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.
[I]n times of trouble, from floods to recessions, citizens turn to their government for stability and help. They expect their leaders have the wisdom to keep the people’s government on solid footing such that when help is needed, help is available. Unlike the federal government, which can “print” money in times of crisis, state governments do not have such luxury. Further, elected leaders can overly leverage state finances and the state’s economy such that when times of trouble arrive, rather than a helping hand, there are only empty pockets for those in need. Over the past six years, Vermont’s leaders have taken us far down the empty pockets road.
Recessions are often caused by private sector “bubbles” that suddenly implode. A housing “bubble” dominated the last recession and before that it was a “tech” bubble. The Great Depression was attributed to a stock market “bubble.” “Happy days are here again,” they said, until they weren’t.
There will be another recession in Vermont’s future and rather than prepare for it, our Statehouse leaders have created a state government spending “bubble” that will certainly implode when the next recession hits, leaving vulnerable Vermonters and over-burdened taxpayers even more vulnerable and more burdened.
Here’s the patchwork of the “government” bubble our leaders have crafted:
The state budget, not including federal dollars, has grown by 35 percent since 2010 while the state’s economy has grown by only 23 percent.
Through the enactment of the Green Mountain Care Board and the all-payer funding system, the scope of taxpayer responsibility for rising health care costs has dramatically expanded.
State budget managers have increased the Medicaid cost shift onto private insurance premiums from $138 million to $176.5 million since 2010.
The state auditor has disclosed numerous and costly areas of state government that are poorly managed.
State economists have documented that recessions occur on average every seven years and as of now the bottom of the last recession was seven years ago.
Act 46 has both disrupted and undermined Vermont’s locally controlled school system while not addressing high property taxes and school spending, which continue to rise despite declining student enrollments.
Vermont’s Rainy Day Fund, established to help Vermonters during hard times, has been leveraged by lending it to the Teachers’ Retirement Health Care Fund and for affordable housing and energy efficient projects, among others. Rather than cash, the Rainy Day Fund is now comprised of IOUs.
The Legislature has enacted costly new mandates such as the minimum wage, paid leave, and energy surcharges. While these measures have merit, no off-setting measures have been enacted to mitigate the costs of these mandates.
The energy plan crafted by Gov. Shumlin and the Legislature undermines Vermont’s iconic bucolic economy while allowing deep subsidies to new energy suppliers.
With the next recession, the cumulative destructive impact of the above excesses will be revealed. Even now, in the midst of an economic recovery, advisers to the state are recommending cuts in investments in needed “bricks and mortar” infrastructure projects as state debt threatens Vermont’s bond rating.
It is probably too late to fix Vermont’s government “bubble.” State economists have documented that recessions occur on average every seven years and as of now the bottom of the last recession was seven years ago. Thoughtful Vermonters with private assets and middle to upper incomes should be thinking now about how to protect those assets, for when the next recession pops Vermont’s government spending “bubble,” it’s assured that our Statehouse leaders will be frantically looking for even more revenues to bail out their misdeeds of the past six years.
