Editor’s note: This story has been updated.
Gov. Peter Shumlin unveiled his much-anticipated budget on Thursday to the General Assembly.
The governor, who is beginning his second term in office, floated a proposal that hews to his agenda. His priorities? Cuts to welfare benefits and new investments in health care, education, renewable energy and transportation infrastructure.
Shumlin zigzagged between fiscally conservative proposals, such as cutting welfare benefits, and socially liberal programs, including funding for his signature universal health care plan. The governor emphasized that his budget “matches Montpelier’s appetite for spending with Vermonters’ ability to pay.” At one point, he invoked Republican President Ronald Reagan (and GOP Gov. Jim Douglas) with the line: “There is no better social program than a good paying job.”
The $1.377 billion General Fund proposal fills a $67 million gap between General Fund revenues and expenditures and addresses upward pressures of $138.66 million in new spending, most of which is for human services. The governor balances the budget through a mix of cuts, new revenues and one-time monies. The Shumlin administration covered the projected shortfall with a $33 million carryforward from the Agency of Human Services; $26 million in increases in Special Funds and General Funds; and $8 million in human services program reductions.
The overall budget, including federal funding, is $5.238 billion, or 3.8 percent higher than last year’s Big Bill.
Shumlin’s spending proposal increases General Fund expenditures by 3.4 percent. It fully funds the state’s pension plans for teachers and state workers at the actuarially required level (though it’s not clear how much the governor recommends for retiree health care costs) and maintains three budget stabilization reserves in the education, transportation and general funds.
The Shumlin administration has set aside $75 million in bonding for the Waterbury State Office Complex and the new Vermont State Hospital in its fiscal year 2014 capital bill proposal.
The budget includes several controversial items, including $6 million in cuts to the Reach Up program that provides support for needy families. For the first time, if lawmakers approve the governor’s proposal, the Reach Up program would be capped at five years. Beneficiaries would be required to seek work after three years. The proposal is also retroactive: Anyone who has participated in Reach Up for the last five years would no longer be eligible for the program as of Oct. 1. According to estimates from the Department of Children and Families, the number of Vermont households seeking aid is slated to go up by more than 3,000 this year, from 14,750 to 18,083.
The governor said he and Doug Racine, the secretary of the Agency of Human Services, believe the “biggest barrier to work for most lower income Vermonters is the cost of quality child care” and it is the government’s obligation to “help chip away the benefits cliff for working Vermonters to make sure the next generation has the best chance possible.” Shumlin said the need to reform welfare is long overdue.
“We will not allow Vermonters such as those who are disabled, to fall throught he cracks, but we will ask those who can work to get the training and support they need and get a job,” Shumlin said. “It takes courage to say it, but we must: Benefits for Vermonters who are able to work must be temporary, not timeless.”
The governor reiterated his determination to fund new education initiatives to enhance early childhood education programs and provide more opportunities for Vermonters who want to go on to college. Shumlin called the state’s children his “highest priority,” and tied their success as students to the state’s economic future. “The most important investments we can make to grow jobs and secure prosperity for our children are the education initiatives that I called for in my inaugural address,” Shumlin said.
He also pushed again (in several pages of his speech) to divert $17 million of $26 million in state Earned Income Tax Credit monies from low-income Vermonters to child-care subsidies. The controversial proposal, which shifts money from the working poor to another program for a subset of low-income Vermonters, has been described by Senate Finance chair Tim Ashe as a proposal that “robs Peter to pay Peter less.”
Other investments in education include: $4 million in new money for the University of Vermont and the Vermont State Colleges system (a 3 percent increase or $2.5 million to counteract tuition increases and $1.5 million in Next Generation money); $150,000 in funding for workforce training for 240 Vermonters; $430,000 to fund a new Vermont Scholars program; $400,000 to expand the school lunch program; $400,000 for new publicly funded preschools and investments in a “dual enrollment” system for high school seniors who want to take college courses.
His sole new tax proposal? A 10 percent assessment, on “break open tickets” sold at drinking clubs and bars. Shumlin hopes to raise $17 million from this surcharge, which would be used to shore up the Low-Income Heating Assistance Program ($6 million), an investment in thermal efficiency ($6 million) and a “stable” source of support for the Clean Energy Development Fund ($5 million).
Shumlin has also proposed raising $36.5 million in transportation revenues through a variety of measures, including a 4 percent sales tax increase on gas. Jeb Spaulding, his secretary of administration, told reporters that the governor is giving lawmakers a menu of revenue-generating options based on a recently released report.
The governor has also sidestepped a straightforward mechanism for funding his signature single payer health care plan that will go into effect in 2017. Instead, his administration has offered a variety of proposals for lawmakers to choose from. Critics questioned whether the governor met his statutory obligation to present a definitive financing plan for his controversial universal health care system.
The budget covers the $10 million gap in funding for subsidies for low-income Vermonters who rely on Catamount and the Vermont Health Access Plan for health care and who must enter the state’s health care exchange next year. It also stems cost-shifting from Medicaid to private insurance by increasing Medicaid payments to health care providers by 3 percent. This provision, the governor says, will “lower private insurance premiums by almost $25 million every single year.”
Shumlin is also investing $1.5 million in initiatives for agriculture, forest products and the “farm-to-plate” program.
The governor’s recommendation includes 79 new positions in state government, a third of which are positions at the new Vermont State Hospital, which is slated to come online in the second half of the fiscal year. The Shumlin administration also plans to add 18 new positions to the Economic Service Division of the Department of Children and Families to address steeply rising demand for services.
According to the Department of Human Resources’ latest annual report, the state’s workforce stood at about 7,800 full time employees, earning an average salary of $49,990. In the past decade, state government was at its largest in terms of employees in 2008, with 8,383 employees, about 500 more than today. During the recession, the state laid off about 600 employees.
Collectively state employees worked a total of 177,718 overtime hours, with cash overtime costs coming to almost $20.4 million in fiscal year 2012. Much of the $2.4 million increase from the previous year was associated with the cost of emergency, mental health and transportation expenses associated with Tropical Storm Irene.
The Agency of Transportation had the most employees, at 1,228, with the corrections department a close second and the Department of Children and Families a distant third.
Transportation investments
For fiscal year 2014, Shumlin recommended a $657 million budget for the sizeable Agency of Transportation. Transportation is the state’s third largest expense, after human services (51 percent) and education (25 percent). This year’s transportation budget proposal from the administration represents a decrease of $887,000 from last year’s budget.
The governor said Vermonters are consuming 35 million gallons less gas per year than they did in 2005, which raises the question of how the state can best make up for lost gas tax revenue. The state needs to bolster funding in order to pay for crumbling highway and bridge infrastructure. His administration proposed a 4 percent gas tax option as one way to raise the $36.5 million the state needs to draw down federal funds.
According to the governor’s dashboard, 9.4 percent of the state’s bridges are structurally deficient, with 25 percent of its roads classed as in very poor’ condition in 2011, though the state has made good progress on those fronts since 2010.
Shumlin also outlined a plan to add $11 million towards rehabilitating the western corridor railway, to spur economic development in western Vermont.
Editor’s note: Nat Rudarakanchana contributed to this report. This story was updated at 5:30 a.m. Jan. 25.
