5 Questions About The Status And Future Of Vermont's State Budget

Mar 27, 2017

The House Committee on Appropriations is expected to vote out its version of the fiscal year 2018 state budget Monday. Here are some takeaways about the state budget as it stands.

How did the House Committee on Appropriations close this year’s $70 million budget gap?

Balancing the state budget is a difficult in any year, but the House had a particularly steep climb — closing a $70 million gap — and they chose to do so without relying on new taxes or fees.

It’s worth mentioning that there is one caveat to this no-new-revenues framework the House used to put this budget together: They’re counting on about $5 million in increased revenue next year, but they say they’re going to get it by increasing compliance with existing tax code, and making sure people pay the taxes they already owe.

This is a very different approach than the one used in the past five years or so, when perennial tax bills that raised anywhere between $10 million and $30 million in new revenues to solve the state’s budget gap.

House Speaker Mitzi Johnson says there are there a number of reasons for doing this.

She said the main reason is that President Trump’s budget proposal, as he presented it earlier this month, would result in some pretty drastic reductions in federal revenue to Vermont.

Johnson, along with most other legislators, says Vermont needs to reserve as much in-state revenue capacity as possible in order to respond to whatever federal reductions end up making it through Congress.

Another reason for this approach, Johnson said, is to work across party lines.

“We’re trying to be cooperative, and feel like we’ve worked really hard to put together a budget that is within the ballpark of the kind of thing the governor would be willing to work with us on,” Johnson said.

Gov. Phil Scott said he wouldn’t sign a budget that includes any new taxes or fees, and Johnson said she’d like to avoid a veto showdown at the end of the session. And this budget represents the House’s best effort at doing that.

Will these cuts affect services and programs in the state?

The fact of the matter is that most of Vermont’s money is tied up in a $2.6 billion-a-year Agency of Human Services budget that provides health care services to lower-income residents in this state.

House lawmakers booked almost $20 million in savings due to projected decrease in Medicaid caseloads. They’re also going to institute some new ways of caring for some of the highest-need, highest-cost Medicaid patients, and they think this is going to deliver some pretty significant savings.

They also have $6 million in what they’re calling “management savings,” and these are yet-to-be-determined ways to whittle down administrative and management costs.

Mike Fisher heads up the Office of the Health Care Advocate, which is the entity that’s responsible for making sure the health care system as a whole is doing right by consumers of that system.

Fisher said the cuts could have been a lot worse.

“The tough decisions that the House Appropriations Committee made weren’t as bad as some of what I feared would happen. Having said that, tough decisions are decisions,” Fisher said.

He said little nicks and cuts could compound on themselves to create some real problems.

And cuts like a $200,000 reduction for instance to navigators — these are people who help you find plans on the state’s health insurance exchange — are the sorts of reductions that, according to advocates like Fisher, could have real-world impacts on people.

What other areas of spending are advocates concerned about?

One example is the decision to eliminate what’s known as the cold-weather exemption in the state’s emergency housing program.

This is a program that allows anyone who’s homeless to get a motel voucher when temperatures dip below a certain threshold, even if they wouldn’t otherwise qualify for that assistance.

Erhard Mahnke, a housing advocate, said that this could present a real problem when next winter rolls around.

“This cold-weather exemption saves lives,” Mahnke says. “People have died homeless on the streets in Vermont. And this is one of the last safety nets for some of the most vulnerable, low-income people in the state.”

Now, House lawmakers say they’re investing new money in temporary shelters that would create the capacity needed to avoid people freezing to death on the streets.

They also say that some people — pregnant women, for example — will still be eligible for the cold-weather exemption. But advocates are not assuaged.

The House is also calling for $2.5 million in cuts to non-profits that serve vulnerable populations.

There is some real concern in the advocacy community over this proposal, but it’s somewhat muted at this point, because lawmakers are leaving it to the secretary of human services to decide where and when those cuts should take effect.

The $2.5 million reduction is coming, but no one knows yet exactly where those cuts are going to fall.

The budget is also built on a lot of hopeful thinking.

The House also booked $6 million in savings for as-yet undetermined management efficiencies. Some people worry about what happens if the executive branch doesn’t find those efficiencies.

And if they don’t, the question is what kinds of program cuts might administration officials resort to instead to balance the budget.

Another example of that phenomenon is a more than $200,000 cut to the Vermont Veterans Home in Bennington. House lawmakers say if the Veterans Home can simply reduce the number of people calling in sick to work, then they can avoid hundreds of thousands of dollars overtime costs.

But the head of the Vermont State Employees Association, which is the union that represents Veterans Home employees, says the facility is already below the national average on those so-called “call-out” rates. And he says administration at the Veterans Home believes that these savings don’t actually exist, and will simply force staff layoffs instead.
Will Gov. Phil Scott support this budget?

The House might have adopted Phil Scott's no-new-revenues framework, but they rejected in a very wholesale way some of the massive reductions in K-12 education spending that Gov. Scott wanted to see.

Scott wanted to freeze school spending next year — something that would have saved $41 million next year.

But Scott said he wants lawmakers to find other ways to reduce education spending. He’s now suggesting that perhaps lawmakers should mandate minimum staff-to-student ratios, for instance, as a way of bringing down payroll costs in Vermont schools.

The question is whether the governor is going to insist on some level of education cuts, or if he’s going to be happy enough with the fact that lawmakers didn’t raise revenues.

There’ll be more posturing over that issue between now and early May. Ultimately, we won’t know whether Phil Scott is going to sign off on this spending plan until then.

What happens when the budget goes to the Senate?

Expect to see some major revisions. Late last week, the Senate Finance Committee voted out an affordable housing bill that uses a $2-per-night occupancy fee on hotel stays to fund the development of housing stock for low and middle-income Vermonters.

This affordable housing plan was one of the centerpieces of the governor’s budget, but he used a reallocation of money the Vermont Housing and Conservation Board to pay for it, rather than raising new revenues.

Senate lawmakers say that taking $2.5 million a year from VHCB, as Scott had proposed, would hurt the organization’s ability to fulfill its mission.

Scott issued a press release after that Finance Committee vote saying, essentially, that he’d veto that proposal, even if it meant killing off all that affordable housing development that would otherwise occur.

But Senate lawmakers say they passed that bill knowing full well how the governor feels about it.

It’s a signal that the Senate may be far less concerned about veto threats from the Republican governor than House leadership seems to be. And it means we might see the Senate insert elements into this budget that are going to make for a more contentious debate in the latter stages of the session than the House proposal would result in.