[F]rom health care to bottled water for state employees, lawmakers and the Shumlin administration pieced together a list of suggestions Thursday on how the state could scrape up $29 million to fill another budget gap.
The list aims to solve the latest financial hardship facing the state: filling an $18.6 million void that formed as a result of a revenue downgrade in January.
The downgrade came on the heels of the governor’s budget proposal, which presents options for closing the state’s $94 million gap. According to projections, the state spending will be 2 percent greater than revenue growth for the foreseeable future.
In addition, lawmakers have not been enthusiastic about the governor’s plan to cover a $16 million gap in Medicaid spending with a controversial 0.7 percent payroll tax.
All told, the gap could go as high as $126 million.
Members of the Legislature’s Joint Fiscal Office and the Shumlin administration presented the list for the additional $18.6 million gap to the House Appropriations Committee, which is beleaguered already by difficult cuts in the governor’s original budget proposal.
Committee chair Rep. Mitzi Johnson, D-South Hero, who worked with the JFO and administration financial offices to compile the list, helped solicit suggestions from a broad range of sources.
“This budget will require all of us up here, in forming it, to take a very good hard look at a lot of our loyalties and core values,” Johnson said.
‘Really only bad and ugly’
Indeed, the list, which ranges from the concise to the vague, includes some painful cuts, or, as noted on the list, “good, bad and ugly, but really only bad and ugly.”
The state could save $3.5 million by reducing the operational funding for the Vermont Health Connect exchange, or it could close Southeast State Correctional Facility in Windsor for $1.5 million savings.
Some of the items are less clear — Johnson said that items were added as recently as a half-hour before the meeting. The list offers suggestions to save money with “pharmaceuticals from Canada” and by cutting the membership of the House of Representatives from 150 to 120, but does not offer explanation or estimated savings amounts.
Ultimately, Johnson said, the goal is to solve a systemic budget shortage that in recent years has been patched by using one-time funds, which she likened to paying rent out of a savings account.
“When I look at each one of these individual cuts some of which are very difficult and very painful, I’m weighing that against the ability for us to create a stable government that provides economic stability and a plan moving forward for Vermonters,” Johnson said.
Steve Klein, from JFO, explained that savings from the list total about $10 million more than would be needed to patch the gap to allow lawmakers some flexibility. The governor’s budget includes a 0.7 percent payroll tax that is running into opposition in the House Ways and Means Committee. The tax would increase Medicaid reimbursements to health providers and cover a $16 million gap in Medicaid spending. If the payroll tax doesn’t meet with legislative approval, lawmakers need other options for covering the additional $16 million.
The list is in a preliminary stage, and some of the suggestions may not survive vetting by legislators. However, Klein stressed the graveness of the situation.
“I don’t want to de-emphasize that these are pretty serious things,” Klein said.
‘Everybody’s got to pull together on this one.’
Since news of the downgrade broke last month, the source for the $18.6 million has been unclear. Johnson and Sen. Jane Kitchel, D-Caledonia, who chairs Senate Appropriations, sent a letter to the Shumlin administration requesting a proposal for how to patch the gap by Feb. 13. That deadline passed without a proposal.
After the meeting Johnson said that the effort to patch the gap requires that everybody be “all in.”
“Everybody’s got to pull together on this one,” Johnson said.
Members of the administration have been collaborating with the Legislature on the issue. Finance Commissioner Jim Reardon, who spoke at the Appropriations meeting along with Secretary of Administration Justin Johnson, said after the meeting that the collaborative approach is one of the things he appreciates about Vermont government.
“We work to resolve our problems on a regular basis, together in a bipartisan way,” Reardon said.
Speaker of the House Shap Smith said Thursday that he saw the list of proposals for the $18.6 million gap before it went out, and applauded the joint effort between the Legislature and the administration.
“While we could argue about who could go first and who should go second, I don’t think it really matters,” Smith said. “It made sense from my perspective to get a list out on the table.”
New sources of revenue
In the course of the session, the administration has issued repeated calls for suggestions on how to solve the budget crisis.
The Vermont State Employees’ Association made good on the offer earlier Thursday, presenting a four-point plan to raise revenue, mainly by raising taxes on wealthy Vermonters.
JFO has estimated that under the governor’s proposal, as many as 200 state workers could be laid off.
The cuts under the governor’s proposed budget, VSEA says, will hurt Vermont’s middle class. Instead of cutting human services and jobs, they say the state should turn to new revenue sources.
“We believe you have a moral obligation to ask for a greater contribution from a broad-base revenue source paid mostly by the wealthiest Vermonters who have had all of the economic gains in the last decade,” said Steve Howard, executive director of the VSEA.
The Ways and Means Committee will consider proposals on how to raise new money that might help to close the 2 percent gap between revenue growth and spending. A tax on sugar-sweetened beverages has already been the subject of hours of testimony, as has the payroll tax proposal.
But Gov. Peter Shumlin has said that the problem will not be solved with new taxes.
“The fundamental issue is that state spending is growing faster than revenues. Unless we can work to match spending with revenue growth, we’ll be right back here again next year in the same situation,” the governor’s spokesman Scott Coriell stated by email Thursday. “Raising revenue this year to meet the budget gap does not solve that problem.”
