The Shumlin administration is asking departments and agencies to submit level-funded budgets for the coming fiscal year.
In a letter, Justin Johnson, the secretary of the Agency of Administration, urged commissioners and secretaries to be “extremely cautious and restrained” as they develop budgets.
The budget instructions for fiscal year 2017 “reflect the state’s fiscal outlook,” Johnson wrote. While the state is expecting a moderate increase in tax receipts, revenues won’t meet current state expenditure levels.
That’s because spending pressure continues to build in two major areas: Human services and education.
The state has experienced a gap between state spending levels and tax receipts every year since 2009. State expenditures have been roughly 5 percent, while revenues have come in at 3 percent.
The Shumlin administration and the Vermont Legislature have balanced the past five budgets by using one-time funds, raising the property tax rate and reducing spending increases in certain areas. Last spring, Gov. Peter Shumlin and lawmakers agreed to modest increases in income and sales taxes that will generate about $30 million in annual revenue.
Johnson says the administration has “progressively reduced the use of one-time funds since the Great Recession.” The use of one-time funds, which come from a variety of sources, to balance the budget is widely considered to have perpetuated the spending gap.
The memo was released on Tuesday. Typically, budget instructions are issued to secretaries and commissioners in October and budgets are submitted about a month later.
This year budgets must be submitted by Sept. 25. Budget adjustment requests for the current fiscal year are due at the same time.
Secretaries and commissioners are expected to absorb employee retirements and pay increases for state workers. They are also required to submit performance measures as part of the budgeting process.
In fiscal year 2016, state departments and agencies were required to find additional labor savings and make adjustments based on a new retirement incentive that was to lead to a reduction in force of 300 employees.
Departments and agencies can refill up to 25 percent of the positions vacated by retirees, but must obtain approvals from Johnson. Departments will know how many workers have taken the incentive, but they won’t know which employees are leaving state government until late September. The retirement incentive program begins in October.
Jim Reardon, commissioner of the Department of Finance, said that “for this exercise, please assume that none of the positions vacated through the retirement incentive program in your department will be refilled.”
“This may require your Agency or Department to scale down or eliminate programs that cannot operate without the necessary personnel,” Reardon wrote in the budget instructions.
Reardon advises commissioners and secretaries to estimate federal funds conservatively, and if there is reduced federal support for programs, they should assume they won’t be replaced “unless you can demonstrate they meet a critical state policy goal.”
