House lawmakers have moved to reverse cuts proposed by Gov. Phil Scott in a budget he presented for the first part of the fiscal year.
The House Appropriations committee on Wednesday unanimously passed a budget bill that will fund state government for the first three months of the next fiscal year, which begins on July 1, at about the same level that it did in the first quarter this year.
In anticipation of plummeting tax revenues from Covid-19, the Scott administration pitched a budget last month that would require most government agencies cut their budgets by 2% between July and September— a reduction that would amount to an 8% cut if it continued throughout the year.
Lawmakers say a 2% reduction in the state’s main budget would mean cutting spending by about $32 million. The governor made exceptions for some departments.
Instead, House lawmakers have decided to wait on how and where to cut spending until the Legislature returns in August to pass a full budget for fiscal year 2021.
Instead of asking agencies to spend 23% of their budgets between July and September, lawmakers are allowing them to spend 25%.
Rep. Kitty Toll, D-Danville, the chair of the Appropriations Committee, said lawmakers are waiting until the summer to institute cuts, so that they have time to weigh in on where reductions are made.
The governor’s budget for the first quarter of the fiscal year didn’t propose specific cuts, or programmatic reductions, meaning that it would be up to government agencies and the Scott administration alone to determine how to restrict spending.
“Who knows where the areas would be of reduction, because there were no proposed reductions by the governor,” Toll said.
“The Legislature has to do its work and just not leave carte blanche reductions for the administration to have, without us weighing in,” she said.
Lawmakers and the Scott administration will be back this summer to pass a complete budget for the upcoming fiscal year.
They are waiting until they have a better understanding of how state revenues will be impacted by the pandemic, and more clarity on whether federal funding can be used to address Vermont’s budget woes, before they do so.
“We felt that at this time, we would do just a very bare bones, minimum budget to keep the lights on, keep the government working, keep programs whole,” Toll said.
“And we will use our time between now and August to prepare for structural changes in government and reductions that would need to be made in order to balance the budget,” she said.
Adam Greshin, Vermont’s commissioner of finance and management, said the governor took a different approach than the House in crafting the first quarter budget.
Scott had wanted to begin making reductions immediately, opposed to “facing the full revenue reduction late summer, early fall.”
According to the latest estimates from state fiscal analysts, Vermont is expected to lose nearly $400 million in tax revenue in the upcoming fiscal year because of the pandemic.
“We wanted to start off essentially adhering to reduced revenue forecasts, which we know we will face in [fiscal year] 21,” Greshin said.
Greshin said it’s acceptable to wait until the state has more details about next year’s revenues before deciding on how spending will be cut.
“But I think it’s perhaps wiser to start to transition towards a more grim revenue outlook at the beginning, as opposed to wait one full quarter,” he said.
However, Greshin said the 25% spend for departments will result in belt-tightening to some degree because it doesn’t address inflation and pay increases for state employees.
Not all agencies and departments will be limited to spending 25% of their budgets, however.
The Agency of Natural Resources and the Agency of Transportation will be able to spend up 50% and 60% of their budgets respectively, as both require more funding for projects and programs during warmer months.
The bill advanced by the appropriations committee also spends about $50 million of the $1.25 billion in Coronavirus Relief Fund dollars the state received from the federal CARES Act in April. That money can be used to address expenses incurred by Covid-19.
The budget gives $15 million to the Vermont State Colleges System and $15 million to the University of Vermont for costs of “impacts and business disruption due to the COVID-19 pandemic.”
Under the legislation, $5 million would go to the Vermont Student Assistance Corporation to help meet increased demand from college students seeking financial aid.
It also includes $2 million which the Legislature will need to extend its operations until the end of September.
A larger chunk of the federal Covid-19 dollars will be folded into a separate piece of legislation that will likely include a major economic relief package.
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