Gov. Phil Scott is asking much of state government to cut spending by 8% in the first quarter of the next fiscal year as tax revenues plummet during the Covid-19 crisis.
The cuts come in the administration’s “skinny budget” proposal — a spending package that will fund state government for the first three months of the upcoming fiscal year while lawmakers and the Scott administration work on a complete budget late this summer.
The administration’s proposal calls for most state agencies and departments to spend only 23% of the dollars they received in the current year’s budget in the first quarter of the upcoming fiscal year. That 2-percentage point cut amounts to a reduction of $32 million.
If spread out over the entire year, the proposal would amount to an 8% budget cut.
The plan from the Scott administration had been expected: last week, the governor asked agencies to search for the 8% savings.
The commissioner of Vermont’s Department of Finance and Management, Adam Greshin, stressed to lawmakers on the House Appropriations Committee Tuesday that the proposal is meant to keep government functioning in the first three months of the fiscal year, which begins July 1.
It leaves bigger decisions about funding in 2021, and major policy changes until the late summer and early fall, when state officials will have a clearer idea about how the pandemic will impact state revenues, and how federal funding can be used to offset budget pressures.
“This is meant to get us through the summer,” Greshin said. “It’s meant to keep the lights on, keep our programs humming and set us up for a more spirited and fully educated debate come late summer.”
Greshin said the proposed cuts will have “minor, if any impact across most departments” given that they will be shared across state government.
“We’re thinking that it’s not going to be a major issue for any one department but it will be, call it, slight pain spread broadly,” Greshin said.
Rep. Mary Hooper, D-Montpelier, pointed out that it may be hard for some departments with large staffs to absorb the cuts when state employees are also expected to see pay increases next year.
“This is going to be a real challenge, again, for departments like say the Department of Corrections, probably Public Safety, that have 24/7 obligations that they can’t say ‘No, we’ll do that tomorrow,'” she said.
The House Appropriations Committee will be reviewing the administration’s plan to give state agencies 23% of this year’s budget in the upcoming quarter, and may make changes.
“Twenty-three is it a magic number? Is 22 the number, is 24 the number, is something in between the number?” asked Rep. Kitty Toll, D-Danville, chair of the House Appropriations Committee.
She noted that the more difficult decisions about next year’s budget, and potential cuts, will come when lawmakers and the administration reductions work on the full spending package over the summer.
“No matter what, the hard budget’s going to be the one we do in August,” Toll said.
According to the latest projections from the state’s fiscal analysts, revenues in fiscal 2021 are expected to fall by $374 million across all state funds because of the Covid-19 crisis — a drop of about 15%.
While most departments have been asked to cut spending by 8% in the first quarter of next year, the administration has made some exceptions.
The Agency of Transportation, which spends heavily on projects during the summer and fall months, will be allowed to use up to 60% of the amount it received in this year’s budget between July and September.
The state will also be able to use up to 34% of its education funding in the first three months of the next fiscal year. This is typically what the state needs for its first quarter education payment, according to the Scott administration.
The budget bill does not include any proposals for how to spend the $1.25 billion the state has received from the federal CARES Act to spend on its response to the Covid-19 crisis.
The Scott administration was expected to unveil a separate plan to spend a portion of that funding on economic relief on Wednesday.
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