Presentation Identifies “Impacts” From Fiscal Year 2011 Budget Agreement

by Aimee Lawton

Jim Reardon, Commissioner of the Department of Finance and Management and Stephen Klein, the Chief Fiscal Officer of the Legislative Joint Fiscal Office gave a presentation in the Representatives Chamber Tuesday regarding the direct and indirect impacts that will be seen in Vermont programs based on the FFY 2011 budget agreement.

Their presentation was based on the assessments that they made regarding the impact of the $38.6 billion reduction that was included in the federal fiscal year (FFY) 2011 budget agreement.

During the presentation, Reardon and Klein reported that they identified an estimated $17.6 million in state impacts and reductions. Of these impacts, $12.8 million are in the area of transportation funding and the other $4.8 million will directly and indirectly impact the state’s general fund. They also identified an additional $7.2 million in the area of non-state and local programs, such as municipalities. These estimates represented the preliminary SFY 2012 impacts.

Reardon and Klein addressed several key points in their memorandum that offered reasons for the uncertainties surrounding the fiscal impact of the legislation. One of them was the flexibility that is given to the federal administration in determining how to allocate the budget reductions. Another was the uncertainty of the FFY 2012 budget and the additional federal impacts that are anticipated once congress finalizes action on the budget. The 2012 FFY budget will include nine months of Vermont’s 2012 SFY, causing further impacts as the budget process continues.

The timing of the impacts was another key point that was discussed, as the impacts are all assumed to be in SFY 2012 and beyond. While this is a FFY 2011 adjustment, one-quarter of FFY 2011 is in Vermont’s SFY 2011. This is due to the fact that Vermont’s SFY runs from July 1-June 30, while the Federal FFY runs from October 1-September 30.

The final key point discussed in the memorandum was the state v. local vs. individual and business impacts. This says that the estimates provided in the breakdown of impacts and reductions focus on state impacts and do not completely address the direct funding of individual, municipal, or other entities that might receive federal funds. It was reported, however, that these impacts do exist and may open up to a greater extent as the budget continues to move through various federal grant agencies.

Before breaking down the preliminary fiscal impacts that they had identified, Reardon and Klein concluded in their memorandum that people should put the FFY 2011 budget agreement in the context of what will be a developing change in the relationship between the states and the federal government. They said that this bill will be followed with the FFY 2012 budget which is likely to contain further reductions, and that various deficit plans including changes to Medicare, federal health care reform, and other programs will see further impacts. They said that it is likely that the reduction in federal participation will continue into future years.

To read the memorandum and see a complete breakdown of the preliminary impacts as identified by Reardon, Klein, and their staff, visit http://www.leg.state.vt.us/jfo/appropriations/fy_2012/Vermont_-_Impact_From_Federal_38_billion_FFY_2011_Reductions.pdf