Business & Economy

Budget legislative preview: Familiar pressures, new factors

Kitty Toll
Rep. Kitty Toll, D-Danville, is the new chair of House Appropriations. Photo by Andrew Kutches/VTDigger

As lawmakers returned to Montpelier last week, they came back to a familiar budget picture. Legislative and administration analysts put the gap between state revenues and spending for fiscal year 2018 in the ballpark of $70 million.

In recent years, lawmakers have become accustomed to a budget exercise that requires them to reconcile the difference as state spending grows at a higher rate than revenues.

According to the nonpartisan Legislative Joint Fiscal Office, several factors are expected to affect the state’s budget in the next fiscal year.

An infusion of funding Vermont received regularly from a settlement in a lawsuit against tobacco companies in the 1990s will expire this year, which one lawmaker says will mean a hit to the budget of between $10 million and $12 million.

Unlike in previous years, Medicaid spending is not running high above expectations. However, analysts expect the budget will be affected by a change in the percentage of Medicaid that the federal government pays.

Vermont’s financial situation will become clearer Jan. 19 when the Emergency Board meets to review revenues from the first half of fiscal 2017. The panel will hear from economists on whether revenues are coming in as expected, and will adjust projections for the future.

The first task of the biennium for the legislative money committees will be the budget adjustment for the current fiscal year, which members of Gov. Phil Scott’s administration will present to the House Appropriations Committee on Tuesday. Members of the administration and the Legislature do not expect significant challenges in the annual adjustment.

Though Scott’s full budget proposal will not be released until Jan. 24, the newly inaugurated governor made clear in his inaugural address Thursday that fiscal restraint will be one of his key priorities during his first year in office.

“Here’s an honest view of what we’re facing: Despite modest economic growth, state revenues are flat and costs are increasing faster than we can pay,” Scott said.

He highlighted certain budget areas as “moral obligations,” including ensuring access to health care, protecting waterways and maintaining clean drinking water. He reiterated a campaign promise not to raise taxes.

“We will uphold our obligations, but we will not fill this gap by raising taxes and fees,” Scott said. “Vermonters do not have the capacity to pay more.”

Rather than raising new revenue, he vowed to “establish more sustainable budgeting policies” to address factors that drive up costs. His administration will also look to find efficiencies within the government, he said.

Jane Kitchel
Sen. Jane Kitchel, D-Caledonia, is chair of the Senate Appropriations Committee.

The Senate and House Appropriations committees are headed by sisters: Sen. Jane Kitchel, D-Caledonia, and Rep. Kitty Toll, D-Danville.

Toll noted that they both were influenced by their mother, who stoked dinner table conversation about politics and was a lawmaker herself. The last woman to hold Toll’s House seat was her mother, she said.

Toll said she is close with her sister and that they have a good working relationship despite their different responsibilities.

“Her priorities will be the priorities of the Senate, and my priorities will be the priorities of the House,” Toll said.

Under the new leadership of Speaker Mitzi Johnson, D-South Hero, who formerly held Toll’s post at the head of Appropriations, House committees will begin the session by vetting their areas of jurisdiction, considering how well programs are utilizing resources and meeting their goals.

Toll welcomed the approach and expects it will lead to more integration of policy committees in the budget process.

She said Friday she is committed to leading the appropriations panel in accordance with five key principles the committee added to the budget two years ago, which include setting aside reserve funds and taking a multiyear view when budgeting.

Kitchel, the longtime chair of Senate Appropriations, said the two biggest pressures on state spending have consistently been education and health care.

After the governor outlined his broad policy focuses in his inaugural address, Kitchel said she is looking to see how that will translate into his budget proposal.

One looming budgetary question is how the state will find an estimated $68 million a year to fund cleanup of Lake Champlain to meet federal pollution standards. Scott mentioned the effort in his speech last week.

“He says he can do it within existing revenues,” Kitchel said. “And if that can be done, and he’s got a way to do it, then I think everybody would be open to that.”

Both Kitchel and Toll also raised concerns over how federal streams of money to the state could dwindle under the incoming Trump administration. Kitchel noted that it is unclear how federal support could change in the next year.

“Until we do know, it’s hard to make decisions,” Kitchel said.

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Elizabeth Hewitt

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  • I certainly hope that the priority of both house and senate is to begin unraveling the financial burden they placed upon taxpayers. I think there is an additional 25 million that may be due the feds’ for Misrepresentation of Vermont’s failed health exchange. ( Vt Digger, Dec.9,2016)
    Seems we taxpayers are looking at over 160 million, all tallied. Perhaps if legislators could get in step with Gov. Scott half as much as they did with the former governor, positive progress to fiscal problems might be found.

  • Tom Grout

    One way to increase revenue without raising taxes is to change some of the processes for which wealthy are being subsidized by the average joe.
    a) reduce current land use owners tax reduction based upon income and whether or not the land is posted
    b) remove the house and two acre income sensitivity for owners in a revocable or irevocable trust.
    c) do not allow for education homestead for any trust ownership
    d) value solar arrays as part of ones home apprasial and if the unit sells ‘extra” power to the grid reduce the homestead exemption on a pro rata basis.

  • Dave Bellini

    Most of the spending is K-12 and Medicaid. Medicaid eligibility verification could result in less cost.

    • Aula DeWitt

      Dave, what specific verifictions would you be thinking of with regard to Medicaid Eligibility?

      • Cheryl Ganley

        Simply review the information provided for those receiving Medicaid for accuracy and perhaps a means test. Why should someone who has substantial assist be eligible for taxpayer funded heath care?

      • Dave Bellini

        Income. If someone makes a million dollars every 6 months they might be eligible for Medicaid for the other 10 months in the year. High earners going from job to job, people with variable incomes, etc. I don’t think this was being looked at. Vermont has a higher percentage of citizens on Medicaid than any other state I checked.

    • In 2015, Medicaid was found to be not auditable, due to a perfect storm sloppy program implementation, lack of consistent oversite and archaic software from the 1980s still being used.

      I just have a hard time understanding in 2017 why this lack of infrastructure has not been addressed and implemented when it was promised to be fixed many years ago.

  • Asher McLean

    The legislature has their job cut out for them this year, because there’s really no way of knowing how much federal money is going to disappear. It could easily wind up being 50 – 150 million in lost subsidies, given the rhetoric out of the current administration. Add to that the lake cleanup, and the loss of tobacco money, and all of the other revenue shortfalls that I’m sure will come up throughout the year….

    …There’s no way that taxes aren’t going up. Right now we’re at the peak of economic recovery and we’re bleeding money. What’s going to happen if we see an economic downturn in the next two years?

  • Bob Orleck

    You have seen that commercial on TV for weight loss program that works by eating their meals and at the end we hear the man say: “It that easy! You eat the food! You lose the weight!” Well that applies here as well to our budget gaps or deficits, whatever you choose to call them. “You cut the unecessary spending, you don’t need new taxes and fees and you lose the gap!”

  • Jamie Carter

    “Kitchel noted that it is unclear how federal support could change in the next year.”

    With Leahy chomping at the bit to make Trumps life in office a royal pain, Sanders confrontational style, and Vermont’s overwhelming support for Hillary I think we can expect a serious decline in financial support from our newly elected president.

    However, we do have Pork Procurer Pat now on Senate Appropriations so we very well could see an increase too I suppose.

    One really simple way to save some money is to model a whistleblower law after the federal law, whereby a % of money recouped is given to the whistleblower. There is enough turning a blind eye to state billing and spending to recover a signficant amount.

  • Tony Redington

    First as both Minter among others called for, go to 0 budget to begin with an build up. Take every single tax expenditure (like deductions of mortgage interest/property taxes, earned income tax credits and standard deductions–yeah there are some tough ones) and put those down with budget items like education costs (colleges, K-12, training programs, etc.). Then look forward at least five years and do a financial plan that also responds to long term investment trends and needs. It would be interesting to see what the House and Senate Appropriations/Finance come up with for their budget proposals!