Power Alley – The 2016 Budget Adjustment

The truth is clear to see. With bi-partisan support, it’s your money they’re spending.

Since fiscal 2010, the year the Legislature overrode Governor Douglas’s budget veto and took the budget helm, the spending of state dollars (not including federal dollars) has increased from $1.760 billion to $2.387 billion, an increase of $627.5 million (up 35.7 percent) amounting to an annual growth rate of 5.2 percent. This does not include another $175.8 million in increased education fund spending driven by local school budgets.

The committee structure in the House and Senate hosts the Power Alleys where key decisions are crafted. The most recent event in spending growth is the 2016 budget adjustment recently passed by the House and Senate with bi-partisan Committee support and the subject of these Power Alley profiles.

House   http://www.campaignforvermont.org/poweralleyhouse_611

Senate  http://www.campaignforvermont.org/poweralleysenate_611

As noted in the profiles, with the increase of $28.4 million of state dollar spending in the 2016 budget adjustment, the total year over year (2016 over 2015) spending increase is $114.67 million or 5.05 percent. At this growth rate, the spending of state dollars in 2016 is in line with the six year trend of 5.2 percent since 2010.

With Vermont’s economy growing at the annual rate of 2 to 3 percent, the above 5 percent growth rates are clearly unsustainable without more and more taxes and fees burdening Vermonters’ wallets. Unfortunately, our legislators and governor are focused on raising revenues to support every increasing budgets rather than bending the spending trajectory in line with economic growth.

Here’s what an alternative looks like. As Vermont emerged from the 1990-1991 recession, both Governors Snelling and Dean committed themselves to sustainable spending.  Snelling raised taxes to protect the most vulnerable through the recession but simultaneously got language passed that sunset these tax increases once the state budget returned to sustainability.  Dean stayed the course of Governor Snellings commitments, allowing budget growth of 1.85 percent, -2.16 percent, and 2.88 percent for fiscal years 1992, 1993, and 1994 respectively. Dean leveraged this constraint to bring necessary reforms in human services and education spending, the same areas that drive the budget today.

Unfortunately, few of our state house leaders exhibit much passion for sustainable spending and cost containment. In 2011, they abandoned their own effort, Challenges for Change, which had identified millions in potential cost savings opportunities applicable to fiscal 2011 and 2012.

Campaign for Vermont believes it’s up to you to tell your legislators of all political parties that enough is enough with regard to raising revenues and it’s time to find cost saving reforms. Over the coming week, Campaign for Vermont will provide you with viable ideas for such reforms to suggest and discuss with your legislators. Reform is never easy, but totally necessary if we are to put our state budget back on sustainable and stable ground. Please share these Power Alleys with your friends and neighbors.

Be Well,
Campaign for Vermont

PS: And don’t forget to make a donation to Campaign for Vermont to help support efforts such as this. Donate Now


Needed: Courage and Common Sense

If the legislature is truly intent on constraining education spending to lower property taxes, there is a simple and direct way to do it.

Vermont’s education funding system is like the House of Mirrors at the carnival. In the House of Mirrors, one’s reflection betrays reality, causing tall people to look squashed, short people to look lanky, and everyone in between warped and distorted.

Similarly, our education funding system betrays common sense. It turns a simple student head count into “equalized pupils” and voter approved school budgets into “education spending”. These terms, established and defined by the legislature, are used to set local education tax rates. The “equalized pupil” process reallocates the student count among districts, creating winners and losers, and the “education spending” process recalculates voter approved budgets by excluding certain types of spending. Such exclusions result in district’s “education spending” as a percent of voter approved budgets to be wide ranging, from the low 50 percentiles to the high 90 percentiles. Bottom line, tax rates associated with voter approved school budgets are highly unpredictable.

Our education funding system has become a House of Mirrors for most citizens and many school board members.  A school district where voters reduce spending might see higher taxes while a district that adds spending may see no tax increase at all.

Layered on top of this system, the Legislature last session enacted Act 46, including spending caps and spending penalties. Such an unworkable mishmash they crafted. Now the Governor wants the caps repealed or “tweaked”; key Senators on the Education Committee, having voted for the caps, now call for their repeal; and other legislators dig in their heals hoping that somehow the caps will lower property taxes.  

There are alternatives more simple and straight forward.  The driving force behind high property taxes is the high staffing levels in our schools. Vermont spends $19,100 per pupil, among the highest in the nation. As our student count continues to drop, now down 20,000 since 1997, our students to staff and students to teacher ratios are now the nation’s most generous at 4.7 and 10 respectively. For perspective, recent data from the National Center for Education Statistics (2013) shows the national average students to teacher ratio at 16, Rhode Island at 14, Massachusetts at 13.5, New Hampshire at 12.7, Connecticut at 12.5, Maine at 12.2 and Vermont at 10.7.

Outside the tangled web of the Education Fund is the Teachers Retirement system, funded substantially by the General Fund with contributions of $46.9 million in 2011 and rising to $73.1 million this year. In effect, the General Fund bankrolls the retirement costs for Vermont’s most generous in the nation students to teacher ratio. The opportunity exists to leverage access to the Teachers’ Retirement Fund such that Vermont’s students to teacher ratio is more tax payer friendly, say a ratio of 12, while remaining the best in New England.

Here’s an outline of what the legislature might do: 

  • Abandon the current caps and penalties as they are temporary, poorly designed and causing great confusion.
  • Establish a ratio of 12 students per teacher as a threshold for enrolling new teachers in the retirement system. Existing teachers would be grandfathered. (Alternatively, a ratio of students to staff could be used upon developing a reliable counting system). Further, establish a threshold of spending per pupil to allow low cost districts more hiring flexibility than high cost districts.
  • Assign teachers (or staff as the case may be) employed at supervisory unions to local school districts similarly to how supervisory union budgets are now assigned to member district budgets.
  • Starting in school year 2018, phase-in the thresholds that inhibit the enrollment of new teachers into the retirement system if the sponsoring school district exceeds both the established pupil to teacher and spending per student thresholds.

The above system would be a powerful spending constraint targeted at the very cause of Vermont’s high education spending and property taxes. Unlike Act 46 which caps every district, leveraging access to the retirement system would target only districts with high staffing levels, leaving the rest alone. As school district’s trend toward lower students to teacher ratios, millions will be saved in the general fund to be used to restore the retirement fund’s fiscal health or redirected to underfunded areas of state government like higher education. For property tax payers, the higher students to staff ratios translate into tens of millions in reduced property taxes.   

If our legislators exercise the necessary political courage to look past the pressures of the education lobby, property taxes can be reduced without undermining education quality.

This commentary is by Tom Pelham, formerly finance commissioner in the Dean administration, tax commissioner in the Douglas administration, a state representative elected as an independent and who served on the Appropriations Committee, and now a co-founder of Campaign for Vermont.


The Governor's Speech

Governor Shumlin’s recent budget speech is a vain attempt to craft a legacy of fiscal responsibility.  But, it’s too late for that; the damage is done to both Vermont’s fiscal standing and the Governor’s legacy.

Some housekeeping is in order.  Governor Shumlin points a finger at former Governor Douglas for the state’s fiscal woes; but state fiscal records reveal otherwise. Governor Douglas vetoed the fiscal 2010 budget not because it spent too little, but because it spent too much. It was Senate President Pro Tempore Shumlin and House Speaker Smith who in June, 2009 lead the veto override and henceforth set Vermont on its current unsustainable spending trajectory.

Governor Shumlin’s speech didn’t mention the $938 million in one-time federal stimulus funds Vermont received through fiscal 2011. Shumlin used these funds to both supplant general funds eroded by the Great Recession and grow base spending until these funds ran out in 2012. Then, Governor Shumlin, not Governor Douglas, raided $23 million from the education fund to prop up his unsustainable spending trend line.

About taxes - Governor Shumlin says, “This will be my sixth budget that does not increase income, sales, or rooms and meals tax rates”. Tax rates, maybe; but taxes, certainly not. Over the past 6 years income taxes (capital gains and deduction restrictions), sales taxes (sugary drinks), rooms and meals (vending machines), gas taxes, cigarette taxes, health insurance claims taxes, property taxes, and numerous fees,  among others, have all increased by the Governor’s actions.  For fiscal 2017, the Governor can say he’s not raising “income, sales, or rooms and meals tax rates” while increasing fees on mutual funds and new taxes on doctors and dentists. And so it goes.

Bottom line, since 2010 general fund and state fund spending generally, exclusive of federal funds, have grown at the respective rates of 5.3% and 5.2%, inclusive of the 2016 budget adjustment now before the legislature. In a Vermont economy experiencing 2 to 3 percent growth, the Governor’s (and legislature’s) aggressive spending of state taxpayer dollars drives the now annual fiscal hazards of budget gaps and higher taxes.

Each year there are two major budget bills before the legislature known as the Big Bill and the BAA (short for Budget Adjustment). The Big Bill covers the coming fiscal year while the BAA makes adjustments to the current fiscal year. When the legislature left Montpelier last year, they approved and the Governor signed the 2016 Big Bill with year-over-year general fund increases of 4.2 percent and all state fund increases of 3.8 percent. But now, with the 2016 BAA currently before the legislature more spending is proposed. The result, if approved, will be year-over-year increases of 5.1 percent and 5 percent respectively.

The Governor’s 2017 budget proposal is a 4.1 percent and 3.2 percent general fund increase over the 2016 Big Bill and 2016 BAA respectively. Relative to all state funds, the increases are 4.0 percent and 2.8 percent respectively. As is happening this year, these increases may rise next year with the 2017 BAA; but that will be next Governor’s worry.  The proposed increases again exceed underlying economic growth and require $13.2 million in higher mutual fund fees and $17 million in new taxes on doctors and dentists.

More of the Governor’s 2017 budget proposal will be uncovered as the legislative process unfolds, but interesting details already stand out. For example, the Governor’s proposed general fund increase totals $45 million. Of this, he directs $12.3 million or 27 percent of these new general funds to the Teachers’ Pension and Retired Teachers Health Care funds, now totaling $101 million - an amount greater than the $83.3 million general funds proposed for Vermont’s institutions of higher education. During Governor Shumlin’s term, the funding ratio of the Teachers’ Pension fund has dropped from 66.5 percent to 58.6 percent; not a great legacy and certainly a red flag to bond rating agencies. It must be noted, however, that the core cost drivers for teacher retirement benefits are not driven by state decisions, but by the salary and benefit contracts between local school boards and the NEA. While the Governor, legislators and Secretary of Education lament the excessive staffing in Vermont’s schools, they remain silent and paralyzed about the general fund bankrolling the retirement benefits driven by Vermont’s lowest-in the-nation pupil to teacher ratio of less than 10 to 1. This costly conflict between fiscal and educational policies and politics now consumes a whopping 27 percent of all new general funds, inclusive of new revenues from fees on mutual funds. With budget pressures ranging from higher education to human services, it’s unfortunate that state house leaders won’t resolve these conflicting and costly policy tensions.

This commentary is by Tom Pelham, formerly finance commissioner in the Dean administration, tax commissioner in the Douglas administration, a state representative elected as an independent and who served on the Appropriations Committee, and now a co-founder of Campaign for Vermont.


Voting With Their Feet

The contrasts are both striking and troubling. We learned recently that 4 of the 11 pediatricians serving Franklin County are closing shop due to low Medicaid rates. Since November we’ve known Vermont’s expanding Medicaid program is short $38 million state dollars in the current fiscal year and another $54 million in fiscal 2017. Further, the disastrous roll-out of Vermont Health Connect has been front page news far too often, from no-bid contracts for Washington, D. C.  insiders to the inability to enforce basic eligibility requirements for Medicaid enrollees.

Yet, throwing caution to the wind, our state house leaders double-down on their government funded health care effort. The Governor anxiously awaits a waiver from Washington that allows Montpelier appointees to manage Medicare payments for Vermont’s seniors and the Speaker of the House aligns himself with single-payer lobbyists regarding the expansion of Dr. Dynasaur to Vermonters of all incomes up to age 26, adding a projected 120,000 new enrollees to this publicly funded program for “children”.

More generally, the U.S. Census reports that Vermont has lost population since 2012 and the IRS reports for calendar years 2012-2013 a net out-migration of Vermont income tax filers, with Florida being the top destination and gaining $52.7 million of net new filer income that once resided in Vermont.  Clearly, from pediatricians to taxpayers, Vermonters are voting with their feet and leaving Vermont. Imagine the out-migration to Florida of more Vermont seniors should the state take over the management of their Medicare payments.

However, where our leaders take us is not inevitable; it’s a choice, both theirs’ and ours. With a bit of courage at the statehouse and pressure from voters, starting with the 2016 budget adjustment and 2017 budget, the corner toward sustainability can be turned. Here are options in healthcare, among others I’m sure. 

  • Do no more harm: Approach the budget adjustment with the aim of bending the spending curve back toward sustainability. Given time constraints, if one-time funds are necessary to prop-up Medicaid spending in 2016, as recommended by the Governor, make the commitment to not rely on such funds in 2017. Further, abandon efforts for the state to manage Medicare payments and enroll young adults in Dr. Dynasaur.
  • Strengthen tort reform consistent with Hsiao Report: The Hsiao report, a foundational document for Act 48, extensively discussed, then recommended, tort reforms for Vermont which the legislature did not adopt. Hsiao projected such would save Vermont’s health care system, at minimum, 2.6 percent or over $130 million. Given Vermont’s high level of publicly funded health care, these savings would accrue significantly to that system.
  • Greater Equity in Health Care Payments: This 2015 Rand Corporation study, The Economic Incidence of Health Care Spending in Vermont, commissioned by the legislature’s Joint Fiscal Office, concluded the following: “While nearly one-third of low-income individuals spend less than 5 percent of their income on health care, about 21 percent of low-income individuals spend more than 20 percent of their income on payments for health care.”

    2015-01-06 RAND Economic Incidence of Health Care Spending PDF

    In view of this wide disparity and recognizing that health care payments include out-of-pocket expenses and premiums, redesigning the payment system such that enrollees in publicly funded health care, especially those between 139 and 317 percent of poverty, pay at least 5 to 10 percent of their income for health care will enhance equity and bring revenues into the system. Further, under the Affordable Care Act, premiums can be adjusted higher based on whether or not the insured smokes. 
  • Rationalize Health Care Benefits: Update the 2009 Medicaid Tiger Team report.

    Tiger EDS Final PDF

    This report included a comparative analysis of utilization limits on certain, mostly medical related, Medicaid benefits among peer state Medicaid programs. The comparative states were Rhode Island, Massachusetts, Wisconsin, Washington, New Hampshire, Minnesota, New York, Delaware, Arizona and Pennsylvania.  The analysis encompassed only beneficiaries 23 and older and was conducted before Catamount health care was implemented. The Tiger Team analysis identified $22 million in potential general fund savings if utilization limits adopted by peer states were adopted as well in Vermont.  

As with Vermont’s K-12 education funding, our state is a leader relative to eligibility for publicly funded health care.  We are a middle income state more generous than most. The above options would not diminish our relative standing and include both revenue and cost containment opportunities. These would more than solve the current budget shortfall, leaving taxpayers grateful for the thoughtful balancing of a troubled situation.

The concept of sustainable spending is well honored but reluctantly embraced. The concept applies to both the ability of taxpayers to pay and the ability of providers to be paid fairly.  With regard to health care, our current leaders have violated both these objectives. Expanding health care programs already busting the budget while pediatricians close their doors for lack of fair payment sends a clear message that fiscal leadership is lacking at the state house. Over the coming weeks and months, we must ask our leaders, both current and future, to abandon the platitudes and give us their specific and serious recommendations for solving the problems before us.

This commentary is by Tom Pelham, formerly finance commissioner in the Dean administration, tax commissioner in the Douglas administration, a state representative elected as an independent and who served on the Appropriations Committee, and now a co-founder of Campaign for Vermont.


Weekly State House Newsletter- 2.3% Provider Tax and Education Spending

Here is Campaign for Vermont’s statehouse report for the week of February 1, 2016.

Budget: One (of many) controversial components of the Governor’s budget is his proposal to raise 17 million dollars in new revenue by way of a 2.3% “provider tax” on independent physicians and dentists. This week’s testimony in the House Ways and Means Committee by solo and small group practitioners was partly a cry for recognition of the benefit of their small size and strong community ties with patient relationships that span generations. It was also a dire warning that the provider tax could put them out of business or drive dedicated young professionals out of Vermont. Here are their presentations to the House Ways and Means Committee.

It’s hard not to smell a rat here. Lurking in the background is the Vermont’s Green Mountain Care Board‘s proposal to the federal government for the establishment of an “all-payer” health care model.  This is a complicated proposal but it is completely based upon the “ACO” (Accountable Care Organization) model of health care delivery. That model has been criticized as creating “a monopoly on health care” by hospital owned and controlled ACOs with an ultimate objective of merging them into a powerful single provider entity.

https://vtdigger.org/2016/01/28/independent-doctors-wary-of-provider-tax-all-payer/

http://vtdigger.org/2016/01/27/davis-the-all-payer-gambit/

The all payer proposal does not require legislative approval. During a Green Mountain     Care Board presentation to the House Ways and Means Committee on Friday, Chair Janet Ancel asked the pointed question, “What if we don’t like ACOs?” The response was basically that the train had left the station.

So while its uncertain at best whether voters can have much of an impact on the “all-payer” proposal, if you value your small town  “country doc” then heads up on the provider tax increase. 

Education Spending: During the first house floor debate on amending Act 46 spending caps some legislators spoke openly about the sense of helplessness school boards experience in trying to keep education tax rates down. Given our statewide system of education funding, there is a need for a complete overhaul of the incomprehensible education finance system. CFV has been promoting this since our inception.

http://www.campaignforvermont.com/ed

While there is little momentum this session to tackle the huge task of overhauling our education finance system there are easier ways to begin cost control, starting with an established standard for a student–teacher ratio tied to funding.  With less than a month left before crossover (the date when bills must go from one chamber to the other) no bills creating a mandated student-teacher ratio have been introduced. 

Several representatives have sponsored a bill to create a statewide teachers’ contract with a cap on teacher salaries. The bill is currently in the House Education Committee. A statewide teachers contract to cut costs is hardly a new idea.

http://vtdigger.org/2013/01/09/house-gop-supports-statewide-teacher-contract-nixing-education-property-tax-for-senior-citizens

Meanwhile here is what is really driving the large increase in teacher health care costs that led to the alteration of the original spending caps in Act 46.

http://vtdigger.org/2016/01/24/valley-news-big-differences-in-vermont-town-school-insurance-plans/

With town meeting day just around the corner the big question is how voters will react to having their plea for property tax relief ignored.

Power Alley: Power Alley, our new tool for informing you of the votes of committee members on significant issues, has been launched with a first installment covering  recent votes to effectively remove meaningful Act 46 spending caps. Please let us know if we can improve upon this service in any way. There is no better means of affecting change than your direct communication with your legislators on important votes.

As always we need your support and donations so we can continue our efforts to watchdog and attempt to influence the legislature and to help you to do the same.  A contribution of $50 or $100 dollars would be greatly appreciated and well used. We do recognize that not all of our supporters can afford this so a donation in any amount is valued. Thank you for all of your past support. Please renew that support with a donation.

And visit us on Facebook or Twitter too!

Best,

Barbara Crippen
Policy Coordinator


Power Alley – How They Voted – Amending Act 46

Welcome to Campaign for Vermont’s first Power Alley presentation. Here’s the thinking behind Power Alley.

On any given issue, not all legislators are created equal. Each legislator is appointed to a Committee and such Committees guide the substance and conversation within the Committee’s area of jurisdiction.

These Power Alley profiles focus upon the recent actions of the House Education Committee and the Senate Education Committee with regard to amending the “spending caps” in Act 46, a bill passed last session to reform Vermont’s education system. Click to learn more about the education power alleys.

http://www.campaignforvermont.org/poweralleyhouse

http://www.campaignforvermont.org/poweralleysenate

If you live in the legislative district of a member of the House or Senate Education Committees, you have more clout to change education policy in Vermont than Vermonters who live outside such districts, given that you directly vote for these Committee members. As noted in the Power Alley profiles, Campaign for Vermont considers Act 46 a weak effort to reform our education system, especially when it comes to reducing property tax burdens.

Whatever your view of Act 46, as amended, we urge you to share these Power Alley profiles with your neighbors and be in contact with your elected representatives about their Committee bills.

One final point. Recently a consultant to the legislature released a study costing near $300,000. Here’s a link to that study:

http://www.leg.state.vt.us/jfo/education/adequacy/VT%20EB%20Analysis%2020.1.pdf

The study concluded the following:

“Using data for school year 2014-15, the Vermont EB model estimates an adequate funding level of $1.56 billion or some $163.9 million (approximately 10%) less than Vermont school districts spent for PK-2 education that year.”

Please ask your legislator whether Act 46, as amended, will save Vermont taxpayers $163.9 million and if not, why not.

Thank you,
Campaign for Vermont


Weekly State House Newsletter – Staff Changes, Budget, Education Spending

We've got some exciting updates in our first newsletter of 2016!

Staff Changes; 
First, some staff changes at Campaign for Vermont.

We are sad to lose Cyrus Patten, our top staffer, to MAYDAY.US , a cross-partisan campaign to fight big money corruption in politics. Cyrus has served Campaign for Vermont well and we wish him success. Luckily we are not losing him completely. Cyrus will remain with us as a Campaign for Vermont Partner and support our efforts in such key areas as ethics reform, an area where Campaign for Vermont has pushed the ball near to the finish line at the state house.

I have assumed the role of Campaign for Vermont’s Policy Coordinator. A former longtime public service lawyer for the State of Vermont, first with the Attorney General’s Office and more recently at the Agency of Education, I will be on site at the state house, tracking legislation of interest and advocating on your behalf. I am excited by our mission and fully committed to Campaign for Vermont’s nonpartisan approach to positive change in how we are served by our state government. 

Budget; Speaking of the state house, there is a lot going on and not much of it is good. The House has passed a 2016 budget adjustment which pushes state dollar spending up another $28.4 million for a total increase of 5.5%, or $114.7 million over the fiscal 2015 budget. Further the 2016 budget adjustment is again build upon a number of “one time” funding sources that make the 2017 fiscal year budgeting  process even more difficult.

Unfortunately, Governor's Budget Proposal for 2017 offers more of the same imbalance. Courage, of the kind displayed by former governors like Dick Snelling, Howard Dean and Jim Douglas who spoke the truth about state spending and brought common sense to the table, is sorely needed.

Education Spending: In another important area, education spending, Act 46 is turning into the quagmire that Campaign for Vermont predicted last fall while property taxpayers have been thrown overboard. The “spending caps” for 2017 have been so weakened by their recent amendment as to be worthless and have been completely removed for 2018. So much for the expressed concerns of property taxpayers last election. We must demand of our legislators that they not go home this session without passing viable property tax relief. Or else!!!!!

Power Alley: The types of problems profiled above are the by-product of bi-partisan dysfunction. Democrats, Republican and Progressives have all failed to offer effective measures to address Vermont’s affordability crisis. However some legislators have more clout than others. The Speaker and Senate leaders appoint some of their peers to important Committees where key decisions are made. From Campaign for Vermont’s perspective, these power committees include in the House: Appropriations; Ways and Means; Education and Government Operations. In the Senate the power committees are: Appropriations; Finance; Education and Government Operations.

A new service for our Campaign for Vermont Partners and Members will be the regular distribution of information about how the members of these  “power” committees vote on important legislation that comes before their committees. We call this “Power Alley” and it will be designed to both inform our membership and enable you to communicate your satisfaction or dissatisfaction regarding specific votes.

As you can see from the above, there is a lot going on that affects you. By now you must know that Campaign for Vermont provides you with valuable insight into how state government works for you or against you. Campaign for Vermont, with your help, looks to change how the legislature handles taxpayers’ money. There are reasonable and responsible solutions to our current problems such as these we’ve offered in the area of health care. Campaign for Vermont will not just finger point the problem, but offer ideas and support the common sense ideas of others to bend the spending curve.

We need your support and donations so we can continue our work during this critical legislative session and election year. A contribution of $50 or $100 dollars would be greatly appreciated and well used. We do recognize that not all of our supporters can afford this so a donation in any amount is valued. Thank you for all of your past support. Please renew that support with a donation

And visit us on Facebook.

I look forward to working with and for you,

Barbara Crippen
Policy Coordinator
Campaign for Vermont


$1,000 for every man, woman, and child in Vermont

This message was recently distributed to our email list.

Let’s not be “penny wise and pound foolish”. Campaign for Vermont needs your help now and here is just one good reason.

In 2011, state government extracted from the Vermont economy $2.954 billion. These revenues from taxes and fees are deposited collectively into the state’s general fund, transportation fund, special fund, and education fund among others. For the current fiscal year, 2016, the equivalent extraction from the Vermont economy in taxes and fees is $3.598 billion, up $644 million over the 2011 level. That’s a whopping 22 percent increase in just 5 years and equates to an increase of more than $1,000 for every man, woman and child in Vermont. The burdens of these increases fall most heavily on Vermont’s middle class and business communities.

It’s common knowledge by now that Vermont’s economy is struggling. It has not grown by 22 percent over the last five years to keep pace with state spending. Campaign for Vermont has been a leading source of factual information profiling the state’s unsustainable budget. We’ve consistently called for specific reforms in this regard.

http://www.campaignforvermont.org/sustainable-budgeting

Certainly, your voice as a Campaign for Vermonter will be sorely missed if Campaign for Vermont does not have the resources to sustain our efforts to constrain state spending and nurture and defend Vermont’s economy.  While our statehouse leaders extract from Vermont’s economy on average $1,000 more per person this year when compared to 2011, we ask for your support to push back on such increases.

Our nation’s Declaration of Independence ends with this phrase, “we mutually pledge to each other our Lives, our Fortunes and our sacred Honor”. The men and women of that era acted with passion to make sure their government represented them. Today, clicking “like” or “dislike” allows some to believe they are a participant in shaping their government when in fact it’s the hard work of participatory democracy that shapes our government.

The choice is clear. You can continue to pay the higher and higher taxes and fees imposed on you by our state house leaders or you can contribute to and participate in Campaign for Vermont’s efforts to refocus our state government.  If everyone receiving this email contributed just $20, Campaign for Vermont can continue forward during this important legislative session and election year. We recognize that not all our supporters can afford $20, so if a contribution of $50 or $100 is possible, it would be greatly appreciated and well used.

Thank you all for your past support. Please renew that support with a donation.


An Open Letter to Minority Leader Don Turner

An Open Letter to Minority Leader Don Turner

I write to you because legislation dealing with state spending and taxes are first considered by the House of Representatives. Truth be told, the current fiscal dysfunction of state government has been a tri-partisan affair. All republicans and democrats on the House and Senate Appropriations Committees voted favorably for the current 2016 budget. Now, near halfway through the fiscal year, that budget appears seriously out of balance by about $40 million. Similarly, the school consolidation bill, now Act 46 and driving school boards nuts, was supported favorably by all House and Senate Education Committee members on a tri-partisan basis.

During the Dean administration, we worked very hard to successfully build centrist support for the Governor’s common sense positions on state spending and education funding. Now that the public sees the fumbled roll-out of the 2016 budget and Act 46, hopefully these matters can be revisited in the coming legislative session and that you can organize a “coalition of the sensible”, including corralling your own caucus as well as moderate democrats and mindful progressives, to unwind the poor choices recently enacted.

In addition to the budget and Act 46, the accumulation of credit authority and interfund borrowing from the state’s cash flows is another risky fiscal adventure, especially as the 2016 budget adjustment and the 2017 budget seem on track to further Vermont’s fiscal train wreck. You might consider a provision in the 2016 budget adjustment that walks back the use of these newly created lending authorities and requires that any unused authority allowed the Treasurer pursuant to Act 199 of 2014 be rescinded.

Vermont’s budget stabilization reserves were established to better accommodate annual fluctuations in state revenues as well as buffer general, transportation and education fund appropriations during revenue shortfalls. They are especially important to Vermont’s most vulnerable as a stabilizing resource supporting program appropriations. These supposedly undesignated reserves are embedded in the cash flows of their respective funds. At their origin, it was never conceived that these reserves be utilized as pools of cash for loans to fund expansions of state programs. Unfortunately, over recent years the legislature and administration now obligate these funds for terms up to 10 – 12 years. Thus, should an economic downturn or revenue short fall squeeze the state’s cash flows, rather than cash available to underpin appropriations, Treasurer Pearce now holds loan receivables that are not useful to that purpose.

First, Act 179 of 2014 allowed the Treasurer to execute an interfund loan to the Retired Teachers’ Health and Medical Benefits fund (RTHMBF) in an amount up to $30 million. Here’s a link to this statutory provision (see Sec. E.514.1) and a power point slide profiling the associated cash flows on page 12.

http://legislature.vermont.gov/assets/Documents/2014/Docs/ACTS/ACT179/ACT179%20As%20Enacted.pdf

http://legislature.vermont.gov/assets/Documents/2016/WorkGroups/House%20Education/Bills/H.490/W~Beth%20Pearce~Powerpoint%20-%20Teacher%20Health%20Care%20and%20Pensions,%20Act%20179~3-11-2015.pdf

Further, Act 87 of 2013 Section 8 as amended by Act 199 of 2014 Sections 23-25 allows the Treasurer, in addition to that authorized above for the RTHMBF, to create credit facilities equaling 10 percent of average monthly cash flows. The calculation of this percentage equates to about $35 million as summarized on the last page of the Local Investment Advisory Report linked here.

http://legislature.vermont.gov/assets/Legislative-Reports/Local-Investment-Adivsory-Report.1.15.2015.pdf

Given the above, the loan authorizations from cash flow amount to $65 million. Keeping in mind that the general fund budget stabilization reserve target is just over $70 million for fiscal 2016, one can see that authorized interfund loan and credit facilities relative to this target are sizable.

A few observations.  

First, as noted above, budget stabilization reserves are not available for their intended purposes when they are simultaneously committed to interfund loans and credit facilities.

Second, state government already sponsors and funds programmatic areas such as affordable housing and energy efficiency, among the targets for these new “credit facilities”. The establishment of another layer of effort in these areas at the Treasurer’s Office is an unnecessary and duplicative expansion of state bureaucracy that end runs the appropriations process.

Thirdly, the interfund loan to the RTHMBF is specific to the general fund while the 10 percent provision of Act 199 is more generally stated at “10 percent of average cash balance”. However, given that the “average cash balance” intermingles cash from restricted/dedicated funds such as Federal Funds, Special Funds, Transportation Funds, Education Funds, Fish and Wildlife Funds, among all others, such restrictions may limit the interim use of these funds for loans beyond their statutorily established purposes. Thus, should the state’s cash flow get squeezed, the burden of these loans from cash flow will primarily diminish the general fund stabilization reserve.

Hopefully you can bring together a “coalition of the sensible” so that legislation leaving the House for the Senate in areas such as those profiled above gets Vermont back on a sensible, less risky fiscal track.

This commentary is by Tom Pelham, formerly finance commissioner in the Dean administration, tax commissioner in the Douglas administration, a state representative elected as an independent and who served on the Appropriations Committee, and now a co-founder of Campaign for Vermont.


The Crippling of State Government

As Vermont turns toward winter, cold winds blow over more than just our beloved landscape.  The holes in our state budget are now open windows not easily shut against cold realities. Despite last year’s $30 million general fund tax increase, we once again face another year of general fund over-budgeting ranging from $90 million to $130 million. By the time we get to January and the start of the next legislative session, both those who rely upon government services and taxpayers who fund government services will feel the chilling squeeze of the fiscal vice our statehouse leaders have crafted.

The Medicaid/global-commitment budget alone has grown (with more to come) by $310 million to $1.38 billion since 2011, equaling an annual growth rate of 5.2 percent. However, as one-time federal stimulus funds totaling over $110 million used to support this growth diminished, state general funds increased 187 percent from $72.5 to $208.7 million to fill the gap along with rapid growth in other state funding sources such as Special funds and State Healthcare Resources Funds. But it gets worse; we now learn even more money is needed. The Joint Fiscal Office (JFO) reports looming Medicaid shortfalls of $105.8 million ($38.1 million in general funds) in the current year and $133.2 million ($58.2 million in general funds) in fiscal 2017. 

http://www.leg.state.vt.us/jfo/healthcare/FY16%20and%20FY17%20Medicaid_Budget_Pressures.pdf

Inclusive of the projected 2016 shortfall, the Medicaid/global-commitment spending since 2011 tracks at a deeply troubling 6.8 percent annual growth rate.

Further, the VtDigger article linked below profiles the management chaos at Vermont’s rapidly expanded Medicaid program. Vermont’s top fiscal officers reveal that, “Medicaid has been auto-re-enrolling folks because of the difficulties of the exchange. It makes the forecasting really difficult.” says JFO’s Stephanie Barrett. Barrett reports that exchange difficulties resulted in a federal waiver that keeps more people on Medicaid without confirming whether they were qualified.

http://vtdigger.org/2015/10/14/lawmakers-begin-work-on-medicaid-deficit/

In return for such fiscal largesse and management chaos, what have Vermonters gained? Well, the needle tracking the number of insured Vermonters has moved slightly favorable from 93.2 percent in 2012 (1st in the nation) to 96.3 percent, now 2nd in the nation. But, along with this slight improvement came the 46.5 percent growth in state sponsored health care plan enrollments from 139,900 in 2011 to 205,000 or one-third of all Vermonters today, in part because certain private insurance plans were outlawed by statehouse leaders in favor of taxpayer funded plans.

Such fiscal uncertainty was avoidable if Governor Shumlin, Speaker Smith and other legislative leaders had taken their fiduciary responsibilities seriously. As an example of being responsible, during the 1995 legislative session Governor Dean recommended and the Legislature passed the Vermont Health Access Program (VHAP), Vermont’s first major expansion of Medicaid. Then, unlike today, fiscal accountability was a paramount concern. We included in the VHAP law this “manage to the money” requirement to prevent revenue shortfalls.

“Sec. 16. HEALTH ACCESS PROGRAM; LIMITATIONS; IMPLEMENTATION

(a) Enrollment in the health access program shall be limited by the amount of money available for that purpose in the Vermont Health Access Trust Fund established in Sec. 9 of this act. The office of Vermont health access shall track enrollment on a monthly basis to assure that enrollment does not exceed either appropriations or the capacity of the health plan to serve enrollees.

(b) The oversight committee shall monitor the implementation of the health access program as required in Sec. 13 of this act. “

http://www.leg.state.vt.us/DOCS/1996/ACTS/ACT014.HTM

Given the sad shape of our state budget and the fiscal tourniquets on areas less favored than healthcare like Higher Education, the Judiciary and Commerce and Community Development, among others, it’s time for state house leaders to give healthcare expansion a rest and maybe, of necessity, take a step or two back. These days there is little appreciation under the Golden Dome that taxpayer dollars are a precious and scarce resource. Their credit card approach to expanding taxpayer funded health care is crippling state government.

A step back might include the following. During the 2004 state budget process, Representative Patti O’Donnell (R-Vernon) and I (I-Calais) sponsored legislation to revamp the co-pay and premium system for Medicaid. Our proposal was to make the system more progressive with premiums based on the ability to pay while diminishing regressive co-pays. Premiums were to be paid prospectively rather than retrospectively. This proposal received broad bi-partisan support in the House and Senate and was signed by Governor Douglas. In a thank you note, then lobbyist for the Council of Vermont Elders and now State Senator Michael Sirotkin recognized the progressive benefits of the new law. He wrote, “We’ve been trying to raise that point for a long time, but this was the first time through this premium model that it was expressly noted.” You can read this legislation here starting in Section 146 (d).

http://www.leg.state.vt.us/docs/legdoc.cfm?URL=/docs/2004/acts/ACT066.HTM

As the last recession took hold, the Douglas Administration established Tiger Teams, one of which focused on Medicaid. ”A Path to Medicaid Savings” was published in December, 2009. The members of this Tiger Team, an accomplished bunch including key managers of the Medicaid EDS system at the Agency of Human Services, a representative from Blue Cross Blue Shield, and Sarah Clark, a rising fiscal star recently appointed Chief Financial Officer at the Agency of Human Services, among others. One area the Report explored was whether the premium system established in 2004 had been updated for inflation and program expansion over time. They found that it had not and therefore offered an opportunity for enhanced revenues to support Medicaid. Their easy- to-read report can be found here:

http://finance.vermont.gov/sites/finance/files/pdf/state%20budget/tiger_EDS_Final.pdf

The Executive Summary reads in part:

“The original goal of the EDS/Medicaid Tiger Team was to identify expense reductions or revenue enhancements that save 5% ($50 million) of the $1 billion total spending in FY09. We believe this paper identifies options of this order of magnitude. While substantial and specific amounts of savings have been identified, more importantly the EDS Tiger Team has developed an approach that will help guide Medicaid’s programmatic and financial managers towards reaching fundamental fiscal goals and contribute to resolving Vermont’s current economic crisis while sustaining as best as possible Vermont’s relatively high standing among states in the health care arena.”

Unfortunately, with the “easy money” of one-time federal stimulus funds in hand, Governor Shumlin and the Legislature abandoned this Tiger Team effort and other budget reform opportunities like Challenges for Change, a legislative initiative. To abate the fiscal pneumonia now threatening state government, maybe it’s time to put away the credit card and revisit some of these cast aside reform opportunities.  

This commentary is by Tom Pelham, formerly finance commissioner in the Dean administration, tax commissioner in the Douglas administration, a state representative elected as an independent and who served on the Appropriations Committee, and now a co-founder of Campaign for Vermont.



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