This commentary is by Tom Pelham, formerly finance commissioner in the Dean administration, tax commissioner in the Douglas administration, a state representative elected as an independent and who served on the Appropriations Committee, and now a co-founder of Campaign for Vermont.
[N]ews flash from the Legislature’s Joint Fiscal Office’s (JFO) October Fiscal Focus:
“Developing the FY 2016 Budget will present some difficult challenges. The July FY 2016 forecast for the General Fund projected $1,411.7million in revenue. In addition to this forecasted revenue, there is projected to be $25 million of direct applications and reversions, for total available funds of about $1,437 million in FY 2016. Compare this to the FY 2015 base appropriation, which after the rescission, is $1,424million. This translates into there being only $13 million available for new spending in FY 2016 over FY 2015.” (Emphasis added)
“There are several identified budget pressures that the Legislature will have to manage in FY 2016. First, the federal match rate (FMAP) in Medicaid will be reduced again in FY 2016. Vermont will also begin the phase down of the 2-year, 2.2% Medicaid match rate increase received in both FFY 2014 and 2015 as part of the Affordable Care Act (often referred to as the “Leahy Bump.”) These two Medicaid FMAP issues will result in a $19 million pressure. Additional pressures on the General Fund include pay act obligations of $8.3 million, the base education transfer increase of $8M, and Teachers and State Employee retirement and health care obligations currently estimated at $19 million. Other issues to resolve include the rollout of this year’s pay act, increased Debt Service requirements, possible costs associated with opening the new Waterbury facility, and additional General Fund expenditures to relieve pressure on the Transportation Fund.” (emphasis added)
“Overall, the upward pressures are likely to result in a projected gap in excess of the $70M gap we faced last year when constructing the FY 2015 budget. The JFO is working with the Administration to finalize numbers on the projected gap, which will be presented at the November meeting of the Joint Fiscal Committee.”
The above total $54.3 million before consideration of the “other issues to resolve” and before any additional pressures on state government services such as the Agency of Human Services, which last year alone received $41.4 million in additional General Fund appropriations, post rescission. Given this, the JFO is being unrealistically limited, even a bit coy, about the extent of this fiscal mess. Clearly, baseline General Fund spending pressures will exceed $100 million and with only $13 million available …, well you get the picture.
The key question before Vermonters this election season is can our legislative leaders and governor change their ways and chart a course of sustainable spending.
The key question before Vermonters this election season is can our legislative leaders and governor change their ways and chart a course of sustainable spending. If most incumbents get re-elected this November, can the same people who created this fiscal mess fix it? Alternatively, will they shift the burdens of their bad decisions onto taxpayers struggling to make ends meet, save for retirement, fund a child’s college tuition, pay higher health care premiums and property taxes, and if they’re lucky, enjoy a well-earned vacation or home renovation project, among other private needs? This is the fundamental conflict that arises when sustainable spending principles are violated.
To provide perspective on how our legislators and governor dug their fiscal hole, consider this. Over the past three years, Vermont’s fundamental economic and demographic indicators such as population, gross state product, employment, and inflation have been growing at zero to 2 percent rates. If General Fund spending over the same period had grown even at the relatively generous rate of 3 percent rather than the 5.1 percent rate that it has, and modest efficiencies in state government of only 1 percent annually had been achieved, General Fund spending for the current fiscal year, fiscal 2015, would be over $100 million less, enough to offset the “pressures” the Joint Fiscal Office now laments.
But, our elected leaders chose the less responsible, fiscally undisciplined course and allowed this problem to fester and grow, and now state agency programs and taxpayers alike must face the high and unpleasant price to remedy this fiscal mess during the upcoming legislative session. It’s important that voters find out, before they vote, where their candidates stand on this important issue.
