Business & Economy

Budget writers say $35 million needed in new revenues

Mitzi Johnson
Rep. Mitzi Johnson, right, chair of the House Appropriations Committee.
Members of the House tax and budget committees commiserated Friday over the bad news: This year, just like last year, lawmakers are having trouble resolving the state’s budget gap.

And this year, just like last year, legislators are looking for a big chunk of new revenue. Last year the Legislature and the governor raised $30 million in new taxes. The nut for fiscal year 2017 is $35 million.

Last year, Gov. Peter Shumlin and Democrats in the House raised broad-based taxes: an extension of the sales tax to include soda and several changes to income tax deductions. No one is proposing increases this year on meals and rooms, sales and income taxes.

The options are limited: a $20 million hike in fees paid by mutual fund companies; $8 million in higher so-called employer assessments for large companies that don’t offer health insurance for workers; a $2.3 million bump in the franchise tax for large banks; and $3 million in miscellaneous fees.

Members of the House Ways and Means Committee squirmed in their seats as they listened to Rep. Mitzi Johnson, D-South Hero, chair of House Appropriations, explain that they needed to come up with more in tax revenues.

Most of the additional money for this budget cycle, $28 million, is for basic budget expenses that have grown as a matter of course. Of the remaining $7 million, most would largely be used for efforts to abate a growing heroin epidemic that is directly affecting families with small children. About $1 million is for boosting Green Mountain Care Board resources.

There is a disagreement between the Fifth Floor and House representatives over $9.4 million lawmakers say should be included in the base budget. The House Appropriations Committee says the governor omitted key expenditures in his recommended budget, including a pay increase for state workers (estimated at $2 million to $6 million, depending on the results of a fact finder’s report and ongoing contract negotiations), pay increases for child care and direct care workers ($1 million each), and funding for the Low Income Home Energy Assistance Program ($4 million).

As House Speaker Shap Smith put it, the governor’s budget “had some gaps in it,” and the 2.35 percent provider tax on doctors and dentists never had support in the House.

“Our choice was to address those gaps which are in spending that is already happening rather than to spend money on new proposals,” Smith said. “We were looking at a different landscape than the landscape that came to us when the governor put forward his budget. We had to make different choices, and it will be an evolving process.”

That landscape, as it appears now, is windswept. The House Appropriations Committee wiped away most of the Shumlin administration’s new spending proposals. Gone is the nearly $1.88 million Next Generation plan, which would have seeded bank accounts with $250 state contributions for newborn Vermonters who might someday want to go to college. Gone, too, is the $500,000 for the Enterprise Fund, which Shumlin has used as an incentive for big business. Not to mention the proposal to speed up court-ordered involuntary medication for mentally ill patients that lawmakers panned on arrival. And really gone is the proposal to extend the provider tax to independent doctors and dentists, which would have raised $4.8 million for a Medicaid reimbursement offset.

Johnson said lawmakers are focused on core state government spending and human services programs. Wherever possible, her committee members are “going really micro” and figuring out, for example, how to cut grants for the Boy Scouts’ annual Veterans Day parade. So far, in spite of the discrepancy between the governor’s budget and the House budget, they’ve found about $10 million in spending reductions from projected increases for fiscal year 2017.

“People are going over every single grant,” Johnson said. “And while we’re doing micro stuff, the real driver is the policies.”

Johnson said everybody hates to spend money on motels as temporary housing, but under state law, the Department for Children and Families is obliged to provide vouchers in order to protect people from freezing on the streets. To alleviate the need for using motels, the state is expanding homeless shelters, and that change is starting to lower costs for emergency housing, Johnson said.

The House Appropriations Committee wants the administration to take a harder look at who is eligible for Medicaid as part of a “redetermination” process. Lawmakers are also looking at requiring prior authorization in the Medicaid program for more than 24 mental health visits.

Justin Johnson, secretary of the Agency of Administration, said he recognizes that lawmakers are reluctant to increase the provider tax and agree to new rules for involuntary medication. He said the Department of Finance and Management will review the tax and fee proposals and work with lawmakers as they zero in on the final budget bill Friday.

“We would not support increases in rates of broad-based taxes,” Johnson said. “There’s no proposal to do that, so I think we’re all on the same page there.”

Johnson said the provider tax is tied to a reimbursement increase for doctors and dentists who see Medicaid patients for a fraction of the actual cost.

“I think the challenge around the rate increase for doctors and dentists is tied to the provider tax,” Johnson said. “If you’re not going to do the provider tax (extension), you’re not going to do the rate increases, and you’re really not solving any of that problem.”

While House lawmakers scrapped Next Generation, Johnson defended the college savings account program and Step Up, an incentive for adult students who need a post-secondary degree to pursue a career, and hopes to restore the proposal in the House budget.

“It’s recognizing we need to make an investment,” Johnson said. “We have a lot of kids who never imagined going to college. The research shows a small amount of money can get them to think about that and really to start imagining that can happen.”

CORRECTION: The bank franchise tax would raise $2.3 million, not $4 million as originally reported, according to JFO.

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Anne Galloway

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  • Phyllis North

    Thirty-five million in new taxes this year, 30 million last year. Obviously, the budget is growing faster than our economy. This is unsustainable.

  • Kyle Williams

    Here we go again, there is never enough money in the budget for this group we have in Montpelier. We could give them another $100mil and they would be back the next year wanting more money to fund programs. The frugal Vermonter is a distant memory. I think the quote from Calvin Coolidge is in need, “Nothing is easier than spending public money. It does not appear to belong to anybody. The temptation is overwhelming to bestow it on somebody.”

  • edward letourneau

    Here. I’ll give them some hints: First, there is 30 some million unaccounted for by hospitals in Medicaid payments. Cut them off for every penny they can’t document. Second, the study on education identified some 100 million in excess spending. Stop spending it people, and you can lower taxes, just as the people have asked.

    • Gary Murdock

      “Second, the study on education identified some 100 million in excess spending.”

      This is covered in the article on Special Ed, their debating now to approve funds to study the issue some more. In other words, Rome is burning but the fiddle plays on.

      • Kathy Callaghan

        Rome has been burning while the fiddle plays on, ever since Shumlin took office.

  • Wendy Wilton

    A large part of the budget gap was caused by the expansion of Medicaid, agreed to by the legislative majority and this governor. Now they don’t have money to pay for it and 35% of our people now dependent on it…twice the burden of other states. This is gross incompetence and arrogance combined.

    • Gary Murdock

      And their not done with it yet Wendy, check out H620 and H730. If passed, Medicaid will pay for contraceptives and meal delivery.

  • Tom Pelham

    Let’s give this some perspective.

    The $34.5 million requested new revenue from House Appropriations is on top of the $33.1 million in projected underlying revenue growth in fiscal 2017 before any tax or fee increases. So the total general fund increase on the table for 2017 is $67.6 million which amounts to a 4.6 percent increase over 2016 general fund spending. This pending increase is on top of a 5.3 percent average annual increase in general fund spending since fiscal 2010. Clearly, House Appropriations is unable to manage a sustainable budget and now repeats their well worn pattern of mandating taxpayers reach deeper and deeper into their wallets and pocketbooks to fund a budget the legislature and governor can’t control. Taxpayers by-the-way who live in the real world where economic growth is 2 percent to 3 percent.

    Further, $22.2 million of the proposed increase is for Medicaid, a program lurching out-of-control. Just look at the recent news since the start of the year. Maybe our legislature should get Medicaid and VHC operationally effective before asking taxpayers throw more money into this open fiscal wound.

    • Eric Davis

      It will be interesting to see what happens next year if there Is a Republican governor, with enough House support to sustain a veto, who says, “I will not sign a budget with overall general fund spending growing faster than the rate of growth in the state’s overall economy.” What will legislative Democrats do in those circumstances?

      • Tom Pelham

        I worry that things have gotten so far out-of-hand and off-track that no matter who the governor is, their hands will be tied. Remember the box Gov. Snelling was in when he took the reins from Gov. Kunin. The budget was so underwater that he had no choice but to agree with Speaker Wright to raise taxes across-the-board in order to avoid deep slashes to vital programs. Snelling did include tax sunsets that Gov. Dean respected and caused to occur over the next few years; but I can tell you from personal experience, it was a miserable ride. Whether Dunne, Lisman, Minter, or Scott, hopefully they will speak loudly to what’s unfolding now at the state house in order not to be boxed in to making very unpleasant choices in their first term, which may be their only term given those choices.

        • Gary Murdock

          “Whether Dunne, Lisman, Minter, or Scott, hopefully they will speak loudly to what’s unfolding now at the state house”

          I would like to hear more from Lisman and Scott, I heard all I need to hear from the other two. As reported here on the recent Lake Champlain Chamber meeting, Dunne wants a new 100 million program, Minter wants the sales tax extended to services, both want legal weed and both want gun control. Not one single mention of the budget crisis and financial peril this state finds itself in.

  • Walter Carpenter

    “This is unsustainable.”

    Legalize marijuana, and plug those tax loopholes which benefit the one percent and the corporations as a start.

    • Cheryl Ganley

      What happens when that money dried up because they have squandered it away? Who/what will we go after than? Shouldn’t we be looking at keeping our expenses under-control vs. expanding taxes?

    • Dave Stevens


      You might have hit a new record with -60. And for that, I am grateful.

  • Todd Hill

    Shame on the governor for leaving out a potential contract increase to VSEA out of the budget. Is that how you negotiate in good faith? How about a tax increase for the most wealthy Vermonters as opposed to a “tax” on the guy/gal that plows your roads.

    • Susanna Rodani

      How about facing the reality that VT is chasing its own tail, a completely dysfunctional behavior, and there is no future here unless you are either a government insider or stinking rich. The options of the common citizen to make a living wage and stay out of poverty are being systematically destroyed and soon there will be nothing left but ski resorts, bars and abandoned properties for sale.

      The prosperity of Burlington is never going to trickle down to the rural communities and the children, who are our future, are already leaving the state in droves.

      These are the real problems we are facing, but like so many other sad realities of our society we vote for band aids because the cost of real change is inconvenient.

      Maybe Montpelier should invest in green glasses and give them to every taxpayer?
      They could probably be paid for by a new tax?

    • David White

      most of the highest paid employees in the state of VT are VSEA members. Do not fear, you will get your tax increase on the most wealthy 25% in the state

      • Todd Hill

        Do you realize that Shumlin is closer to a Republican that a Democrat? No REAL democrat would treat a union this way or bemoan wage stagnation and proceed to cut wages of one of the largest workforce a in the state.

        • Neil Johnson

          Wage stagnation? Show me any where in the private sector that has better benefits and pay.

          Teachers are approaching the salary of Governors across the United States. Principals for elementary schools are exceeding this. I can only imagine what people in the higher administration are paid.

          • Paul Donovan

            Here’s one: ‘they find that state and local government workers actually earn less than their private sector counterparts. According to the analysis, state government workers earn an average of 11.4 percent less than private-sector workers of similar education and work experience and local government workers earn 12.0 percent less. Due to the greater benefits received by public sector workers, the gap narrows when these benefits are factored in, to 6.8 percent and 7.4 percent, respectively. – See more at:

            Here’s another: “The average state employee is better educated than the average private sector employee, an important factor to consider when looking at salary data from the Bureau of Labor Statistics Quarterly Census of Employment & Wages.” from

            Comparing private sector pay with public sector pay, without considering any other variables, does not make sense.

            “Less-educated federal workers make a bit more than their private-sector counterparts and receive more generous benefits. Workers with a complete or incomplete college education or a master’s degree tend to make about the same amount, again with more generous benefits. But highly educated federal workers earn less than their peers in the private sector.

            The Congressional Budget Office went further than some other studies in ensuring a comparison of apples to apples — controlling for a worker’s education, years of experience, occupation, neighborhood, age, sex, ethnicity and immigration status, among other characteristics.”


        • Kathy Callaghan

          This is totally true. I wonder why so many negative votes? It’s not like it’s not an accurate statement.

          But the real issue is – failure on the part of the state to negotiate in good faith and failure to plan for contingencies. Regardless of the fact that the state went to the bargaining table with a “no wage increase” position, the state knows that in the end, there will be an impartial independent fact finder. The fact finder will look at other wage settlements in the area and in the state, and come back with a recommendation.

          The state can and should have done its own homework on the issue. The same data was available to the state as to the fact finder. If the data revealed that other employers have given their employees raises (which was the case), the state knows that the fact finder will come back with such a finding. The state was in a position to know in advance that a fact finder would most likely recommend a raise, and to tell the Governor to include it in a budget – even if their bargaining position was no raise. If they won, hey no raise. Use the money for something else. If not, at least the money would have been budgeted. There is no excuse for not preparing for such a contingency. Had the state done so, the legislature would not be in the position of having to fund something in this case that wasn’t planned for.

          I predict that when the dust settles, based on the strength of the fact finder’s report, state employees will get some sort of raise. And the state will be left trying to explain to the legislature why they didn’t plan better when they had the facts at their disposal all along.

      • Kathy Callaghan

        Actually the highest paid employees in the state are NOT VSEA members. The Governor’s cabinet, staff, senior state managers, secretaries, commissioners, et al are considered “exempt” from joining the union.

        • David White

          actually, they are elected and appointed officials, who do not warrant the same protections as a VSEA employee

    • Traven Leyshon

      The failure to budget funds to cover our state employees is also a backhanded way to cut basic services to Vermonters as the agency heads are once again told to do more with less. How many more Lara Sobel like tragedies will we have before we get a competent Administration that respects state employees and funds essential services?

  • Wayne Curley

    Perhaps the House Appropriations Committee should start with the premise that new revenues simply do not exist. Just not possible. The closet is bare. This would force them to look in every nook and cranny of government for any unused or misappropriated money. Then they can began to comb through every agency and department to look for waste and duplication. And then, based on what is found, they prioritize what government is capable of doing with the funding available. If the funding is not available then the House Appropriations Committee will list, in order of priority, the funding/program cuts that bring the budget into balance.
    It’s hard work, but it has just become to easy to create new taxes (oops I mean fees) to plug the holes and let budget just keep rolling upward.

  • Steve Woodward

    Here we go again. Hang on to your wallet people. It’s almost like they do this on purpose so they can get the carbon tax passed. We need to fire this crew this fall before they can put forth more bad budgets and drive the rest of the middle class out of the state. Year after year after year it’s the same scenario. Spend more than we can take in and then tax the hell out of the citizenry.

  • Jay Eshelman

    Nothing new here.

    “The American Republic will endure until the day Congress discovers that it can bribe the public with the public’s money.” Alexis de Tocqueville

  • John Poratti

    The incompetents in Montpelier simply don’t get it. Do they even know what a reduction in spending means. It’s certain that they don’t ever consider it. November can’t come soon enough, hopefully voters will remember.

  • Peter Everett

    Maybe, just maybe, government should be finding ways to get people off of public assistance programs, rather than finding ways to get them on these programs. This may help cutting costs. Wouldn’t it?

  • Neil Johnson

    New math doesn’t work in the real world.

    The grant train is crazy. Stop all grants, pretty easy. We wasted 5 million dollars at least in grant money. In our little town we are getting a grant for $200k to install park benches, in a flood plain and FLOOD WAY. Many in town are protesting it’s a total waste of money, $45,000 for the engineering and permits for what 5 benches? This is a serious project, it’s not make believe. But the planners are pushing it, for the economic viability of our town. This is the canary in the coal mine. This is what is wrong with Vermont.

    The planners are working on adding another local option tax in our area. They are trying to recreate another chamber of commerce we already have one! For all this we are locally paying another $140k per year.

    We need ordinary citizens in our government, the kind that balances a budget every year. It’s really not too hard, just don’t spend all the money!

    The waste in Vermont is so widespread it’s mentally explosive to anyone with any budgeting skills. We could give every teacher the best family plan Vermont offers through Vermont Health Connect. That would save $10,000 for every teacher with a family. There are 19,000 teachers in Vermont…that equals $190 million! You and I can’t buy the “Cadillac” plan the teachers are given as it doesn’t exist for us Citizens.

    Oh and the latest idea is we can form Drug cartels, monopolies called cooperatives to sell drugs within the state so we can balance our budget. What would you tell your son or daughter if this was their plan to pay off their credit card?

    Have you had enough from Montpelier?

  • Randy Jorgensen

    All this while the salary of a Vermont Governor is currently $145,538. With this salary they almost qualify for income sensitivity on property taxes which are pegged at $137,500 . Something is seriously wrong with our Government philosophy.

  • Another vtdigger article is citing 3.4% unemployment in Vermont. This is essentially full employment if the figure is anywhere near being correct.

    With full employment, this state should be awash in tax revenue……but its not. The state is perpetually short of money, why?

    If this state cannot function in a full employment economy without continually implementing new taxes, then there is something fundamentally wrong with management in Montpelier.

    Time for an objective internal review of state policies and operations to see what’s causing the revenue problem with a special emphasis on benefit programs. Excessive reliance on state benefits should not be occurring in a full employment economy.

    • Tom Pelham

      Peter….you can see here (Table 1) that despite the 3.4% unemployment rate that the number of actually employed people year-over-year is down by 1,550. Employed people pay taxes regardless of the unemployment rate. In January 2009, the unemployment rate was 6.1% but there were 337,650 employed Vermonters or 6,200 more than today.

      Potentially related, here is a JFO commissioned study relative to the minimum wage.

      Check out the chart on page 15. It shows that between the wages of $9.62 to $20.43 an hour that a single person with a child is worse off by accepting a wage increase because the off-setting loss of benefits is greater. Legislators should address this area for cost saving reforms. It seems that a restructuring of benefits such that a higher wage always off-sets any loss in benefits would be good for the employee as well as the state budget.

  • john repsher

    legalize gaming at the ski resorts

  • Peter Everett

    As long as the worker has a penny in his/her pocket, the Legislature will feel like it still has funds it can go after. Remember, Margaret Thatcher once said “Socialism will work only as long as people have money to put into it”.
    How much further until the Legislature hits it’s maximum? We have to be reaching that point.
    Hell, my family hasn’t gone out to eat or a movie in over a year. I put all my extra money into a “tax” fund. This to pay my annual Property Tax increase. Oh, how lucky I am!!!!

  • J Scott Cameron

    Our legislators never learn. They think they can solve all problems and they just keep causing more and more. And then they beat their chests and wonder why so many people are embracing blowhards like Donald Trump. It is just painful watching the Liberal/Progressive assault on the middle class.

  • michael olcott

    ok so i will bite on this,bring on the expected downvotes,lol. One of the biggest problems i have seen throughout my 25 or so years of adulthood is that the social programs that were intended to help people up continue to hold them down due to the income limits. TBH i would think that just cutting a check from the treasury to all Vermonters weather they need it or not and eliminating the overhead of all the state programs ( payrolls,benifits,and pensions) would be far more effective and efficient. this would eliminate the income limits and if one can live on 1000/mo then fine go for it, if you want more then go get a McJob for 10-20 hours a week. this probably wouldn’t work at the state level though and would require a GMI on the national level. it would be interesting to see something from the number crunchers on this like the rand study on cannabis. We REALLY dropped the ball on that issue too as a source of revenue for the state giving it all away to the special interest groups just to get it passed through the senate.

  • Peter Everett

    Obviously, those in the State House have no idea how to control themselves with money.
    A novel idea…form a committee of housewifes/husbands or any person who has had the task of trimming their household budget, so they could survive. Granted, not an easy task to undertake, but, unlike Legislators whose only answer is….take, take, take, and take even more to satisfy their lust of spending (what doesn’t belong to them, although they think it does). Place people, in charge, who routinely must trim their budgets without destroying their family’s finances. I will bet that these people could humanely reduce spending and INCREASE efficiency within the go ferment.
    As I said, a novel idea. Perhaps to novel for those, in office, whose only solution is to keep placing good money after bad.
    My guess is there is not one elected official who views any type of cuts as a viable solution to any program. I could be wrong, but, past budgets may prove me correct.
    Finding new taxes to continue the annual increase isn’t working. It is just punishing workers and taxpayers.

  • Joyce Hottenstein

    “I think the challenge around the rate increase for doctors and dentists is tied to the provider tax,” Johnson said. “If you’re not going to do the provider tax (extension), you’re not going to do the rate increases, and you’re really not solving any of that problem.” This is a very disingenuous statement. Only a fraction of the money would be spent to increase anything. The money was designed to fill the hole they left last year and the overspending by putting almost 40% of the population on medicaid.