Editor’s note: 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.
[M]arch is generally the middle of Vermont’s legislative session and Vermonters are still looking for remedies on major issues from Statehouse leaders – including balancing the state budget. Unfortunately, this critical area remains trapped by indecision and tepid leadership.
By now, most Vermonters understand the problem. Since 2010, state leaders grew state spending faster than taxes filled the treasury and this despite increases in the income tax through changes in the capital gains exclusion, the enactment of a tax on health care claims, and raiding the education fund of $23 million, among others.
In a recent editorial, Gov. Shumlin would have us believe that the $120 million deficit we now face is the fault of state economists Jeff Carr and Tom Kavet. The governor wrote, “economist had predicted that Vermont’s economy would grow at around 5 percent. Those assumptions were the ones upon which budgets were created and state spending was based. Those assumptions turned out to be wrong.”
Such finger-pointing is ridiculous and further erodes the governor’s credibility. Keep in mind that Gov. Shumlin has long experience under the Golden Dome as a state representative and senator, including membership on the Senate Finance Committee during the Dean administration. The governor is experienced enough to not blindly follow the advice of economists, but to look independently at underlying demographic and economic indicators, all of which have been in the sub-3 percent growth rate in recent years.
Yet, despite these indicators the governor allowed spending to grow excessively from 2010 to 2015 at these annual rates: general funds (5.3 percent), special funds (5.9 percent) and health care resource and Catamount funds combined (7.8 percent).
Budget management is not the economists’ responsibility, it’s the governor’s.
For those who want to better understand budget details for 2010-2015, here’s the link.
The governor’s gambit is becoming clear. His gambles that legislators will not have the fortitude to make the cuts he recommends and in the end will raise the payroll tax and income taxes to bandage the budget gap, with a minor portion of the payroll tax going to mitigate a portion of the Medicaid cost shift to provide the “fig leaf” to justify his $105 million in proposed tax increases.
Despite rhetoric to the contrary, Gov. Shumlin remains firmly on the road of higher spending and higher taxes. Readers can see his proposed spending growth for 2016 here.
On page 32, readers will find the governor proposes the following major fund spending increases in 2016 over 2015: general fund (up 4.4 percent), special funds (up 7.2 percent) and health care resource funds (up 17.6 percent). In order to fund these increases while avoiding a budget deficit, his budget proposal includes cuts to critical human services, public safety and labor contract areas among others. The governor’s gambit is becoming clear. His gambles that legislators will not have the fortitude to make the cuts he recommends and in the end will raise the payroll tax and income taxes to bandage the budget gap, with a minor portion of the payroll tax going to mitigate a portion of the Medicaid cost shift to provide the “fig leaf” to justify his $105 million in proposed tax increases.
Hopefully, legislators are made of stronger stuff. Rather than a one year gambit as crafted by Gov. Shumlin, legislative leaders Mitzi Johnson and Jane Kitchel should craft a multi-year strategy of cost containment coupled with fiscal reforms.
Vermont has traveled this successful path before, as Sen. Kitchel knows having been a key player in the Dean administration. In the early 1990s Gov. Dean held general fund spending essentially flat from 1992-1994 with an actual reduction of 2.15 percent in 1993. This strategy allowed Vermont’s fiscal condition to recover from the 1990 recession by realigning expenditures with revenues. Further, the reward for such discipline was the ability for Gov. Dean to propose and implement important initiatives like the Vermont Health Access Program (VHAP) in subsequent years. Similarly, today a multi-year strategy will reduce pressures for budget cuts and tax increases embedded in Gov. Shumlin’s one-year patch to the state’s fiscal woes.
Finally, VTDigger is lucky to have very bright and engaged readers who may not often agree but keep the conversation informative and lively. Folks like Scott Cameron, John Greenberg, Dave Bellini, Kim Fried, Ron Pulcer, Heidi Spear, Peter Yankowski, Kathy Callaghan, Willem Post, Bruce Post, Don Peterson, David Schoales, Wendy Wilton and Lance Hagen among many others who come to mind.
I urge all of you to scroll through the governor’s proposed 2016 budget linked above and use your talents to ask legislators to explain aspects that look a bit squirrely. For example, why is the Governor’s Office budget up 27.9 percent, Legislative Council up 9.3 percent and the Joint Fiscal Office up 6.1 percent in the middle of a fiscal crisis?
