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January 19, 2010

Douglas Outlines Austere Final Budget

In his final budget address to lawmakers, Gov. Jim Douglas compared the devastating flood of 1927 that wiped out many of Vermont's roads, bridges and farmlands to today's economic crisis.

"The Great Flood of 1927 was a defining moment in our state's history not just for the magnitude of destruction, but for the effort to rebuild that followed," said Douglas. "Today, the crisis we confront is economic. Just as Vermonters did more than 80 years ago, we must rebuild better than before. This year we will be judged not just by our ability to pass a balanced budget, but by whether that budget prepares our state and its people for a stronger tomorrow."

To see a Tweet-by-Tweet account of his speech, check out my Twitter feed.

And what a budget it will be: The state is facing a $150 million shortfall. To meet that gap, the governor is cutting programs throughout state government, though largely in the Agency of Human Services.

AHS was largely spared from drastic cuts last fiscal year because the legislature used one-time federal stimulus money to plug budget holes. Douglas said that won't work this year, as fewer federal dollars are available.

"By starting now the difficult process of realigning human services spending within currently available resources, we will spare programs from devastating cuts when the federal spigot is eventually turned off," said Douglas.

In all, the governor expects $38 million in efficiency savings from a bipartisan committee's recommendations, $25 million in pension savings, $8 million in federal funds from the recertification of the state hospital, and $1 million from a court restructuring. Of this $72 million, it's too early to say if all these savings can truly be realized. In the past, banking on such savings has proven a fool's errand.

To trim human services spending, the governor wants to increase the deductibles for people served by a panoply of Medicaid-funded programs via Green Mountain Care and Catamount Health. For example, an individual would see his or her annual deductible increase from $250 to $1200.

"Vermont’s Medicaid program is among the most generous in the nation. We can all be proud of efforts to expand coverage, because better health outcomes are achieved when people get care before they become sick. But maintaining coverage for the greatest number of people will mean scaling back benefits for some," the governor said.

Likewise, the governor is proposing some increases in the premiums paid by Catamount participants, but exact details were unavailable today, and said he would devote more resources to fraud detection and enforcement to better review the veracity of information provided by applicants as well as bills submitted by providers.

He also proposes eliminating about 20 separate grant programs — everything from mentoring to fitness programs at senior housing.

"I understand that these changes will generate considerable debate, but I’ve seen the alternatives and they are much worse," Douglas said.

As he did in his State of the State Address, Douglas called for major changes to education funding. He wants to make some people pay a larger percentage of their income toward local property taxes, cap the homestead value at $400,000, and wants to urge the early retirement of up to 1200 teachers over four years, with about half of them rehired, to lessen the cost on the education fund and the pension system. He also wants teachers to pay more for their share of health care.

In changing income sensitivity, Douglas is proposing that Vermonters earning $60,000 to $75,000 would see the maximum amount they pay in property taxes rise from 1.8 to 2.25 percent of their income; for Vermonters earning $75,000 to $90,000 that percentage would rise from 1.8 to 3.5 percent.

In addition, the governor wants to sunset the capital gains tax imposed last year, as well as the estate tax. That will reduce revenues to the state coffers by $10 million.

The governor is also proposing an increase of $13 million in telecommunications infrastructure, as well as giving another $5.5 million to the University of Vermont, Vermont State Colleges and the Vermont Student Assistance Corporation. He also wants to give a $1.5 million boost to the Next Generation scholarships program to help Vermonters pay for school, and stay in Vermont.

 Unlike in year's past, legislative leaders were not so quick to dismiss the governor's budget proposals as "dead on arrival."

"The budget message that you just heard is not unique to Vermont," said Senate President Pro Tem Peter Shumlin. The other 49 states' legislatures are receiving equally somber messages about the tough fiscal times we are facing, and the speaker and I, our chairs of appropriations committees and others in the legislature intend to work together with the governor to solve our visceral problems and to put Vermont  back on a sustainable fiscal path so we can grow jobs and get this economy moving again."

Shumlin said the Democratic-led legislature will use these principles to guide them as they review, and debate, how to meet the $150 million shortfall:

• Ensure that the most vulnerable Vermonters that need us so badly are not left behind;

• Local control in Vermont works, and they want to keep it alive and well;

• They don't want to transfer Montpelier's fiscal problems to the backs of property taxpayers; and,

• Ensure whatever they do creates jobs.

House Speaker Shap Smith acknowledged that the governor is in a difficult spot facing down another tremendous shortfall.

"This is the last budget address any governor would want to give, and I don't think any governor would want this to be the last budget address he gives," said Smith.

That said, Progressive David Zuckerman (P-Burlington) said he found Douglas' budget message too focused on punishing the vulnerable.

"It's interesting that he's going after people in a program that helps people the most, but he eliminated tax compliance officers who could be going out and finding people who are cheating the tax system," said Zuckerman.

The Douglas administration presented not only its budget in idea form, but in the form of an actual bill. This means that the House Appropriations Committee can begin work today on the specifics of the proposal. Usually, it can take weeks for such a bill to materialize.

Perhaps everyone realizes that a repeat of last year's budget showdown isn't in anyone's best interest — especially in an election year.

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