Update February 2009
In this issue:
-- Medicaid Math
-- The Stimulus Should Stimulate Long-Range Thinking
-- Vermont's 2008 Job Losses: Twice as Bad as Estimated
-- School Funding Ain't Broke—So Why the Call to Fix It?
-- Some States are Increasing Joblessness
Medicaid Math
Policymakers are eyeing cuts to Medicaid as one way to help balance the state budget. But a cut to the state's Medicaid spending does not equal lower health care costs for Vermont. How can that be?
The reason is that the less Vermont spends, the less we get from the federal government in matching funds. Healthcare costs don't go down just because we decide to spend less. We still have to get the money to pay for that care from some Vermonter: the doctor or hospital or, least fairly, the Medicaid recipient, who can least afford it.
This report does the math.
The Stimulus Should Stimulate Long-Range Thinking
The American Recovery and Reinvestment Act, which President Obama signed this month, will send nearly $750 million to Vermont. The money is intended to stimulate job growth, or at least reduce job losses; kick-start the economy by funding large infrastructure projects; and help close the gap in state budgets facing huge deficits due to reduced tax and other revenues.
The funds are coming not a moment too soon. Vermont's budget deficit could reach $250 million in 2010. The state lost almost 11,000 jobs in 2008—nearly half of those in the month of December—and now the governor wants to ax another 660 state jobs. The federal aid will help Vermont maintain current services, allowing it to keep its commitments to the most vulnerable citizens, and also allow it to step up to meet increased demand as more people are hit by the downturn.
Washington can help stem the immediate crisis. But the federal aid is temporary, and it won't solve Vermont's deep-seated structural budget problems. To make the best use of this one-time money, elected officials need to incorporate these hundreds of millions of federal dollars into a five-year plan to restore fiscal stability to the state. And they should be thinking even longer term than that.
Read The Stimulus Package: Fixing Problems Now Can Help Vermont Face its Bigger Problems
Vermont's 2008 Job Losses: Twice as Bad as Estimated
Last month, Vermont's Department of Labor announced that Vermont had lost 5,800 jobs in 2008, 2,400 of those in December alone. Those were pretty sobering statistics.
Now we learn—from routine yearly statistical revisions—the reality was even worse. According to the revised figures, the number of seasonally adjusted, non-farm jobs dropped by 10,900 last year, to 297,800—with a hemorrhage of 4,900 in December. The new annual numbers are nearly double the earlier estimate.
Throughout the year, the Labor Department issues monthly employment reports based on surveys of employers. The samples are relatively small so they can be done frequently, but there's always a margin of error. Once a year, therefore, the survey results are matched against actual employment data filed with employers' tax returns.
According to the department, this year's revisions were greater than any previous adjustments. Typically, the changes involve several hundred jobs—not 5,000. The revised employment data are available at the department's website.
School Funding Ain't Broke—So Why the Call to Fix It?
The grumbling about Vermont's school financing system never stops. One state leader now calls it "fundamentally broken and beyond repair." The problem? The system is too complicated for people to understand, critics say. And school property taxes have increased as enrollment has declined.
True enough. School finance is hard to understand. That's no reason to dump the system. Spending is rising, but that's part of the plan—for now. In 1997, Act 60 redressed historic, unconstitutional inequities that let wealthier districts fund their schools robustly with low tax rates, while poorer ones had to impose high rates to raise a relative pittance. To close the gap, under Acts 60 and 68, lower-spending towns have spent more. They needed it. But as we near equity, spending is leveling off.
Vermont has the most equitable, stable, sustainable education funding system in America. Vermonters spend a lower percentage of their income on school property taxes now than they did before 1997. Public accountability is unequaled—last year 170,000 votes were cast on local school budgets. And our students' test scores are among the top five in the nation.
So why the griping? Read our op-ed.
Some States are Increasing Joblessness
Some state governments aren't making life any easier for the Obama administration. Its intention in pumping billions of dollars into the economy is to create new jobs and save existing ones. But some states are making decisions that will only increase unemployment.
With revenues falling sharply, states have been forced to choose between cutting services and raising taxes in addition to using rainy day funds. Each option has it's downside, but some economists suggest that raising taxes on upper income taxpayers produces less of a drag on the economy than cutting services and laying off state workers, which increases joblessness.
Many states, including Vermont, have ignored this advice and have proposed budget cuts before raising revenues. In many cases, these cuts are hurting the people who are least able to cope with any additional pressure in this economy.
Some states—nearly half of those facing deficits—have concluded that they can't cut their way out of their fiscal problems and are now looking at raising taxes. New York, for example, is considering raising tax rates on income over $250,000, including a 50 percent increase on income over $1 million.
For more on how states are coping with budget problems, read the Center on Budget and Policy Priorities report Facing Deficits, At Least 40 States are Imposing or Planning Cuts That Hurt Vulnerable Residents.
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