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.
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.