Remember the alligator mouth? The graph that shows the wide ugly smile of a long-running gap between the state’s revenues and state spending?
State lawmakers and Shumlin administration officials have been trying to shut the gaping trap of this recessionary beast for several years now, but it looks like fiscal year 2013 will be another mouth wide open year for state budget-writers.
Last year lawmakers and the Shumlin administration closed a budget gap of $176 million with a combination of one-time and base cuts; this year they will come face to face with at least $50 million more in reductions.
Revenues have improved over last year, but the recovery from the recession has been anemic, and the big red numbers that could have the greatest impact on the state’s coffers are still great unknowns. At this point, federal budget cuts and the one-time and base or ongoing costs for the state’s share of the Irene recovery are either mushy or non-existent.
But we do know this: The Shumlin administration isn’t taking any chances.
In a memo sent out last Friday, Jeb Spaulding, the secretary of the Agency of Administration, and Jim Reardon, the commissioner of the Department of Finance and Management, urged agency secretaries and department commissioners to scrub their budgets and come up with a 4 percent reduction in spending.
In August, when the Joint Fiscal Office recommended a 3.5 percent increase in state spending to accommodate increases in health care costs, Reardon told lawmakers that the administration would seek a level-funded budget. For the first time in many years, the JFO and the administration couldn’t agree on a consensus forecast. Hence, no new version of the alligator graph has been released for prime time just yet, though Spaulding alluded to a consensus forecast in his memo.
Level funding state spending is still Reardon’s plan, but in order to get there, he says he’s asking all state agencies to look at a 4 percent reduction in spending to counteract increases in some areas of state government, particularly health care costs and retirement benefits.
“We frankly don’t know what will happen at the federal level,” Reardon says. “We won’t be able to backfill every federal cut; we don’t know what Irene base costs will be and we need to accommodate other areas.”
The request is the latest in the fourth year of the Great Recession cycle of reductions in state spending. Over the last three budget years, the state has trimmed 700 workers from state government (about 10 percent of the workforce); gained a 3 percent wage concession from state employees; reduced its contribution to teachers’ retirement by about $15 million a year; closed highway rest areas; put off construction of a new facility for the state’s severely mentally ill residents and eliminated or significantly reduced money for services offered by a number of nonprofit groups.
So where will the Shumlin administration’s managers find the additional 4 percent? Reardon advises them to find a way, especially in light of the fact that the state may have to “revisit funding targets” for fiscal year 2012 and 2013.
Reardon warned: “Further FY 2012 and 2013 adjustments may be necessary based upon revisions to the consensus revenue forecast at the next Emergency Board meeting, unknown federal funding reductions, and Irene-related recovery costs.”
Download a PDF of Reardon’s budget instructions and memo from Spaulding.
