Commentary: Gov. Scott’s Budget Plan (January, 2018)

by John McClaughryJohn 2

Gov. Phil Scott has delivered his budget address, and the consensus of various pundits seems to be that it’s mostly a no-excitement, small-bore initiative, hold the line, need more thinking, and “help me!” production. But let the governor take credit for this: “For the second consecutive year, Gov. Scott has proposed a budget that does not raise a single tax or fee”, and his proposed General Fund spending exceeds this year’s by only $82 million (+2.2%). He also emphasized the importance of creating and applying performance indicators to assess the State’s use of tax dollars.

In my take, the Governor deserves a gold star for highlighting, right at the beginning, “one of the most underreported fiscal issues that we face”, our unfunded state employee and teacher pension and health benefit liabilities. In 2017 those liabilities totaled over $4.5 billion, a staggering number for such a small state. Despite a conscientious effort by the Treasurer and some legislators, those liabilities have been increasing. Gov. Scott is asking for an extra $20 million above the Annual Required Contributions for this coming year.

The governor offered some small-change proposals with political appeal, but of very limited impact. Among these were exempting military pensions from the state income tax, and phasing out income tax on Social Security income for low and moderate-income households.

It’s regrettable that the governor once again endorsed Gov. Shumlin’s “90% renewable energy by 2050” goal. Why? Because the single minded pursuit of this unlegislated decree can only result in an increasing flood of subsidies, regulations, mandates, prohibitions, and taxes to enrich the renewable industrial complex for no detectable climate benefit, at the expense of everybody else. To his credit, he has steadfastly opposed any form of a carbon tax.

It would have been refreshing, albeit politically perilous, for the governor to announce a policy to set Vermont on a path to assure safe, reliable and competitively priced energy that will make possible a strong, competitive and growing economic base, for creation of new wealth and income, an inducement to his targeted recruits to return, and expanded tax revenues to enable the state to meet its fiscal obligations.

The governor did embrace one really good idea for coping with the problem of phosphorous-fueled algae-fouled waterways: “My administration is exploring how the State can help create a commercial enterprise that captures a large amount of Vermont’s excess phosphorous and converts it to a wholesale or retail product.” This could turn out to be a far more cost effective alternative to the traditional big government model of taxes, fines, subsidies, mandates, and closely-policed remediation efforts for the Lake Champlain basin.

Another proposal, however, was puzzling. He believes Vermont can become the “nation’s leading manufacturer of battery storage technology”. The nation’s leading developer of that technology is a fifteen mega-partner consortium based at Argonne National Laboratory west of Chicago. Vermont has two small Eveready battery plants (St. Albans and Bennington) but the St. Louis-based company’s technology center is in Ohio and its portable batteries are mostly made in China. Let’s hope the Governor is on to something not yet disclosed to the public.

To cope with the projected seven percent ($75 million) shortfall in the property tax-financed Education Fund, the governor pointed to an 18-point menu of proposals released by his Secretary of Administration on January 18. The governor promised only to “discuss all options with civility and respect”. Hopefully the legislature will resist his inclination to push Vermont further toward One Big School System, micromanaged by an all-powerful Board in the Capitol, offering what he describes as “the best Cradle-to-Career system in the nation.”

As the media saw it, the most important feature of the governor’s address was his urgent appeal for the state to spend $3.2 million on a new “personalized” program to persuade onetime Vermont residents and vacationers to return to the state, bringing their workforce skills and spending habits. This is based on the idea that if only these expatriates – and others who “share our values” – grasped the opportunities and benefits of living in Vermont, a significant number would return, buy homes, take or create jobs, enroll their kids in our underpopulated classrooms, use their dollars to buy electric vehicles and solar panels, and, of course, increase the state’s tax collections. This proposal may encounter legislative skepticism among those who have their own ideas about how the $3.2 million could be more wisely spent.

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

{ 1 comment… read it below or add one }

Roger Joslin February 1, 2018 at 10:02 pm

It is time for the legislature to start decreasing regulations, thus decreasing state employees. It is time for this state to get as responsible as our citizens have to be with our budgets. nobody is moving to VT with our tax and spend policies.

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