As I write this, Governor Shumlin is beginning his budget speech. But I’ve just returned from a sneak preview of the FY 2014 budget from Administration Secretary Jeb Spaulding and Finance Commissioner Jim Reardon. I’ll put out a few headlines right now, and fill in more information later today and tonight.
No new broad-based taxes. As promised, Shumlin is delivering a balanced budget without any increases in income, sales, or rooms and meals taxes. There is at least one major spending problem to be resolved — about $35 million in the transportation budget– that is likely to require some tax or fee increases.
Budget gap: Following yesterday’s announcement of lower-than-expected revenues, Reardon said the gap in the 2014 budget (which had been estimated at $50-70 million) has come in near the top of that range: $67 million. The Governor’s budget, as presented, is in balance for 2014. The shortfall was largely made up in three line items, all in Human Services:
1. $33 million in unspent human services funds carried forward from 2012 and 2013.
2. $26 million in “special and federal funds” allowing for a corresponding cut in general fund money.
3. A change in the “Reach Up” program that would save about $6 million. Shumlin proposes setting a lifetime cap of five years, or a cap of three continuous years, for any recipient. The reasoning is that Reach Up is meant as a temporary stopgap for people who could (at least in theory) enter the workforce. There would be no cap on benefits for the disabled or others unable to work.
The five-year and three-year (continuous) caps would be applied retroactively. So if you’ve been on Reach Up for four years, well, sorry, you’d suddenly be close to maxing out.
As Spaulding and Reardon explained the budget, the “Reach Up” change is the only significant true “cut” in Human Services.
Transportation funding. Shumlin proposes $250 million in transportation investments, including $131M for bridges, $109M for paving, and $11M for rehabbing the western Vermont rail line. There is a $35 million gap in the state’s portion of transportation spending; if Vermont doesn’t spend that $35M, it will lose federal matching funds.
Shumlin is not proposing a specific funding mechanism to raise that $35M; he will work with the Legislature on that one.
Spaulding specifically said that “a gas tax increase is NOT off the table.” And he raised an interesting possibility: currently, gasoline is taxed on a per-gallon basis, plus there is a small sales tax on gasoline. He raised the idea of shifting some of the tax burden from the per-gallon levy to the sales tax, which would be a percentage of each dollar in gas sales — a higher figure. But that’s only one possibility.
After the jump: Heating and efficiency, EITC reboot, and a modest increase in the state workforce.
UPDATE 2:30 p.m.
Heating and thermal efficiency. For the first time, Shumlin is including money for the federal LIHEAP program, because the feds haven’t been fully funding it in recent years. So there’s $6M in the state budget for LIHEAP.
There’s also $6M for thermal efficiency (weatherizing) and $5M for the Clean Energy Development Fund. To pay for this $17M in new commitments, Shumlin considered and rejected a fuel tax. Instead, the state will impose a 10% levy on the sales of lottery-style “break open” tickets (not to be confused with Vermont Lottery games).
If you’ve ever been to a fraternal organization like the Elks or the American Legion, you’ve seen these games. You pay a buck per ticket at the bar, break it open, and you may win a small prize. These games are permitted as long as the proceeds go to a nonprofit cause. But there has been no state regulation or taxation, and Spaulding admitted that the state has no clear idea of how many “break open” tickets are sold each year. Estimates range from $135M to $224M; the actual total may be higher.
This proposal is likely to be very unpopular in certain circles.
Early childhood education. The budget does include Shumlin’s controversial proposal to redirect $17M from the Earned Income Tax Credit (resulting in lower benefits to the working poor) into support for early childhood education.
In a tacit admission that this idea has stumbled badly out of the gate, Spaulding told reporters that there would be a big media briefing on the proposal next Monday. They’re clearly hoping a public-relations reboot will give the proposal a better chance of passing the Legislature.
Adding to the state workforce. The budget adds a total of 79 new positions, including 25 in Mental Health for operation of the new Berlin psychiatric hospital and 18 in the Department for Children and Families to address caseload pressures. Spaulding was quick to point out that the state is “still operating leanly” with a total executive branch workforce that’s nearly 300 positions smaller than in January 2007.
UPDATE 3:00 p.m.
Smoothing the transition to the health care exchange. The budget includes $10M to help Vermonters now enrolled in Catamount or VHAP make the transition to the new health care exchange. There is an estimated $18M annual gap between the coverage provided by Catamount and VHAP, and what will be provided under the exchange.
However, as Spaulding was eager to point out, the $10M covers only part of a year under the exchange, so it’s enough to hold Catamount and VHAP clients harmless for FY 2014. (The fiscal year runs from July 1 to June 30. The exchange goes online on January 1, 2014.)
A capital budget squeeze. Shumlin’s budget accommodates the state’s expected portion of rebuilding/replacing the Vermont State Hospital and the Waterbury office complex. It does so by cutting other capital projects to the bare-bones level for the next two years. That’s believed to be sufficient to cover the new costs while keeping all other capital projects on line — although admittedly, their pace will be slowed.
A change in the Secretary of State’s budget. The Secretary of State’s office is being taken off the General Fund books (saving $4M). Instead, it would be funded through the redirection of corporate fees. The SoS budget will include funding for technology improvements needed to implement campaign-finance reforms — particularly electronic filing to a searchable database of campaign finance information.
Those are the highlights as I saw them. There may be more thoughts and reactions later on.