Recent Fiscal Follies

by Robert Maynard

Last week Vermont Digger posted an article about the Speaker of the House Shap Smith calling out Governor Shumlin in his proposed spending increase:

House Speaker Shap Smith says lawmakers will likely reject most of the $50 million in “new spends” in the governor’s budget proposal.

Smith says the state can’t afford to pay for new programs. He cited pending federal budget cuts as the primary reason for rejecting Gov. Peter Shumlin’s proposals to fund $17 million in childcare subsidies, $17 million in energy programs, $10.7 million in increased Medicaid subsidies for health care providers and $2.5 million for higher education.

Debate over that article carried on into the weekend with the founder of Vermont’s first SuperPac, Bob Stannard trying to make the dubious case that Vermont’s legislature has already made significant cuts to the budget: “What seems to go unnoticed by the regular responders here is that this Speaker and at least two legislatures have made cuts in the budget totaling roughly $300 mil. Considering the state budget is roughly $1 billion these cuts have not been insignificant.”  Tom Pelham, of the Campaign for Vermont, quickly took Bob to the woodshed for this claim:

It might be helpful for you when you have some free time from your lobbying duties to go over to the JFO and research your above statement. There you will find this JFO spreadsheet documenting the state budget from 2009 to 2013 (pre-budget adjustment). The tally for the entire budget, all funds and individual funds, can be found on page 31.

http://www.leg.state.vt.us/jfo/education/FY2014%20Ed%20Fund%20Outlook%20H265%20Rates.pdf

Contrary to your statement, you won’t find cuts. The total state budget grew from $4.374 billion to $5.011 billion. That equals a greater-than-inflation annual rate of growth of 3.5%. The 2013 budget grew by 6.3%. The share of this coming from Vermont’s tax and fee payers (non-federal funds) grew from $2.918 billion to $3.233 billion, a portion of which was fueled by increases in the income tax in fiscal 2010 and a subsequent assessment on health insurance claims in 2011. Plus, the legislature has cost shifted tens of millions of Medicaid expenses onto hospital budgets beyond the appropriated spending in the JFO spreadsheet. You can go to page 18 and see that, exclusive of the millions in Medicaid cost shifts, the Human Services’ budget increased from $1.742 billion to $2.085 billion, an increase of 19.7%.

I know that many of your lobbyist peers like to say the budget has been cut when they didn’t get all the increases for which they lobbied. And unfortunately, some of our not so diligent members of media pass along these urban legends despite the underlying financial realities. But, the JFO spread sheet is an accurate record, to the dollar, of the legislature’s spending during the period referenced in your comment above. Equating a $637 million increase to a “cut” and a “tough choice” is a bit of a stretch.

Caught with his pants down, Stannard’s response basically was: “I think it’s safe to say that in his capacity as Finance Commissioner under the Dean Administration and Tax Commissioner under the Douglas Administration the budget was not cut either. Recommended spending may have been reduced back then, I don’t know.”  Here is a case where it would have been better to remain silent, since he admittedly did not know what he was talking about.  Instead he was taking to the woodshed again by Pelham:

If you read this document

http://campaignforvermont.org/cms-assets/documents/95246-114634.01.21.13-cfv-budget-paper-final.pdf

you’ll see that, contrary to your above “safe to say” observation, we actually did cut the budget in 1993 and the state budget grew by only 7/10ths of one percent from 1992 through 1994. This period of constrained spending set the table to reverse in 1998 the bond rating downgrade Vt. received in 1991 and its further increase in 2000, both of which occurred during my terms as Finance Commissioner. All this historical information is available in the appendices of the document linked above. As Tax Commissioner, I had little to do with crafting the state budget except for the Tax Dept’s piece of that pie yet I believe that Jim Reardon did great work for the Douglas Administration.

But, it seems this extended period of relative budget peace from the mid-1900’s until 2009 maybe be coming to an end. Our teacher and state employee pension funding levels are on the decline; as the Speaker noted recently we’ve spent the last of our reserves, except for rainy day funds and even here education fund spending for 2014 calls for the use of rainy day funds to fuel a 5.3% spending increase; we are not prepared for pending federal cutbacks necessary to balance the federal budget; we are cost shifting over $150 million of Medicaid costs onto our hospitals; we’ve raised or are about to raise income taxes, property taxes, assessments on healthcare insurance claims and gasoline taxes, among others; and health care reform maybe be just around the corner, which could more than double state budget responsibilities from $5 billion to $11 billion.

So, as you tour the statehouse doing your lobbying, you are likely witnessing the unfolding of events that lead to the first downgrade in the state’s bond rating in 23 years unless our leaders can find a path to the type of courage that Governor Dean displayed. Blissful unawareness of the above events unfolding before your eyes has its rewards but you are a state house lobbyist after all.

It would appear that Bob Stannard is not the only one who seems to be blissfully unaware “of the above events unfolding before your eyes.”  Governor Shumlin seems to be singing a tune of “Don’t Worry, Be Happy,” as we rapidly plunge ourselves into the realm of fiscal follies.  The again, he may be completely aware of where he is taking us, but thinks that we are not paying attention.

4 thoughts on “Recent Fiscal Follies

  1. The Governor and his band of thieves just really don’t get that we are sinking like Europe, but at least we can stop it before it goes the way of Greece. We need to stop spending money we don’t have. Vermont’s picture is not rosey, and maybe Shap Smith is startinbg to see that….maybe he is finally realizing that you can’t spend more than you are taking in. We still don’t know how the Healthcare is really going to be maintained.

  2. Excellent article. I just wish that everyone would be forced to read it. I find it “entertaining” that Stannard would even consider countering Tom P. In my opinion-Tom is one you best listen to-NOT counter.

  3. Post script: Bob Stannard’s SuperPAC,
    significantly supported Beth Pearce’s campaign for state treasurer.

  4. Excellent article–speaks the truth of where we are and where we are headed financially. The state treasurer’s claims about AAA or AA+ bond rating during the 2012 campaign were created by the work of those before her and the ratings will not hold given the realities so aptly discussed by Pelham.
    Without real cuts, and systemic change to the pensions, state government is unsustainable. The state treasurer is acting irresponsibly as she is not actively advising the legislature or the public on these matters. By remaining silent she is supporting myths perpetuated by folks like Bob Stannard.

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