The $5.5 billion price tag is about 4.1 percent more than the current year, which ends June 30.
Gov. Peter Shumlin’s recommended budget included $14 million from a tax that would have been levied on every health insurance claim; lawmakers rejected that proposal and trimmed new taxes on a handful of products and services to $5.79 million.
Legislators scaled back Shumlin’s proposed 2 percent increase in reimbursement rates for health care providers who accept Medicaid payments. House budget writers instead proposed a 0.75 percent uptick. The Senate tried to restore the 2 percent rate increase; the House and Senate budget conferees settled on 1.6 percent, effective Jan. 1.
The Medicaid reimbursement issue came as no surprise. Lawmakers increased reimbursement rates by 3 percent in fiscal year 2014, and they knew Shumlin wanted to continue the gradual increase in compensation for services that are reimbursed at lower rates than the cost of care. The gap in Medicaid payments contributes to the cost shift and rising insurance prices. Vermonters who buy private health insurance pay the difference in higher premiums.
This year the budget addresses funding for retired teachers’ health care. State Treasurer Beth Pearce proposed a plan to pay for the roughly $28 million in annual health care costs. For years, most of the money has been borrowed from the teachers’ retirement fund, which has undermined the stability of the pension plan.
Pearce assembled stakeholders in the fall of 2013 to develop a funding solution. They came up with a combination of General Fund appropriations, employee contributions, school district fees ($1,072 annually for each new teacher hire), federal grant allocations and a one-time, low-interest, $28 million General Fund “loan.”
The plan is not loved by municipalities and school boards, who say they should not have to shoulder the burden for a benefit they never negotiated. But few lawmakers balked at the impact of the proposal on local property taxes. They were more concerned about $485 million in interest payments that come due in 2024 than they were about incremental increases in the local property tax burden.
The plan was approved, including a $28 million interfund loan from the General Fund cash pool. The loan is expected to be paid back by 2023.
To help speed along the repayment schedule, lawmakers rejiggered the budget “waterfall” provisions that dictate where end-of-year surplus revenues should flow. Under the new plan, half of all General Fund surpluses will pay down the loan.
The other half will be split evenly between Rainy Day Reserves and the Education Fund. The rainy day fund also will be built up by General Fund revenues from a new legacy insurance license, created in February.
A newly unionized group of home health care providers negotiated a roughly 2.5 percent raise from the state, at a cost of about $2.2 million just a few weeks before the session ended. The eleventh-hour contract negotiation took lawmakers by surprise and the tax and budget-writing committees had to go back to the drawing board to find more funds, though Secretary of Administration Jeb Spaulding said legislators should have known the payout was coming.
Other budget decisions had more to do with policy goals — especially economic development and health care reforms.
economic development
The $5 million Vermont Enterprise Investment Fund that Shumlin announced in April originally counted on surplus funds. But April revenues (announced in May) fell far short of expectations and administration officials scrambled to find a way to backstop the new business incentive tool. Revenues from personal income were down $19 million in April; an unexpected estate tax windfall for about the same amount helped to soften the blow.
Budget writers appropriated $5 million for the Vermont Enterprise Fund from the estate tax windfall; any excess estate money will go to the Higher Education Trust Fund.
The fund gives Shumlin the discretion to provide $4.5 million in cash incentives to a large business located in Vermont that is threatening to leave or close up shop. The fund also includes $500,000 for entrepreneurial lending through the Vermont Economic Development Authority.
Other economic development line items include:
• $1.5 million for working lands investments;
• $50,000 for a new domestic export program to help Vermont businesses sell their products across state lines;
• 6 percent increases in funding for regional development and for regional and municipal mapping;
• $50,000 additional funding for the Vermont Employee Ownership Center.
Education
In an effort to support sound decision-making about education, legislators this spring devoted $3.5 million from a supplemental property tax relief fund to pay for wide-ranging educational data initiatives.
The budget also:
• Fully pays for the Education Fund transfer, which includes a $7 million increase.
• Instead of growing the General Fund transfer to the Education Fund by just the cost of inflation, a new formula allows additional transfer increases that are based on the sustainable growth of General Fund revenues, which is far from guaranteed in the current fiscal year.
• The Vermont Student Assistance Corporation also got a funding increase — 1 percent starting in January, bringing its total appropriation to about $19.5 million. The Vermont State Colleges also will see a 1 percent funding increase over fiscal year 2014.
• Some assistance and pilot programs for low-income students also made it into the budget bill at the last minute.
Health and human services
Human services comprises by far the largest portion of the state budget: $3.6 billion all-told. Most of that is covered by nearly $1.3 billion in federal funds and another $1.27 billion in Medicaid Global Commitment Funds. The rest is paid for by a combination of general funds, state health care resources and other smaller sources.
Included are:
• $1.2 million in substance abuse and mental health funding for Reach Up clients;
• Child care eligibility updates, plus additional funding for Step Ahead Recognition System (STARS) to rate the quality of child care centers;
• Funding for Vermont Psychiatric Care Hospital in Berlin, slated to open in late summer or early fall.
More policy-oriented provisions also were written into the budget:
• A new legislative Health Care Reform Oversight Committee is created to monitor the economic and financial aspects of pending health care reforms.
• Substance abuse programs have a new incentive for documenting their success by establishing performance measures. If they can link program success to savings in other areas — for example, clients avoiding emergency room visits by getting clean — then those savings can be transferred to the substance abuse programs to support expanded services.
Other initiatives didn’t get traction this session:
• A proposal to transfer ADAP to DVHA took some lawmakers and administration officials by surprise. It was dialed back to merely studying the potential for a move in the future.
• Lawmakers hope more sophisticated data collection in the future will help agencies better integrate weatherization and home heating fuel subsidies for low-income households.
Affordable housing
• Vermont’s rental subsidy program is doubled to $1 million;
• $900,000 is allocated for temporary emergency housing;
• Emergency Solutions grants for shelters are boosted by $300,000;
• Family supportive housing gets $200,000;
• The Vermont Housing and Conservation Board sees an 8.1 percent funding increase from the property transfer tax.
Other budget provisions
• The Transportation Budget will hit a record high $686 million in fiscal year 2015. Most of the transportation infrastructure improvements are federally funded.
• The Vermont Center for Geographic Information, a nonprofit corporation, will become part of the Agency of Commerce and Community Development.
