Blog – Public Assets Institute http://publicassets.org forward thinking for Vermont’s common good Tue, 27 Jun 2017 14:52:58 +0000 en-US hourly 1 Let Vermonters weigh the budget options http://publicassets.org/blog/let-vermonters-weigh-the-budget-options/ http://publicassets.org/blog/let-vermonters-weigh-the-budget-options/#respond Thu, 15 Jun 2017 13:46:52 +0000 http://publicassets.org/?p=11463 The state’s 2018 fiscal year hasn’t started yet, and already the administration is considering cuts. Vermonters deserve to know what’s at stake and have a chance to consider alternatives.

Vermont’s 2017 fiscal year ends on June 30. Technically, because of a gubernatorial veto, the state doesn’t have a budget yet for next year, but should have one in place after the June 21 special legislative session and before the end of the month. Nevertheless, Gov. Phil Scott’s administration is making contingency plans to cut spending for fiscal 2018, which will start on July 1.

At this point, it appears the administration is being cautious. Both the administration and the Legislature’s Joint Fiscal Office anticipate that the economists who forecast state revenues will lower their estimates for the coming year. Late last month, the commissioner of finance and management asked various agencies and departments in state government to develop plans for absorbing cuts of 2 to 4 percent.

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The state’s 2018 fiscal year hasn’t started yet, and already the administration is considering cuts. Vermonters deserve to know what’s at stake and have a chance to consider alternatives.

Vermont’s 2017 fiscal year ends on June 30. Technically, because of a gubernatorial veto, the state doesn’t have a budget yet for next year, but should have one in place after the June 21 special legislative session and before the end of the month. Nevertheless, Gov. Phil Scott’s administration is making contingency plans to cut spending for fiscal 2018, which will start on July 1.

At this point, it appears the administration is being cautious. Both the administration and the Legislature’s Joint Fiscal Office anticipate that the economists who forecast state revenues will lower their estimates for the coming year. Late last month, the commissioner of finance and management asked various agencies and departments in state government to develop plans for absorbing cuts of 2 to 4 percent.

The picture should get clearer after the current fiscal year is closed out and the new revenue forecast is released in mid-July. Some areas of the budget will be exempt from the potential cuts. But Commissioner Andy Pallito told vtdigger this week that the agencies and departments affected could see spending reductions between $15 million and $30 million.

Whatever cuts are being considered, Vermonters should get an accounting of the consequences of the reductions. While the administration undoubtedly will find some legitimate reductions, for the most part, when positions are cut or resources are reduced, government services suffer.

Gov. Jim Douglas used to talk about doing more with less. But when he proposed across-the-board cuts, he drew criticism from an unexpected source—the then president of Ethan Allen Institute, John McClaughry. It wasn’t the cuts that McClaughry objected to; he thought it was unfair to give state employees fewer resources and expect them to do the same amount of work. In McClaughry’s view, for government to spend less, it has to do less.

But do people really want reduced public services? That’s the question Montpelier should be asking Vermonters if the economists conclude that revenue will drop off next year. Vermonters need to hear what services or programs the state will curtail. And they deserve to hear the options for increasing revenues if they decide they want to maintain current services.

Ideally, the state would have this kind of discussion each fall, when the administration is beginning to draw up its budget plans. We would have a current services budget, which the Scott administration published in greater detail this year than previous administrations had. It is an estimate of the cost of delivering all of the services the state is obligated or committed to provide. We would get the governor’s budget, which is the amount the administration proposes to spend. And where the governor’s budget falls short of what’s needed to meet the state’s commitments, we’d get an accounting of how the reduced budget will affect specific programs and services.

It’s prudent for the administration to be looking ahead and anticipating problems. And an early jump on fiscal 2018 insures there is plenty of time for Vermonters to hear and consider all of the options for addressing a drop in revenue.

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The fight we should be having http://publicassets.org/blog/the-fight-we-should-be-having/ http://publicassets.org/blog/the-fight-we-should-be-having/#comments Fri, 02 Jun 2017 16:52:06 +0000 http://publicassets.org/?p=11456 In case you missed it, the governor and the Legislature are in a showdown over the budget. Or unions. Or both, depending on whom you ask. But no matter how you see it, it’s the wrong fight.

Instead, the Legislature should be taking significant steps to make life more affordable for Vermonters. Fighting about $26 million in teachers’ health insurance savings, which will probably show up without the governor’s involvement, is not one of those significant steps.

Governor Scott says Vermont has an affordability problem. But it’s not state taxes that are causing the squeeze for low and moderate income Vermonters. It’s stagnant wages and rising costs for essentials.

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In case you missed it, the governor and the Legislature are in a showdown over the budget. Or unions. Or both, depending on whom you ask. But no matter how you see it, it’s the wrong fight.

Instead, the Legislature should be taking significant steps to make life more affordable for Vermonters. Fighting about $26 million in teachers’ health insurance savings, which will probably show up without the governor’s involvement, is not one of those significant steps.

Governor Scott says Vermont has an affordability problem. But it’s not state taxes that are causing the squeeze for low and moderate income Vermonters. It’s stagnant wages and rising costs for essentials.

What could Vermont do to make life more affordable? How about significant investment in making child care and college more affordable? How about raising the minimum wage? How about ensuring there’s enough affordable housing to go around?

These ideas and more were part of Public Assets’ A Framework for Progress report last summer. They’re also included in the Congressional Progressive Caucus’ aptly named The People’s Budget, which is a blueprint for how to make smart investments at the national level. The People’s Budget provided a clear plan to reallocate resources for a better health care system, family economic security, jobs, infrastructure, and education. It shows that the resources are there; we just need to decide that making these investments is a priority.

The governor has threatened to veto the appropriations bill over a statewide contract for teachers’ health care, which the Legislature adamantly opposes. Both sides say they won’t allow a government shutdown, but seem no closer to a deal than they were before the Legislature adjourned two weeks ago. While protecting local control is important, this game of chicken is distracting everyone from the larger issues facing the state.

Neither the House nor the Senate did anything drastic with the budget this year. Each cut a little here, added a little there, and ultimately agreed on a budget that relied on one-time funding and changed very little about what the state does for Vermonters. The governor made clear from the beginning that he would not sign a budget that raised taxes or fees, so the Legislature chose to work within that constraint. And the ongoing veto fight is unlikely to change the budget plan significantly. It’s just the hostage in an unrelated power struggle.

In 2012, the Legislature codified Vermont’s idea of a “People’s Budget,” which clearly defined the purpose of the state budget: to “address the needs of the people of Vermont in a way that advances human dignity and equity,” and “recognize every person’s need for health, housing, dignified work, education, food, social security, and a healthy environment (32 VSA § 306a).”

Does this budget move the state forward on those goals? It funds many critical services, though many of them have been eroded over the years. And the Legislature took some small positive steps that improve economic security for some Vermonters: implementing the Green Mountain Secure Retirement Plan, raising the asset cap for receiving Reach Up funds, investing modestly in affordable housing, and increasing the child care subsidy.

But these small steps ultimately won’t make the big difference that Vermonters finding life unaffordable need. In this national climate, we probably shouldn’t hold our breath hoping the federal government acts to help average citizens. Instead, the state should be doing all it can to address the needs of Vermonters. That will take bold leadership. Instead of “to veto or not to veto?” the fight we should be having in Montpelier is over how to make investments in a better future for Vermonters.

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Stay out of the swamp http://publicassets.org/blog/stay-out-of-the-swamp/ Tue, 23 May 2017 19:14:37 +0000 http://publicassets.org/?p=11446 For the most part, Vermont has been spared the kind of the political dysfunction that has paralyzed Washington for an embarrassingly long time. But Montpelier is at risk of sliding in that direction if the current dispute between the governor and the Legislature ultimately leads to a veto.

A gubernatorial veto is a legitimate political tool, although it is rarely used. Both sides try to avoid a veto showdown because the loser usually comes out looking weaker, and who the winner will be is never a sure thing.

In the past, governors have used the veto to prevent a legislative action they didn’t like from becoming law. In the extremely rare cases of an appropriations bill veto, governors were trying to force some cuts when they thought the Legislature wanted to spend too much.

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For the most part, Vermont has been spared the kind of the political dysfunction that has paralyzed Washington for an embarrassingly long time. But Montpelier is at risk of sliding in that direction if the current dispute between the governor and the Legislature ultimately leads to a veto.

A gubernatorial veto is a legitimate political tool, although it is rarely used. Both sides try to avoid a veto showdown because the loser usually comes out looking weaker, and who the winner will be is never a sure thing.

In the past, governors have used the veto to prevent a legislative action they didn’t like from becoming law. In the extremely rare cases of an appropriations bill veto, governors were trying to force some cuts when they thought the Legislature wanted to spend too much.

This year, for the first time in memory, the governor is threatening to veto the budget to force the Legislature to pass something he wants, outside of the budget—namely, the authority to negotiate a single contract with all Vermont teachers over the terms of their health insurance coverage.

The authority to negotiate teachers’ health insurance benefits is not intrinsically tied to the budget. The governor isn’t claiming that the budget is too big because it allocates too much for teachers’ health insurance. Rather, he’s threatening to hold the budget hostage unless the Legislature passes a bill that gives him powers he doesn’t currently have.

This is an ominous moment in Vermont politics. It is akin to the government shutdowns we’ve seen in Washington—both threatened and realized—over issues unrelated to the budget or the national debt. We don’t want to go there.

As a matter of sound fiscal policy, budget battles need to be confined to matters of government spending. If a governor thinks the appropriations bill is too big or allocates money for something that shouldn’t be funded, by all means he or she can veto the budget and fight it out with the Legislature. The same goes for revenue bills. If a governor doesn’t want to raise taxes, then veto the tax bill.

But it begins to smack of extortion when a governor starts threatening to kill bills out of spite or in an attempt to force the Legislature to do something unrelated to the bill under threat. It’s bad enough that Washington has sunk to such tactics. Vermont should stay out of that swamp.

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More state control is not the answer http://publicassets.org/blog/more-state-control-is-not-the-answer/ http://publicassets.org/blog/more-state-control-is-not-the-answer/#comments Thu, 18 May 2017 13:27:36 +0000 http://publicassets.org/?p=11423 Two years ago, I wrote an op-ed that opened: “The Legislature can work with local communities to improve education, or it can push them around.”

This is the fundamental choice that the governor and lawmakers continue to wrestle with this session.

In 2015, the debate was over school district consolidation. This year, the discussion hinges on savings from lower premiums for teachers’ health insurance, which have already been set for 2018. Both issues involve the state imposing control over local school management, and both have profound implications for communities.

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Two years ago, I wrote an op-ed that opened: “The Legislature can work with local communities to improve education, or it can push them around.”

This is the fundamental choice that the governor and lawmakers continue to wrestle with this session.

In 2015, the debate was over school district consolidation. This year, the discussion hinges on savings from lower premiums for teachers’ health insurance, which have already been set for 2018. Both issues involve the state imposing control over local school management, and both have profound implications for communities.

While framed as a way to reduce property taxes, this latest push for more state control appears to be coming from a desire to solve chronic General Fund revenue problems without raising General Fund taxes.

In January, the governor proposed moving $50 million in General Fund costs to property taxes and leaning on local school boards to make cuts to cover these costs. While House and Senate leaders rightly rejected that idea, the Senate itself decided last month to push $8 million of General Fund obligations onto property taxes. Same bad idea, just smaller scale.

Then when everyone thought the 2017 legislative session was about to close at the beginning of May, the governor proposed that the state take over health insurance negotiations with teachers—even though teachers are employees of local school districts, not the state. He has suggested that if the Legislature does not give him this authority, he will veto the budget.

The governor’s simplistic and unnecessary proposal has created chaos in Montpelier and put the Legislature two weeks beyond its scheduled adjournment. The administration has provided little information about how this hastily drawn plan, which would upset long-established labor law, would work. A seven-page memo by Legislative Council lawyers lays out myriad problems with and unanswered questions about the proposal.

Who knew that health care negotiations with teachers could be so complicated?

While Legislative leaders are right to oppose the governor’s intervention into local school district labor negotiations, they have nevertheless been floating their own state intervention proposals, trying to extract savings from local school districts, much as the governor had proposed back in January.

All of the time, effort, and heartache that has gone into wresting control from local communities—for no apparent good reason—might be better spent on cooperation. Instead of assuming that school boards and local voters—the same voters who elected legislators and the governor—are incapable of making sound decisions about our public schools, maybe the governor should start a conversation about something other than extracting money from public education to fill General Fund gaps.

Maybe we could talk about the children that the state is charged with educating and educators’ challenges of getting that job done in a time of unprecedented income inequality.

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Don’t mess with success http://publicassets.org/blog/dont-mess-with-success/ Wed, 10 May 2017 13:21:49 +0000 http://publicassets.org/?p=11414 The Legislature postponed its planned adjournment last week ostensibly over a disagreement with the governor about health care for Vermont’s local teachers. A lot of numbers have been thrown around—and I’ll get to those in the minute—but the crux of the dispute is that the governor claims he can drive a better bargain with the teachers than local school boards can. He’s not trying to make himself out to be Donald “Art of the Deal” Trump, but he says he has a plan to save $26 million.

The thing is, the plan the governor is promoting is a variation of one already underway.

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The Legislature postponed its planned adjournment last week ostensibly over a disagreement with the governor about health care for Vermont’s local teachers. A lot of numbers have been thrown around—and I’ll get to those in the minute—but the crux of the dispute is that the governor claims he can drive a better bargain with the teachers than local school boards can. He’s not trying to make himself out to be Donald “Art of the Deal” Trump, but he says he has a plan to save $26 million.

The thing is, the plan the governor is promoting is a variation of one already underway. It was developed by the Vermont Education Health Initiative—better known as VEHI, which is managed cooperatively by the teachers and Vermont school boards. Changes in federal law are forcing teachers to change from the health care plans most of them currently have. So for the last two years, VEHI has been working with the teachers and other stakeholders to come up with new plans. And an important part of the design of the new plans is encouraging smarter utilization of health care services to reduce costs for teachers and their communities.

Achieving the savings envisioned in the new VEHI plans will depend on the teachers’ success in being more cost-conscious about health care, which is something we all need to pay attention to. But in the long run it’s a more sustainable way to slow the growth of health care costs than simply shifting costs or, as they’re doing in Washington, leaving more people uninsured.

It’s easy to get lost in the weeds when talking about health insurance. There are two essential components: premiums, which are paid to the insurer for the services it covers, and out-of-pocket expenses, which is the share of the costs borne by the individual. Premiums and out-of-pocket costs can be split between employers and employees in lots of different ways. Currently, most teachers have plans with relatively high premiums and low out-of-pocket costs. The new plans developed by VEHI all change the mix—lower premiums and higher out-of-pocket costs.

One of the VEHI plans, which is the one the governor is promoting, would reduce premiums by approximately $75 million in 2018. Since the plan would increase out-of-pocket costs, the governor would use some of the premium savings—just under $50 million—to help teachers cover those additional costs. The idea is that his plan would not require teachers, as a group, to pay more next year than they are paying now, and it would result in an estimated net savings to the system of $26 million.

The cooperative, collaborative approach, which has served VEHI for years, has been providing the best value health insurance for the lowest cost for teachers and school boards. The new VEHI plans will take effect Jan. 1, 2018, and schools board around the state are already in the process of negotiating the specific terms of the health plans with their teachers. Which plans the district will offer, how the premiums will be split, and how the out-of-pocket costs will be shared are part of the negotiations. Those details are being worked out.

The governor only recently jumped into this process that has been going on for nearly two years. He claims that if he is given the authority to negotiate with the teachers—even though teachers are not state employees—he will achieve savings that the boards won’t be able to achieve on their own.

But premium savings for 2018 are already locked in, and for 2019 and beyond, no one, including the governor, knows what premiums will be. There are too many factors in play.

The governor has not explained why he suddenly needs to intervene in a process that is working and is actually on track to deliver cost savings to taxpayers.

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Vermont’s a great place to raise kids – for now http://publicassets.org/blog/vermonts-a-great-place/ Tue, 02 May 2017 17:44:43 +0000 http://publicassets.org/?p=11402 A new study ranked Vermont the #1 state to raise healthy kids. That’s the good news. Vermont often ranks high on quality of life surveys. The question is: Can Vermont stay on top if it continues to cut state services and postpone investments?

The study looked at three broad categories: 1) kids’ health and access to health care; 2) kids’ nutrition, physical activity and obesity; and 3) kids’ oral health. Vermont ranked #1, #1 and #5 respectively.

Vermont made the choice to invest in children’s health, and it’s paid off – both in terms of the impact on kids’ actual health and on Vermont’s reputation for citizens’ well-being. There’s a lesson here.

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A new study ranked Vermont the #1 state to raise healthy kids. That’s the good news. Vermont often ranks high on quality of life surveys (here, here and here, for example). The question is: Can Vermont stay on top if it continues to cut state services and postpone investments?

The study looked at three broad categories: 1) kids’ health and access to health care; 2) kids’ nutrition, physical activity and obesity; and 3) kids’ oral health. Vermont ranked #1, #1 and #5 respectively.

Vermont made the choice to invest in children’s health, and it’s paid off – both in terms of the impact on kids’ actual health and on Vermont’s reputation for citizens’ well-being. There’s a lesson here.

It’s not by accident that Vermont tops so many of these quality-of-life lists. It’s the result of decades of thoughtful policy about how best to protect and facilitate a way of life that depends on a healthy environment, a welcoming culture, and a commitment to its citizens.

But a decade of austerity budgeting puts both the reality and reputation of the state at risk. Since the Great Recession, Montpelier has slashed funding for housing programs, cut cash assistance to the most vulnerable families, and reduced policy and planning staff.

At the same time, political leaders have openly acknowledged the need for more resources to clean up Lake Champlain, provide more affordable housing, increase the child care subsidy, and invest in education.

The Senate just passed a state budget plan that makes some good investments in child care and mental health care and homeless shelters, but it does so by raising property taxes. The House’s version included $17 million in cuts to state government. These plans may have moved through respective chambers with consensus, but neither of them do enough to move the state forward.

Recently, the One Vermont coalition offered a plan to political leaders that would lower taxes for most Vermonters while closing loopholes for higher-income taxpayers. By making the tax system fairer and more up-to-date, the state can find the savings it needs to make strategic investments in Vermont’s future without cuts to services or increases in property taxes.

These smart investments work. Vermont is the healthiest place in the nation for kids to grow up. Now we need to ensure they also have high-quality, affordable child care, education that prepares them to succeed, and water free from toxic algae to swim in.

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Everyone loves the property tax http://publicassets.org/blog/everyone-loves-the-property-tax/ Tue, 25 Apr 2017 20:29:28 +0000 http://publicassets.org/?p=11396 For all of their public hand-wringing over property taxes, legislators and even the governor seem almost cavalier in their willingness to ask property owners to pay more.

- The tax incentives proffered by Act 46 to induce school districts to merge are being funded by higher property taxes.

- The Legislature imposed property tax penalties last year in an effort to reduce property taxes.

- In January, the governor declared property taxes “one of the biggest contributors” to what he called Vermont’s “crisis of affordability.” He then made a proposal that would have shifted $50 million in additional costs onto the property tax.

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For all of their public hand-wringing over property taxes, legislators and even the governor seem almost cavalier in their willingness to ask property owners to pay more.

  • The tax incentives proffered by Act 46 to induce school districts to merge are being funded by higher property taxes.
  • The Legislature imposed property tax penalties last year in an effort to reduce property taxes.
  • In January, the governor declared property taxes “one of the biggest contributors” to what he called Vermont’s “crisis of affordability.” He then made a proposal that would have shifted $50 million in additional costs onto the property tax.
  • The House Education Committee introduced a plan earlier this session that would have increased school property taxes on high-tax towns in order to lower taxes on low-tax towns.
  • Now the Senate Appropriations Committee wants to load more costs onto the property tax. In order to balance the state’s General Fund, the committee decided to shift an $8 million appropriation into the Education Fund. So $8 million that would have been covered with income taxes or the sales tax would have to be picked up by property owners.

Given the public rhetoric around property taxes, this proposal ought to provoke a lot of head scratching, if not head banging. But this is another consequence of leaders in Montpelier painting themselves into a corner by pledging a balanced budget with no new taxes before they’ve even had a chance to determine what needs to be done for the people of the state in the coming year.

The governor proposed some worthy initiatives in his budget, like putting more money into providing affordable, high-quality child care. More money for child care was also one the items the Senate Appropriations Committee wants to fund next year.

But while it appears everyone knows the state should be making more investments in people and programs, no one seems to want to have an open discussion about the best way to pay for those investments. Instead, the solution is: move it to the Education Fund. That way, the governor and the Legislature can avoid raising taxes directly. It will be property taxes that go up, but that can be blamed on school spending, teachers, and local school boards.

Despite what we often hear about Vermont’s “skyrocketing” or “out of control” school costs, Vermont school spending has consumed the same share of state and local taxes for at least 20 years. And for the last 15 years or more, the share of General Fund revenue going to support general education has remained pretty constant. It was 33.2 percent in fiscal 2003, and it’s 33.5 percent this year. During that period, it hit a high of 35 percent early in the recession, and thanks to federal stimulus money, it hit a low of 30.2 percent.

There are better ways to generate the money that leaders in Montpelier appear to agree is needed. Instead of increasing property taxes, which fall more heavily on low and moderate income Vermonters, we could close some of the tax loopholes enjoyed by those who aren’t having an affordability crisis. Wouldn’t that at least be a better place to start?

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Letter to Legislative Leaders http://publicassets.org/blog/letter-to-legislative-leaders/ Fri, 14 Apr 2017 12:48:47 +0000 http://publicassets.org/?p=11351 Dear Speaker Johnson and President Pro Tempore Ashe,

We’re writing with a plea for bold action. Last fall’s election demonstrated one thing loudly and clearly: people want political leaders to act, to address the problems that are all around us. Across the political spectrum, people feel ignored by government and left behind by an economy that rewards those at the top.

Vermonters want a vision for what the state can be in five or 10 or 20 years and a path to a more prosperous future. The state budget should be part of that vision, but for over a decade Montpelier has focused on immediate, yearly budget gaps...

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pdficonPDF Version

April 13, 2017

The Honorable Mitzi Johnson, Speaker of the House
The Honorable Tim Ashe, President Pro Tempore of the Senate
Vermont State House
115 State Street
Montpelier, VT 05633

Dear Speaker Johnson and President Pro Tempore Ashe,coverOVletter2017

We’re writing with a plea for bold action. Last fall’s election demonstrated one thing loudly and clearly: people want political leaders to act, to address the problems that are all around us. Across the political spectrum, people feel ignored by government and left behind by an economy that rewards those at the top.

Vermonters want a vision for what the state can be in five or 10 or 20 years and a path to a more prosperous future. The state budget should be part of that vision, but for over a decade Montpelier has focused on immediate, yearly budget gaps. The Great Recession was clearly a major crisis that required everyone’s full attention. But the recession officially ended almost eight years ago. It’s time for Montpelier to begin to address the state’s chronic problems like poverty, especially among young single mothers; the lack of affordable, high quality child care; the high cost of higher education; the underfunding of the mental health care system; pollution of the state’s waters, and jobs that don’t pay enough to support a family.

Vermont has structural fiscal problems. Health care has been consuming a bigger and bigger share of available revenue, which has squeezed the rest of state government. Meanwhile, revenue growth has not kept pace with economic growth. These structural problems will take time to solve, but the sooner elected leaders begin to address them the sooner they will be solved.

Here is what the Legislature can do now:

1. Begin to make smart investments, starting with the governor’s recommended new funding for early care and learning and higher education. The governor’s vision to expand our idea of public education—from early childhood through college and beyond—is the right one. Quality child care and early education are critical to preparing kids for adulthood, and postsecondary or technical education is a prerequisite for a successful career. Additional funding for the child care financial assistance program and institutions of higher education is a good step toward achieving that vision, but it shouldn’t come at the expense of pre-K to 12 schools. The state also needs to make other strategic investments in affordable housing, the developmental and mental health system, services that provide pathways out of poverty, cleaning up the state’s waters, and other key areas.

2. Fill the budget gap without additional damaging cuts. Cuts over the past decade or more and the growth in health care costs have already undermined the state’s ability to competently deliver the services that Vermonters need and want. Two years ago, for example, Vermont reduced Reach Up grants for families with adults receiving disability benefits, leaving 700 families already facing poverty in worse shape. Diverting funding for housing programs to help balance the General Fund means fewer Vermonters have access to affordable housing.

3. Eliminate income tax loopholes that primarily benefit the wealthy, and lower tax rates for everyone. By reducing all the income tax rates and eliminating the top bracket, most Vermonters will see a tax cut. The top marginal rate will go down, making Vermont more competitive with other states. And Vermont can make the tax system more progressive by eliminating itemized deductions and phasing out the benefits of the lower tax brackets for Vermonters making more than $300,000 annually.

Most states with an income tax use federal adjusted gross income (AGI)—income before deductions and exemptions are applied—as the starting point for calculating their state taxes. Vermont is one of only seven states that start with federal taxable income—the amount left over after deductions and exemptions—which is substantially less than federal adjusted gross income.

Taken together, these changes produce savings to support needed strategic investments and make the tax system more fair.

As the attached Public Assets Institute analysis shows, taking these steps will allow the Legislature to lower income tax rates, balance the budget, and start to make smart investments that will begin to address Vermonters’ needs.

We hope you will consider this approach to the fiscal 2018 budget. We recognize that this is not easy. But it’s the right direction for Vermont and will put us on the path to becoming a state that works for all Vermonters.

For One Vermont,

Dan Barlow, Public Policy Manager, Vermont Businesses for Social Responsibility

Melissa Battah, Community Organizer, Vermont Interfaith Action

Paul Cillo, Executive Director, Public Assets Institute

Jan F. Demers, Executive Director, CVOEO

Carlen Finn, Executive Director, Voices for Vermont’s Children

Dan Hoxworth, Executive Director, Capstone Community Action

Karen Lafayette, Legislative Advocate, Vermont Low Income Advocacy Council (VLIAC)

Ed Paquin, Executive Director, Disability Rights Vermont

Colin Robinson, Political Director, VT NEA

Julie Tessler, Executive Director, Vermont Council of Developmental and Mental Health Services

cc: The Honorable Phil Scott, Governor
The Honorable David Zuckerman, Lt. Governor
Members of the General Assembly

Attachment

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Budget numbers http://publicassets.org/blog/budget-numbers/ http://publicassets.org/blog/budget-numbers/#comments Fri, 31 Mar 2017 21:32:44 +0000 http://publicassets.org/?p=11282 143 to 1. That was the headline last week. The House budget plan that closed a $70 million gap without raising revenue had near-unanimous support.

The House’s version of the budget cobbled together $48 million in transfers, $17 million in savings and cuts, and $5 million in enhanced tax collections to create a budget that virtually everyone could agree on. While the plan appears to be popular inside the Statehouse, this budget does little to address the real issues Vermonters are facing outside.

Here are some other Vermont numbers worth thinking about:

47%: the share of single mothers with young children living in poverty

12%: the amount the middle class has shrunk since 1980

$304,465: the difference in income between a Vermont family in the bottom 20% and one in the top 5%

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143 to 1. That was the headline last week. The House budget plan that closed a $70 million gap without raising revenue had near-unanimous support.

The House’s version of the budget cobbled together $48 million in transfers, $17 million in savings and cuts, and $5 million in enhanced tax collections to create a budget that virtually everyone could agree on.  While the plan appears to be popular inside the Statehouse, this budget does little to address the real issues Vermonters are facing outside.

Here are some other Vermont numbers worth thinking about:

47%: the share of single mothers with young children living in poverty

12%: the amount the middle class has shrunk since 1980

$304,465: the difference in income between a Vermont family in the bottom 20% and one in the top 5%

15,000: the number of Vermont children living in poverty

$25 million: the annual amount Vermont needs to raise to clean up Lake Champlain

665%: the increase in the cost of attending the University of Vermont since 1980

According to Vermont statute, the purpose of the state budget is “to address the needs of the people of Vermont.”  While arriving at consensus and balancing the budget are important, especially against the national backdrop, neither is the goal of the annual budget exercise.  The goal is to address the needs of the people of Vermont.

As the fiscal 2018 budget process continues, it needs to include more discussion about smart investments that will improve the lives of 625,000 Vermonters. That’s the most important number in this year’s budget debate.

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Another attempt to lower property taxes by raising them http://publicassets.org/blog/another-attempt-to-lower-property-taxes-by-raising-them/ http://publicassets.org/blog/another-attempt-to-lower-property-taxes-by-raising-them/#comments Wed, 22 Mar 2017 15:40:11 +0000 http://publicassets.org/?p=11264 It should be obvious by now: You can’t provide property tax relief by raising property taxes. In fact, it should have been obvious long before now.

Yet that is exactly what the Legislature included in Act 46, the school consolidation bill, in 2015. (It then repealed that provision in 2016.)

And that is exactly what the House Education Committee is proposing again this year. The committee voted on Friday to introduce a committee bill (H.509).

This latest attempt at property tax relief would increase taxes for about half of Vermont towns—the half that has the highest property taxes already—and lower taxes for the towns that have the lowest property taxes.

Seriously. I’m not making this up.

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It should be obvious by now: You can’t provide property tax relief by raising property taxes. In fact, it should have been obvious long before now.

Yet that is exactly what the Legislature included in Act 46, the school consolidation bill, in 2015. (It then repealed that provision in 2016.)

And that is exactly what the House Education Committee is proposing again this year. The committee voted on Friday to introduce a committee bill (H.509).

This latest attempt at property tax relief would increase taxes for about half of Vermont towns—the half that has the highest property taxes already—and lower taxes for the towns that have the lowest property taxes.

Seriously. I’m not making this up.

Twenty years ago Vermont got away from its parochial funding system, where each town was largely responsible for paying to educate its own children. The current system recognizes that we’re all responsible for educating all of the state’s children. So all of our education resources are pooled into the Education Fund, and all communities have equal access to that funding pool based on the same set of rules.

The property taxes that go into the Education Fund come from non-residential property based on a single, uniform rate statewide ($1.535 per $100 of fair market value this year) and from primary residences with tax rates determined by each town’s education spending per pupil. The homestead tax rates are the same in towns with the same per-pupil spending, and the rates are proportional throughout the state—that is, a town that spends 20 percent more per pupil than a neighboring town will have a 20 percent higher homestead tax rate.

The current system provides children with equal access to educational resources, and because tax rates are tied to per-pupil spending, it discourages unnecessary spending. Higher spending per pupil results in proportionally higher tax rates, and lower spending per pupil results in proportionally lower tax rates.

H.509 would do away with this proportional system for homestead taxes. Instead, it would create two groups of towns: one below an arbitrary spending threshold and one above. The group below the threshold would have a single, uniform tax rate and receive a fixed amount per pupil—initially about $12,500.

Towns in the second group—those that spend more than $12,500 per pupil—would receive the $12,500 per pupil at the uniform rate and also be in a separate sharing pool. As with the current system, they could expect their tax rates to go up as they spend more per pupil. The ultimate tax rate calculation, however, would depend on how many towns and which towns were in the separate sharing pool.

Vermont had a system like this in the late 1990s and early 2000s. The separate sharing pool was known as the “shark pool.” It proved unwieldy, unpredictable, and confusing, and the Legislature wisely scrapped it in favor of the simpler, proportional system we have now.

We all have a stake in seeing that all children in the state get a good education. H.509, by pitting one group of towns against another, undermines this fundamental feature of Vermont’s school funding system.

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