Editor’s note: This op-ed is by Oliver Olsen, the Republican representative for the towns of Jamaica, Londonderry, Stratton, Weston, and Winhall in the Vermont House of Representatives. He serves on the House Ways & Means Committee. He can be contacted at www.oliverolsen.com.
Although much has been said about the efficiency of this year’s legislative session, we should be judged by the substance of our accomplishments, rather than procedural mechanics. All is well and good when the trains run like clockwork, but there isn’t much point to getting on a train that arrives at the wrong place at the right time.
Until this year, we had a sustained period where the Legislature was under the control of one political party, and the governor’s office was controlled by another. During that time, there existed a healthy tension between the executive and legislative branches of state government. That tension ensured that a broad range of ideas were brought forward, subjected to rigorous debate, and given serious consideration; usually giving way to a common sense solution in the middle.
This year, there was much more certainty to the order of business in the legislative process, and much of what came before the Legislature had a predetermined outcome. The governor outlined his agenda; while legislative leaders choreographed and executed a near flawless plan to pass that agenda, culminating in an on-time adjournment last Friday. With the outcomes certain, a meaningful deliberative process yielded to the efficient transaction of business.
That being said, here is a look at the good, the bad, and the ugly of the 2011 legislative session.
In January, Gov. Peter Shumlin unveiled a budget proposal that included modest reductions in the growth of state spending – something of a necessity, given the projected $176 million budget gap we faced. Some of the governor’s proposals were not warmly received by all, but apart from a few modifications by the House and Senate, the Legislature more or less swallowed the tough medicine. The governor and legislative leaders rejected calls by some to raise income tax rates, and also ignored imprudent gimmicks, like drawing down on the General Fund stabilization reserves (often mischaracterized as the “rainy day” fund). The governor and legislative leaders demonstrated leadership on issues that were sometimes at odds with the winds of populist sentiment. And that’s a good thing
Now, the bad.
At the start of the session, Shumlin pledged not to support any new or expanded broad-based taxes. At the time, he defined “any tax that affects all Vermonters” as a broad-based tax. By that definition, the governor’s budget lived up to that promise – technically speaking. Instead, we ended up with a number of new and expanded taxes that will impact most Vermonters.
The cigarette tax increase may have grabbed the headlines, but there are a few tax increases that will impact Vermonters more broadly. For starters, the Fiscal Year 2012 (FY12) budget includes a permanent reduction in general fund support for the state’s education fund ($23M in FY12). When state funding for education is reduced, the property tax has to be increased to make up the difference, which is what the Legislature did this year (the first increase in the base rate since Act 68 was passed).
Obviously this will exacerbate the property tax burden in districts with higher school spending, but even in districts that reduced spending this year, property tax rates may still increase, since the governor’s budget soaks up much of the savings that local school boards delivered. In effect, we are balancing part of the state budget on the backs of local property taxpayers.
Non-profit hospitals will be expected to net out with a $5 million hit from increased provider taxes. While some healthcare providers will pay for this tax hike by cutting back on services or eliminating jobs, much of the tax increase will be pushed onto consumers, through higher fees, and ultimately higher insurance rates.
Even more direct are $11 million in new taxes on health and dental insurance claims. Nearly all private health insurance in Vermont is provided by non-profits, such as Blue Cross & Blue Shield and MVP Health Care, or self-funded plans offered by some employers, so this tax will ultimately be shifted onto the backs of consumers, in the form of higher premiums.
No, these are not broad-based taxes; they are targeted taxes – aimed squarely at working Vermonters.
And finally, the ugly.
After resolving a budget gap of $176 million for fiscal year 2012, we face a projected gap of $70 million in fiscal year 2013. Complicating matters further are the continuing challenges that exist with the federal budget, and the impact this may have on state funding. Some of Vermont’s largest areas of spending depend on significant revenue streams from the federal government. For example, of the $1.16 billion budgeted for Vermont’s Medicaid program in FY12, the federal government will contribute about $671 million – and that is just one program. Picture what would happen if the federal government reduced state funding by 5 percent or 10 percent, and you can imagine how difficult our job could become next year.
