Playing Thimblerig in Montpelier

by John McClaughry

The street game of thimblerig, more commonly known in this country as “the shell game”, has a long and fascinating history. But wherever found, it invariably has one objective: to separate a “mark” – a gullible bystander – from his money through sleight of hand.

The “shell man” sets up a folding table with three walnut shells. As a crowd gathers, herded by the “shills”, the operator performs some slick hand movements, and invites the mark to win his bet by picking the two shells which do not cover the pea. Actually the pea has migrated into the operator’s palm, to magically appear under the shell not chosen. Sorry, pal, you guessed wrong.

This ancient game has reappeared on State Street in Montpelier. The chief shell man is the dexterous Gov. Peter Shumlin. He is aided by numerous shills in the large building called the State House.

A year ago Shumlin badly needed for other purposes the $27 million General Fund dollars assigned by law for transfer to the Education Fund. If he diverted it to other General Fund purposes, a $27 million shortfall would appear in the Education Fund. The only way of making it up would be to increase the two education property tax rates, for the first time since Act 60 was enacted in 1997. Not popular!

So rather than doing that, Shumlin came up with a subtle plan called “rebasing”. It permanently redefined the transfer formula base downward by $27 million. That way he could divert the money arguably without breaking the law.

But that of course ensured that the Education Fund would suffer the shortfall. To cure that, the Miscellaneous Tax Bill now pending before the Senate raises the residential school property tax rate from 87 cents to 89 cents per $100 of Grand List, and the nonresidential (business and second home) school property tax rate from $1.36 to $1.38. That will shift more school costs onto property tax payers who are not likely to figure out what was being done to them. Sorry, pal.

Last month the House, to its credit, acted to replace the $27 million Shumlin took by “rebasing”. But the Senate Appropriations committee, chaired by Sen. Jane Kitchel (D-Caledonia), has a very different idea.

Kitchel declared that the House proposal for “putting the money in the Ed Fund doesn’t guarantee any relief to Vermont property taxpayers.” She might have added, but didn’t, “besides, we have lots of things we would rather spend it on than ship it off to the Education Fund.”

So Kitchel won’t support the House plan to repay the purloined $27 million, and at the same time she and the Senate’s Democratic majority will in all likelihood vote to raise both school property tax rates. To shift attention from these awkward facts, Kitchel offered this novel proposal: if there is a General Fund surplus next year, then half of that surplus would be sent back to residential property taxpayers, but not businesses or second home owners, sometime in 2013.

Sen. Robert Hartwell (D-Bennington) didn’t buy it. “This is a short term fix,” he said, correctly. “I disagree that putting more money in Education Fund won’t help property taxpayers.”

To believe that here’s actually a pea under this shell, you have to believe that there will actually be a FY 2013 surplus. With General Fund spending increasing by over five percent a year, there would have to be a breathtaking upsurge in the state’s economy to put the pea under the tax rebate shell a year from now.

In addition, the elephant in the Appropriations room is the fact that the two big state retirement funds are over $2 billion out of actuarial balance. Indeed, the retired teachers’ health care benefits are being drained out of the fund instead of being covered by annual appropriations.

Admittedly slicing a $1.3 billion state general fund pie among so many claimants is a challenging task. But the people of this state would be better and more honestly served if its budget operators swore off intricate shell and pea games like the Shumlin rebasing, and making empty election year promises of future tax rebates out of funds never likely to materialize.

As Wikipedia says of the old shell game, “the game should not be mistaken for an honest game. Through very skilled sleight of hand, the operator can easily hide the pea without the mark’s seeing him or her do so.” That’s why shell men always have to keep moving, one jump ahead of the law.

John McClaughry is vice president of the Ethan Allen Institute (