As of the beginning of December, both the administration and the legislative Joint Fiscal Office, estimated that pressures for state spending in FY 2017 will outpace revenues by approximately $58.5 million. A revenue update, scheduled to be taken up by the Emergency Board on Jan. 19, will give a clearer picture of where things stand. Gov. Peter Shumlin will deliver his annual budget address on Jan. 21.
The Shumlin administration is putting together a balanced budget that does not rely on one-time funds, according to Andy Pallito, the new commissioner of the Department of Finance and Management. Pallito compared the use of one-time funds to dipping into a savings account instead of a steady stream of revenue that is replenished year over year.
Pallito said there will also be no increase in the number of state worker positions across agencies and departments.
Rep. Mitzi Johnson, D-South Hero, expects that the budget for the next fiscal year will include many of the same upward pressures as budget adjustment. Medicaid, and high rates of utilization, will be a major focus of the committee. Johnson says the impact of the opiate epidemic will be another theme.
One year into her tenure at the head of the House Appropriations table, Johnson has requested that other House committees take some time to review policies and programs that are under their jurisdiction to see how effective and how much of a priority they are.
Policies and programs, though not money focused, are interlaced with the state budget she said.
“The availability of money puts brackets around what sort of policy the state can engage in, and the policies that are passed drive sections of the budget,” Johnson said. “They’re interlinked.”
First up for the money committees will be the budget adjustment bill — an annual piece of legislation in which lawmakers approve changes to the current year’s spending bill.
The House Appropriations Committee got a jump on their work for the session, holding three meetings in December to get started on the Shumlin administration’s proposed budget adjustment — which would increase the state’s total expenditures by $88.9 million.
Medicaid is the primary driver of the increase, where utilization and other factors have caused the program to run over-budget by tens of millions. Some $67.4 million will go toward funding Medicaid over-spending.
The state will pay for part of that sum using $10 million from the General Fund and $10.3 million of one-time money out of the state health care resources fund. The federal government will foot the rest of the bill.
The remainder of the budget adjustment request — approximately $21.5 million in all funds — will go to a variety of other expenditures. That includes $7 million for the Department for Children and Families, some $3.3 million of which will come out of the General Fund, which will in part cover the cost of hiring new social workers for the 1,370 children now in state custody.
The administration is also asking the Legislature to authorize $1.55 million in spending from the Clean Water Fund, which will go to fund activities approved in November by the board that oversees the fund.
Rep. Janet Ancel, D-Calais, who chairs the House tax writing committee, said that she does not anticipate a repeat performance of last year, in which lawmakers put together a $30 million tax package.
“We passed a fairly significant revenue bill last year, and I don’t anticipate that we’d be doing a significant revenue bill this year,” Ancel said. “I hope not.”
Early on in the session, Ancel expects the House will push for a change to the variable cap on school spending that was passed as part of Act 46, the omnibus school district merger bill. The House Education Committee took the lead on the legislation last year, and Ancel’s committee will be responsible for approving changes to the cap, which was designed to limit school spending increases to 2 percent in the coming year.
“There’s a strong feeling that whatever we do we need to do quickly,” Ancel said. “I agree with that.”
Her committee will likely continue work on a bill they began work on last year that relates to the estate tax, she said.
At the other end of the building, Sen. Tim Ashe, D/P-Chittenden, chair of Finance, said Medicaid will be “the primary issue” facing the Legislature. But new revenue to fund health care in Vermont “would be the last resort,” he said,
“Our problem in terms of health care spending in the state isn’t that we don’t spend enough,” Ashe said. “It’s that we don’t spend it efficiently.”
Senate Finance will continue work on reviewing tax expenditures. The state doles out more than $1 billion in tax breaks each year and legislation passed three years ago requires legislative reapproval of the loopholes.
Ashe’s committee will also spend time looking at Act 46, utility rates and telecommunications.
Contract negotiations with state employees have been underway since the summer, but talks broke down in October.
The Vermont State Employees Association and the Shumlin administration were far apart, with the union pushing for a 13.4 percent increase over three years, and the governor starting out with a negative number. The union declared impasse and a fact finder has been brought in to find middle ground.
The two sides are also at odds over the total number of state workers. In this budget year, Pallito, the finance commissioner, says the administration is aiming to come out with a net zero increase in the number of state employee positions across state government.
In the FY2016 budget, lawmakers approved a plan to find labor savings using a combination of a retirement incentive and a reduction in positions. About a dozen employees were laid off in the summer.
The union wants an increase in the number of employees in certain sectors as a matter of worker safety, according to Steve Howard, executive director of the union.
While the administration has already put forward a plan to hire an additional 28 social workers, the union would like to see a total of 53 new social workers, Howard said.
The union would also like the state to follow up on a recommendation in a report delivered to the Legislature last year to increase the number of correctional officers in Vermont’s prisons to reduce reliance on temporary workers and overtime hours.
Howard says the union believes the proposals could “save the state money if they could just get over the short-term view of the position cap they have.”