Vermont’s Supplement Budget Adjustments due to the current pandemic have been in the news recently. But how many Vermonters know what it is and what impact it has on the State’s yearly budget? 

First, some background on how we set the initial budget. At the beginning of every session, the Governor submits their budget for the coming year. Following the introduction, usually as a large and heavily covered press conference, it is written as an Appropriations Bill and sent to the Appropriations Committees of the House and Senate. There is a lot of debate and testimony as the committees work out their differences and propose a final Appropriations Bill. At the end of the session, the bill is signed into law by the Governor, and a budget is passed which becomes effective July 1st of that year.

During the course of the year, a variety of unexpected situations may make it necessary to adjust the Appropriations Bill. This is where the Budget Adjustment Acts (BAAs) come in. The BAA is a necessary tool to reflect an accurate budget. Just as businesses update their profit and loss projections, the State also adjusts its numbers and funding to ensure we have funds to meet obligations.

In 2020 there are two BAAs. One is for the “normal” BAA (BAA1) and the other (BAA2) is meant to deal with revenue and expenditure changes due to the COVID-19 pandemic. The “normal” BAA was already passed when COVID struck. The original 2020 General Fund Budget was approved at $1,634 m and BAA 1 brought the revised GF Budget to $1,641 m in expenditures. In addition, another $11 million was used for one-time expenditures such as the 27th pay-period (occurs every 4th year) and a transfer from the General Fund to the worker's compensation fund needed for COVID1-9 unemployment in FY20. This brings total uses of General Fund to $1,655 m. The Legislature follows the same procedure with the review of the BAA as they do when reviewing, approving and funding the Budget.

FY2020 BAA 2 (FY20 Supplemental Budget Adjustment) was submitted to the Legislature on May 20th. BAA2 deals with covering the reduced and deferred revenue and the use of reserve funds to cover the shortfall. Both the reduced and deferred revenue were the result of the COVID emergency plan actions - businesses closed, stay-at-home was enacted, submission dates for several tax categories were extended, among other circumstances. As the deferred revenue is received in FY 21, the reserve funds will be refilled. The original FY20 base-to-base adjustment (FY19 vs. FY20) was a 4.1% increase. After BAA 1, it was 4.8%. Interestingly enough, after BAA 2 (as submitted) the year-over-year comparison actually goes back down because the State needed to cut expenditures due to loss of revenue, so the State ended up basically back where it started.

Submitted by
Former Rep. Pat McDonald,
Berlin