Shumlin administration and the Joint Fiscal Office show Vermont will see $15.1 million in “baseline” cuts to federal funds as a result of the federal sequester in fiscal year 2015.
The estimate for reductions in 2013 and 2014 is about $9.3 million, so far.
The cuts will affect state programs, nonprofits and municipalities.
The direct hit to the state budget is $5 million in 2013 and 2014, and $6.1 million in 2015.
Jim Reardon, commissioner of the Department of Finance and Management, says state departments and agencies must absorb the cuts; the governor will not “backfill” the reductions with taxpayer money.
“Departments and agencies are working to address these reductions within existing appropriations, with shortfalls to be determined,” Reardon and officials from the Joint Fiscal Office wrote in a memo.
John Campbell, Senate President Pro Tem, said it’s hard to tell, at this point, how much of a shortfall the state could be facing because so many of the cuts won’t go into effect until next year, and Congress has yet to pass a fiscal year 2014 budget. In the past, the state has had reserves and money from the federal government to “plug the holes,” but Campbell said that’s “over now.” Vermont’s budget is “so bare bones right now,” he said, that the state “can’t continue on the path of uncertainty that this sequestration puts us in.”
“I hope Congress can finally get out of this game playing mode and understand states are in dire fiscal crisis,” Campbell said. “The federal government has abandoned its obligation to the states.”
The House Appropriations Committee budget sets aside $3.8 million to soften the blow of anticipated sequestration cuts. That won’t be enough, however, to fill the gap caused by the federal reductions.
House Speaker Shap Smith said the cuts were “not that surprising.”
“We’ve been estimating there would be an impact of millions of dollars from the federal sequestration that has come to pass, and we know it’s going to impact our 2014 budget considerations,” Smith said. “We took that into account in the budget we passed out of the House last week, and I think we’re going to have to sharpen our pencils and make sure that we take into consideration the further impact from federal cuts.”
The tax bill the House passed last week, Smith said, was designed to cover potential state shortfalls as a result of federal cuts. The legislation eliminates sales tax exemptions on soda, candy and clothing purchases of $110 or more, raises taxes on tobacco by 50 cents a pack and puts a 0.5% increase on restaurant meals for one year. In all, the plan raises $27 million, most of which will be used to cover holes in the 2014 budget. In year two, the plan raises $32 million as a result of a cap on itemized deductions and the changes to the sales tax; it also eliminates a $15 million employer assessment for the Catamount Health program.
Details on the cuts
The federal government’s fiscal year runs Oct. 1 to Sept. 30. The state’s fiscal year is from July 1 to June 30. The federal sequester cuts that go into effect immediately will have an impact two of the state’s fiscal year cycles, the last quarter of fiscal year 2013 and the first quarter of fiscal year 2014.
There could be more cuts coming for the last three quarters of fiscal year 2014, Reardon said. The amounts will be unknown until Congress passes a new Continuing Resolution. The House of Representatives and the Senate have failed to pass a budget for several years running.
The state’s fiscal year 2015 estimates include a full 12 months and are based on an extrapolation of the partial year sequester cuts.
The reductions will affect three types of federal funding: direct financing of state programs ($6.1 million); funding for state partners in the nonprofit sector ($5.5 million); and grants to municipalities and nonprofits ($3.6 million).
Here is a rundown on the biggest fiscal year 2015 estimated baseline cuts of $15.1 million:
• $680,000 in benefits for the longterm unemployed, plus an additional $500,000 in cuts to Department of Labor programs;
• $3.8 million to the Vermont Agency of Education — $1.4 million in special education funding and $1.1 in Title I academic support programs for low-income students;
• $800,000 to the HeadStart early education program;
• an additional $1 million in cuts to the Low Income Heating Assistance Program;
• $1.7 million to the Vermont Department of Health;
• $1.1 million to the Department of Environmental conservation;
• $164,000 to the fish restoration program, Department of Fish and Wildlife;
• $305,000 for higher education;
• $1.6 million for the Department for Children and Families;
• $1.12 million for the Department of Disabilities, Aging and Independent Living;
• $2.2 million for non-state entities.
The preliminary cuts for fiscal year 2013 and 2014 fall in the aforementioned areas and in most instances are identical to the 2015 baseline. In some cases, however, the amounts are somewhat reduced. The Department of Health, for example, would see a $732,000 hit this year; the Department of Environmental Conservation is facing a $340,000 cut; the Department of Labor will see a total of $800,000 in reductions, including $680,000 in unemployment benefits.
Editor’s note: This story was updated at 6 a.m. and at 6:30 a.m.
