Editor’s note: This commentary is by Fred Baser, of Bristol, who is a Vermont Housing Finance Agency commissioner. He is chair of the District-9 Act 250 Commission and an Addison County Home Health board member. He was a Vermont state legislator and small business owner.
The pandemic is hurting Vermont’s revenues in a significant way. How much of a tax shortfall we will experience is difficult to predict, but all areas of public support that our tax dollars pay for will be stressed. How does our Legislature and administration come to grips with this problem? There are three general avenues that our state’s fiscal thinkers can explore.
Raising revenue, taxes, will certainly be one conversation in Montpelier. If you polled Vermonters on this strategy, it is likely the idea would not receive a warm welcome, plus the post-pandemic picture is likely to leave quite a few Vermonters and Vermont businesses in a financial pinch.
One could also reduce spending. This will also raise the hackles of many. It is tough to cut program dollars. In addition, there likely will be a cry for more dollars to be invested in our health care system, future pandemic prevention measures, paid family leave, unemployment protection for sole proprietors, and other areas of concern raised by the pandemic.
Another option is to borrow dollars to right the ship. This will be expensive, and perhaps put the state in fiscal peril in the future, unless our federal government makes low-cost loans available to the states. Today the federal government is borrowing money at .6%. States do not have the same financial authority to act on low-interest loans. However, the feds could permit states to borrow federal dollars at very low rates for a period of time to allow them to regain their financial footing. As long as state tax revenues exceed the interest rate charged, and we borrow in a proper relationship to our gross state product and tax revenue, Vermont, and other states, will be able to meet their obligations. We also need a growing economy to make this strategy work.
It is my hope that the state chooses not to raise taxes on an already stressed population.
There are areas where the state can save money. For example, the teachers pension plan gets more expensive almost every year. Struggling financial markets will only make this bad situation worse. A renegotiation needs to take place to fix this financial problem.
Vermont colleges financial picture is not bright. Our governor rightly says now is the time to modify our approach to education Pre-K through college. The high cost of secondary education and an underfunded higher education system are not new problems. Kicking the can down the road is not responsible. There are likely other cost saving areas to explore.
Saving state government dollars plus accessing very low interest loans from the federal government gives us an opportunity to come out of this tough financial situation stronger than pre-Covid. Write your congressional delegates, Rep. Peter Welch and Sens. Patrick Leahy and Bernie Sanders and have them push a special low-cost state lending program.
There will be tough decisions to make in Montpelier in the coming year. There are no painless solutions. Let’s hope our elected officials have the wisdom and courage to make wise ones.
