Editor’s note: There are three video clips from last week’s budget adjustment meetings at the end of this story.
Halfway through the year state government makes sure its budget is on target.
Vermont’s Department of Finance and Management balances savings against unexpected and anticipated costs, and ideally the budget neatly balances out. This process is known as the budget adjustment, and it typically includes a set of routine accounting changes that are approved by the Legislature.
This year, however, the budget adjustment is a prelude to what lawmakers and administration officials predict will be a rocky financial period. The state is seeing an increase of about $5 million in additional, ongoing program expenditures for Fiscal 2010, the current year. Most are directly related to the economic downturn, according to the agency secretaries who gave testimony at the budget adjustment hearings held at the Statehouse last week.
These costs were included in the state’s $150 million deficit estimate calculated by the Joint Fiscal Office, the Legislature’s non-partisan resource for assessing the state’s financial health. The federal stimulus funds, which have helped to keep the state in the black will be discontinued next year, according to Stephen Klein, the director of the JFO. Most of the increased costs listed in the budget adjustment are for services Vermonters are relying on more heavily in the economic downturn.
The question lawmakers will face in the coming session is: Will the state support such programs once the stimulus funds dry up?
Rep. Mark Larson, D-Chittenden, vice chairman of the House Committee on Appropriations, predicts the budget crunch ahead will “be the worst” in decades, but he said he has no doubt that “we will come up with a balanced budget.” “We’ve gone through a lot of easy-to-moderately- difficult decisions in balancing budgets,” Larson said in an interview.
“We’ve taken all the money from the little pockets from here and there. After cutting as much as we have already, it gets that much harder. So it’s both the size and the cumulative effects of the cuts that have already been made in previous years.”
Over a three-day period last week, Douglas administration officials and lawmakers from the House Committee on Appropriations met to review $16.4 million in budget changes for the current fiscal year, July 1, 2009 through June 30, 2010.
The good news: The budget adjustment bill was introduced before the session in an effort to get ahead of the curve for the coming difficult budget negotiations. In that spirit, Jim Reardon, commissioner of the Department of Finance and Management, announced that no major policy changes had been introduced in the budget adjustment process. (In the last legislative session, the Douglas administration stirred controversy when during the budget adjustment process it proposed eliminating the VPharm program, which helps Medicare patients pay for prescription drugs.)
The bad news: The changes cited by Reardon and agency secretaries indicate that demand, and hence costs for services, is growing, and the state doesn’t have the revenue base to support the expenditures in the future. The Douglas administration is looking to cover those costs by spending down its Agency of Health and Human Services surplus and using one-time savings from other areas. So far, only one change in the budget adjustment process has been cause for controversy this year. Some committee members expressed dismay about the administration’s elimination of the municipal planning grant program. (See related story.)
In the minus column
Here is a list of the $16.4 million in additional expenditures cited in the budget adjustment proposal:
- The Department of Corrections has seen a dramatic increase in incarcerations and has placed 118 inmates in out-of-state beds at a cost of $2.64 million.
- The Department of Public Safety Fire Safety Division saw an $880,000 shortfall in receipts for fire inspection fees, in part because of the significant downturn in new construction. Until this year, the division had a surplus, Reardon said.
- The federal government didn’t come through with $600,000 to help subsidize the state’s supplemental Social Security Insurance program, Aid to the Aged, Blind and Disabled. An increase of 280 Vermonters seeking AABD assistance led to a $184,800 shortfall in the program. A total of 14,950 residents now receive the $55-per-month supplemental payment, according Stephen Dale, commissioner of the Department of Children and Families.
- The state also needed to come up with an additional $744,960 to provide benefits for an increase in the number of families seeking General Assistance.
- The Treasurer’s Office lists nearly $1 million in unanticipated costs for health insurance costs for newly retired state employees.
- About $750,000 is needed from the General Fund to cover a shortfall in the state’s Petroleum Cleanup Fund; and $449,166 for the Sarcoidosis Fund, which was created by the legislature under Act 53 in 2008 “to provide benefits in lieu of workers’ compensation to state employees working in the Bennington state office building who are diagnosed with sarcoidosis,” according to the Department of Labor.
In the plus column
Here are some of the one-time funds the state is looking to tap:
- The state raided its $12.9 million piggy bank from the Agency of Health and Human Services. These “caseload reserves” offset most of the $16.4 million. Reardon said the reserves, which once held $20 million, were designed to be used to counteract service needs in an economic downturn. The account will be spent down to about $70,000, Reardon said.
- An estimated increase in Special Education Medical receipts of $2.4 million will be funneled into the General Fund.
- The administration is proposing the elimination of the municipal planning grant program, which would save $408,700.
Reardon summarizes the budget adjustment changes, Part 1.
Reardon talks about the shortfall in inspection fees for the Fire Safety Division, increased caseloads for general assistance to needy families and a growing number of prisoners, and higher health insurance costs for newly retired state employees.
Reardon, Part 2.
Reardon continues his explanation of insurance costs, a change in the state’s debt service requirements and a possible payment to the IRS.
Reardon, Part 3.
Reardon talks about the Sarcoidosis Fund for state employees. He says the state faces “huge exposure” in this area. He also explains why his department decided to use up most of the Agency of Health and Human Services “caseload” reserves, money that was set aside over time to cover increased demand for services in an economic downturn. This money is separate from the state’s rainy day funds.
