Commentary: Disappointing Budget with a Silver Lining (March, 2015)

by John McClaughryJohn McClaughry

Last Friday the Vermont House completed deliberations on a fiscal year 2016 general fund budget and an associated tax package. The appropriations committee, after months of intense work and no little agony, produced a budget that covers a $113 million deficit.

The House-passed bill (H.490) reduces the governor’s budget request by $53 million, and calls for  $35 million in new revenues. It accepts Gov. Shumlin’s proposal for $10.8 million in labor force savings. Some $24 million in one-time money – including $5 million from the Rainy Day Fund – will go toward closing the gap.

Over Republican objections, the House voted to raise $35 million with two income tax increases (H.489). One caps itemized deductions to two and a half times the standard deduction. The other eliminates the deduction for state income taxes paid, which also hits high bracket taxpayers the hardest.

The two bills do not include Gov. Shumlin’s proposal for a new payroll tax. They also do not include a $1.44 per six pack sugary beverage tax or a new carbon tax sought by an enviro coalition headed by VPIRG.

Several pro-spending and taxing groups, including the Vermont Workers Center, the Public Assets Institute, and the Vermont State Employees Association, made a concerted pitch for higher taxes and no spending cuts.  After Republicans and less liberal Democrats voted down their proposals, most of the “Working Vermonters Caucus” voted no on the tax increase measure, as did most of the Republicans. It passed 76-67. The appropriations bill then passed 96-46, with four Republicans from the Appropriations Committee voting in favor.

Publisher Emerson Lynn of the St. Albans Messenger, a long time voice for fiscal sanity, didn’t find a lot to cheer about. In an editorial he said “We’re contenting ourselves by thinking we’ve made progress when all we’ve done is reduce spending [a little] from what we all consider to be an unacceptably high target. It should be difficult to claim victory if we reduce from a five percent spending increase to a four percent increase, when we only have the revenue for a three percent increase.”

That’s surely true in the short term, but there is one unprecedented new section in the appropriations bill that may become a landmark event . It’s labelled “Intent” and it’s worth quoting at length.

“This fiscal year 2016 appropriations bill represents the beginning of a multiyear process to bend the trend of State spending and bring revenues and spending into a long-term balance. … It is the intent to move forward on the following goals:

    • reduce the reliance on one-time funding for base budget needs;
    • bend the rate of spending growth and bring the expenditure pressures in line with revenue growth to end the cycle of annual budget gaps;
    • create an ongoing expectation that Administration and Legislative proposals for budget changes and new programs contain a multiyear analysis of what the changes will cost;
    • move toward budgeting based on using less than 100 percent of forecasted revenue to build a reserve which can help offset the variability of revenues that comes with a progressive tax system and the risk of reliance on federal funds; and
    • explore moving to a two-year budgeting cycle where the interim year will be such as to allow time to be spent focusing on program performance, results-based analysis, and evidenced-based program evaluation.”

These provisions were approved by a Democratic House with Republican support. They indicate that a long overdue new era of serious responsibility in state taxing and spending may soon be at hand. The task now will be to fend off a Progressive assault on the “Intent” section in the Senate.

Gov. Shumlin has installed a “Results Based Accountability” system under a very able Chief Performance Officer. By itself, this can’t pare back government to its core missions, within the revenues that Vermonter can afford to pay. But it’s an important step in getting better results from money spent.

The remaining vital step is to initiate “a top to bottom Performance Review of the functions of state government….to find creative, smart new ways to make government run more efficiently on the resources we have.”

That’s from the 2004 Vermont Democratic Platform. Add to that the Republican willingness to pare down today’s high-tax, do-everything state government,  and the door is open to a bipartisan drive to redefine, restructure, and restrain something that is now too big, too inefficient, and too costly for Vermont.

- John McClaughry is vice president of the Ethan Allen Institute (www.ethanallen.org).

 

{ 2 comments… read them below or add one }

jim bulmer April 1, 2015 at 8:15 pm

Silverlining? My taxes will increase once again! These clowns should set an example and take a pay cut gincluding government and educators’ by at least 10% to set an example to demonstrate that they are serious about their new found fiscal concerns. Problem is it will never happen and reckless spendng will continue. There is NO end in sight. Sorry, John.

Reply

Hugh Hermann April 2, 2015 at 5:15 pm

Jim Bulmer is right on!

Reply

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