Editor’s note: This commentary is by Tom Pelham, formerly finance commissioner in the Dean administration, tax commissioner in the Douglas administration, a state representative elected as an independent and who served on the Appropriations Committee, and now a co-founder of Campaign for Vermont.
Housing activists and legislators, at a press conference covered by VTDigger, scolded Gov. Peter Shumlin for making a $2 million proposed cut in the Agency of Human Service’s (AHS) Weatherization Program. The press conference was also a case study of how advocates and legislators link arms under our capitol’s golden dome to protect bureaucratic turf at the expense of Vermont’s low-income folks, taxpayers and ratepayers alike.
Rather than fault the Shumlin administration, activists, legislators and AHS leaders might look back to 2010 for an alternative when this problem could have been avoided in the first place. Gov. Shumlin should insist that Rep. Tony Klein act upon his suggestion that “legislative committees should tighten up current programs and redirect existing expenditures toward low-income weatherization programs” and have a bill accomplishing this on the governor’s desk by session’s end.
In 2009, as the Great Recession squeezed Vermont’s economy and state and family budgets, the Legislature smartly initiated Challenges for Change, a program to identify reforms in state government to both preserve vital services while saving money. The Douglas administration complemented this effort with Tiger Teams, comprised of capable state employees who volunteered to research and make recommendations to improve state government effectiveness. With almost $1 billion in one-time federal stimulus money available to Vermont for fiscal years 2009 through 2012, our leaders had the time and money to comfortably design and transition reforms in state government before the federal stimulus funding pipeline went dry.
One of the Tiger Team reports, Energy Policy Considerations for a New Economy, was issued on Jan. 6, 2010. This report was thoughtfully crafted by a knowledgeable team of state employees. It’s worth the read. The team examined the eight major energy programs sponsored by state government including Efficiency Vermont, the Weatherization Program and the Low Income Fuel Assistance Program.
With regard to the Weatherization Program, the Tiger Team found, as did the Public Service Board itself, that while low-income Vermonters contribute to state-sponsored efficiency programs through their electric rates, they are least likely to benefit from these programs. The report says:
“Even with the Weatherization program, it is estimated that between 70,000 and 84,000 households may not receive electric efficiency services. These families fall within a service ‘dead band,’ and are also negatively impacted because of the ‘rate effect.’ Briefly, the rate effect occurs when electric consumption goes down (for instance, as a result of more efficiency deployment), causing rates to increase (because the system costs are generally fixed). The net result for a non-participant is they pay for efficiency they don’t receive, while also having to pay more for higher rates. In effect, this section of the population falls within the ‘dead band’ of the program.”
Further, the team found:
“… there could be a value opportunity to transfer the Weatherization program from the state to Efficiency Vermont. As noted above, there are weaknesses in Efficiency Vermont’s business model, especially when serving the low income community. For that income band, incentive programs are not effective simply because lower income people often do not have the disposable funds to participate in efficiency measures. Further, they are adversely affected by both the electric rate surcharge and rate increases due to reduction in statewide energy use. Moving Weatherization to Efficiency Vermont could help change the institutional focus and provide better services for low income people.”
Given the millions in new money flowing into select programs, the creation of new programs and the savings potential achieved through consolidated management, there should be no need for a press conference to guilt trip the Shumlin administration.
Unfortunately, along with Challenges for Change, the Legislature in 2011 shelved the Tiger Team reports, including the one on energy. The easy but short-sighted path of one-time stimulus money flowing in from Washington trumped the political difficulties of enacting program reforms. With regard to Weatherization, the Legislature did strengthen some language, found here, to encourage better communications among three “silo” programs, Efficiency Vermont, the Weatherization Program and the Fuel Assistance Program, but no substantial changes have been made.
But now the federal stimulus funds have dried up and the Legislature’s chickens are coming home to roost. With stimulus funds, the Legislature expanded eligibility and eliminated the asset test for the Fuel Assistance Program. Not surprisingly, more people signed up requiring the Legislature to replace $6 million of lost stimulus funds with state general funds. Weatherization has not been as lucky as evidenced by the Shumlin administration’s $2 million proposed cut to this program.
Yet, while cuts are proposed for low-income weatherization, millions of new dollars are flowing to expand or create new energy and efficiency programs, mostly funded by ratepayers. For example, the energy efficiency charge on electric bills just increased by 7.2 percent, providing more funding for Efficiency Vermont. You can read about this here and here. With legislative support, the Public Service Board recently ordered a new $5.6 million program, funded by a surcharge on all electric meters, providing a 25 percent discount on service and electric charges up to the first 600 kWh for GMP customers at 150 percent of poverty or below. You can read about this new program here. GMP has contracted with the Agency of Human Services to run this new program and the agency recently created eight new positions in response. Further, the House recently expanded the net-metering program by almost fourfold and the state treasurer just announced a new $6.5 million lending program for residential energy efficiency projects profiled here.
If the above millions in increases and decreases appear a bit scattered, even contradictory, well they are! In 2010, the Legislature missed the opportunity to integrate, rationalize and better focus resources available for energy conservation and low-income subsidies. It’s significant to note that the Community Action Agencies and the Agency of Human Services, in defense of their bureaucratic turf, resisted the Tiger Team recommendations. With the status quo preserved, our energy programs remain loosely cast across the landscape of state government. While subsidies for using heating fuels and electricity are increased or newly created by millions, programs to help low-income households conserve energy and save money are cut by millions. Yet, programs at Efficiency Vermont and net metering, which serve middle and upper income households and businesses, are expanded. So much for efficient efficiency!
Given the millions in new money flowing into select programs, the creation of new programs and the savings potential achieved through consolidated management, there should be no need for a press conference to guilt trip the Shumlin administration. If the Tiger Team’s suggestion four years ago were embraced by Community Action Partnership agencies, AHS and the Legislature, a $2 million gap for weatherization would easily be accommodated. Within Efficiency Vermont alone, in addition to recent rate increases, their 2012 annual report shows spending of $1.32 million on administration, another $1.38 million on strategic planning and another $1.28 million on marketing. Further, in 2011 they had six administrators’ compensation at over $120,000 and over $6.7 million in independent energy efficiency consulting costs.
The governor should hold firm while insisting that Reps. Klein and Mary Hooper, their advocate colleagues and his agency appointees address this funding problem not with more spending, but with structural reforms that make our energy and efficiency programs more efficient, with priority given to the needs of low-income households.
