Gov. Peter Shumlin proclaimed this year’s legislative session to be “one of the most productive sessions that I can remember.” To others that appears as a new frontier in spin, possibly coupled with a bit of amnesia. Let’s review the report card.
Going into the session in January, the state’s General Fund for 2016 faced a projected $113 million deficit. The legislature cut $53 million out of the governor’s budget request. This was hailed as a new era of public frugality.
But as former Finance and Management Commissioner Tom Pelham has repeatedly pointed out, most of that $53 million represents cuts from the Governor’s wish list – not actual cuts from 2015 spending levels.
When asked about actual cuts, the chair of the Senate Appropriations Committee pointed to a reduction in state funding for Vermont Public Television, from $553,000 this year to $271,000 next year. That’s an actual cut of $282,000, representing two hundredths of one percent of the $1.469 billion budget.
All in all, the General Fund spending that increased 1.8% for this year is slated to increase by 4.1% for the coming year. The most recent revenue forecast for that coming year projects an increase of 2.4% to cover a 4.1% increase in spending. Coupled with an expected reduction in the Federal Medicaid matching percentage, next year’s session will face another $50-70 million deficit. The Governor says he is “thrilled” with the session’s results, but “appalled” – or at the very least “nervous” – might be more defensible.
The governor’s greatest disappointment, he says, was the refusal of the legislature to create a new Vermont payroll tax of seven tenths of a percent (to begin with). He promoted the expected take – $90 million – as reducing the notorious Medicaid payment shortfall. A significant slice of it, however, was to be awarded to the Green Mountain Care Board to enable it to convert the governor’s failed dream of “single payer” health care into “all payer” health care. The difference in the end results of the two plans appears microscopic.
The legislature was certainly “productive” in finding new things to tax. It will suck in another $34.6 million from putting the sales tax on soda, taking away deductions for state and local taxes paid, capping deductions (other than charitable and medical) at 2.5 times the federal standard deduction, slapping a new income surtax on returns with AGI above $150,000, and of course adding another 33 cents a pack on cigarettes.
These tax hikes pale compared to what’s likely to appear next year: extending the sales tax to dozens of everyday services, and imposing a carbon tax to defeat what VPIRG describes as “climate-related superstorms and extreme weather events”. VPIRG currently says its carbon tax will be “largely” revenue neutral, but it is in fact designed to divert up to $70 million a year (by 2030) into ever more VPIRG-favored renewable energy subsidies.
The legislative leaders promised to act on mandatory paid sick leave in 2016. Democrats voted down Republican amendments to let businesses escape the clutches of the failed Vermont Health Connect. Neither action promises to make Vermont more attractive to business and job growth.
The legislature passed a sweeping energy subsidy bill called “RESET”, that the governor hailed as favoring “green, clean, renewable power.” He might have acknowledged, but didn’t, that requiring Vermont utilities to buy 55% of their power from “green, clean, renewable” sources (versus 40% today, mostly from HydroQuebec) is a marvelous windfall for wind and solar producers, who can’t sell their high-cost power without huge subsidies mandated from taxpayers and ratepayers.
Responding to taxpayer outrage against rising school property tax bills, the legislature raised the rate only for non-residential properties, after five years of annual raises in both homestead and non-residential rates. Then it installed property tax penalties for high spending towns in an attempt to limit “allowable growth” of overall K-12 spending. This will remain in force for two years, while the legislature tries to think up something else.
The Democratic legislature enthusiastically ignored the only effective way of flattening out public school spending – deregulating public schools and making them compete with independent schools for customers. The teacher’s union and public school educrats are terrified at the specter of giving up their comfortable monopoly and having to compete.
This was a “productive” General Fund budget year only if one describes keeping increasingly unaffordable big government afloat for one more year as “productive”.
A more hard-headed assessment would be that the legislature produced a hopefully balanced budget without cutting the Education Fund transfer ($303 million) or raiding the budget stabilization funds. It went on another modest tax raising spree, pushed through more economy-choking mandates, assured higher electric rates, centralized power over public schools in the State, and set the stage for another tax and spending onslaught in 2016.
- John McClaughry is vice president of the Ethan Allen institute (www.ethanallen.org).