Public Assets Institute http://publicassets.org forward thinking for Vermont’s common good Fri, 24 Feb 2017 20:54:23 +0000 en-US hourly 1 Spending caps undermine the state budget’s purpose http://publicassets.org/blog/spending-caps-undermine-the-state-budgets-purpose/ http://publicassets.org/blog/spending-caps-undermine-the-state-budgets-purpose/#respond Fri, 24 Feb 2017 20:54:23 +0000 http://publicassets.org/?p=11235 Tying public spending to any measure of economic growth is a double whammy for Vermonters in bad times: When the economy slows, it takes state spending down with it. So Vermonters not only have to deal with job and income losses during a recession, they also get hurt by a reduction in state services just when they need them most. Read more

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Tying public spending to any measure of economic growth is a double whammy for Vermonters in bad times: When the economy slows, it takes state spending down with it. So Vermonters not only have to deal with job and income losses during a recession, they also get hurt by a reduction in state services just when they need them most.

Nevertheless, the governor has proposed restricting state General Fund spending growth to the average growth rate of wages over the prior six years.

Given the countercyclical nature of public investment—spend more when the economy is slow, reduce spending and save when the economy picks up-  concerns that the state budget is growing too fast are overblown. It’s true that for the past few years state General Fund spending has grown faster than the economy. But there was a lot of lost ground to make up following the Great Recession. Over the last 20 years state spending has in fact grown more slowly than the economy, and wage growth has been even slower.

According to Vermont statute, the purpose of the state budget is to “address the needs of the people of Vermont in a way that advances human dignity and equity.” This applies in good times and bad. And that’s why public spending should buck the economic trends. There’s greater demand for food stamps and housing assistance, for example, when the economy slows. The administration’s proposal to tie General Fund spending growth to wage growth undermines the fundamental purpose of the state budget.

But there are other problems with this approach to budgeting.

Cutting back on public investment aggravates a slowing economy. The Center on Budget and Policy Priorities found that Vermont was one of many states that reduced services in the midst of the Great Recession.  These cuts “not only harm vulnerable residents but also worsen the recession—and dampen the recovery—by reducing overall economic activity.”

Another problem with a General Fund-only spending cap is that it reduces the budget debate in Montpelier to one question: How do we keep General Fund spending under the cap? The governor’s fiscal 2018 budget recommendation shows just how easy it is to keep General Fund spending growth low by moving expenses to other funds, like the Education Fund, without paying for them. A cap on General Fund spending, which is only a quarter of the state budget, encourages more of this cost shifting.

None of this is to say that Vermont should have unlimited state spending. Budgeting is a balancing act that requires thoughtful consideration of needs and resources.  In times of greater need, spending should go up.  When the economy is good, Vermont should plan ahead and save for leaner times, so that temporary revenue losses in bad times don’t lead to abrupt cuts to state services we all need.

Instead of working to meet an arbitrary cap, the budget debate in Montpelier should focus on how to make consistent smart investments that meet the state’s needs and build its future. That would be a better approach for the state’s economy and for Vermonters.

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General fund budget gap? What gap? http://publicassets.org/blog/general-fund-budget-gap-what-gap/ http://publicassets.org/blog/general-fund-budget-gap-what-gap/#respond Wed, 15 Feb 2017 19:23:46 +0000 http://publicassets.org/?p=11230 On one level, Gov. Phil Scott’s first budget proposal provides a useful lesson. He showed it’s relatively easy to reduce or eliminate a state budget “gap,” at least on paper. You just move the problem into a different account. But it also could be a useful service if it shifts the budget conversation in Montpelier away from “the gap” and more toward to the purpose of raising and spending public money. Read more

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On one level, Gov. Phil Scott’s first budget proposal provides a useful lesson. He showed it’s relatively easy to reduce or eliminate a state budget “gap,” at least on paper. You just move the problem into a different account. But it also could be a useful service if it shifts the budget conversation in Montpelier away from “the gap” and more toward to the purpose of raising and spending public money. We should be talking about how the budget can improve the lives of Vermonters and help them achieve their potential.

For at least 10 years now, as each annual session of the Legislature approaches, all eyes in Montpelier focus on the size of the budget gap projected for the following fiscal year. The gap is the difference between the estimate of taxes and other revenue flowing into the state in a given year and the projected cost of various public programs and services that year.

The gap that generates all the anxiety is the one in the state’s General Fund. Admittedly, this is the account the covers the operation of much of state government—human services, corrections, the state police, environmental protection, economic development, the courts, the Legislature, and so forth. And it’s funded with taxes many Vermonters are familiar with—the personal income tax, sales tax, rooms and meals tax, and corporate taxes are the big ones.

While the General Fund might be considered the state’s main account, it represents only about a quarter of all the money Vermont state government spends every year. The Education Fund is roughly the same size as the General Fund. And federal funds, about $2 billion a year, make up the biggest single account.

The drama in Montpelier each year is usually about closing the gap and balancing the General Fund. And this year Governor Scott has proposed another twist: He wants to set a limit on how much General Fund spending can grow in any given year.

But as the governor showed with his proposed budget, one way to make the numbers come out right is to move expenditures out of the General Fund into other accounts or move revenue from other accounts into the General Fund.

What the governor proposed for next year was to move a lot of expenditures that normally would be paid out of the General Fund—about $136 million—and pay for them out of the Education Fund. He also shifted some revenue from the General Fund into the Education Fund, but not enough to cover the additional obligations. This left the Education Fund with a $50 million gap. To close the Education Fund gap, the governor asked local school boards to cut their budgets.

This isn’t new. Administrations and legislatures have moved money around like this for decades. In this case, the shift makes the General Fund increase look smaller than it normally would be. It also gives local school boards the task of making the cuts. But the take-away in all of this is that we shouldn’t get too hung up on what’s happening with the General Fund in any given year.

That’s not to say the state doesn’t need to balance its budget. It does. And it’s important to track how money is being spent to insure taxpayers are getting the results they expect and deserve. But Vermonters would be better served if the budget discussion each winter in Montpelier focused less on whether the General Fund is growing faster or slower than it did the year before. The change may be due to spending, or it could be the accounting.

A better discussion would concentrate on whether the plan is meeting the purpose of the state budget. Will it move us toward the state we want to have five or 10 or 20 years from now? Will it improve the lives of average Vermonters, especially families who struggle the hardest to make ends meet?

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No homeowner tax relief in governor’s school budget cuts http://publicassets.org/blog/no-homeowner-tax-relief-in-governors-school-budget-cuts/ http://publicassets.org/blog/no-homeowner-tax-relief-in-governors-school-budget-cuts/#comments Fri, 27 Jan 2017 22:31:16 +0000 http://publicassets.org/?p=11204 Gov. Phil Scott said this week that property taxes were one of the biggest contributors to what he calls the state’s “affordability crisis,” and he called on local school boards to cut more than $50 million from the budgets they’ve prepared for next year. Read more

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Gov. Phil Scott said this week that property taxes were one of the biggest contributors to what he calls the state’s “affordability crisis,” and he called on local school boards to cut more than $50 million from the budgets they’ve prepared for next year. But if schools make the cuts the governor has asked for, Vermont homeowners won’t see lower taxes. Instead, school budget savings will be used to cover new obligations the governor wants to pay for out of the education funding pot.

The governor’s plan is to transfer some existing expenditures—for higher education and a portion of teachers’ retirement—from the General Fund to the Education Fund. He also wants to add new spending—additional money for early education and education “innovation”—to the Education Fund. While he is proposing to move additional General Fund revenue to the Education Fund, it is not enough to cover the additional expenditures.

Here’s the math:

EdBlog

At first glance, this appears to be a simple case of paying for public services out of a different pocket. But the taxes that go into the General Fund and the Education Fund aren’t the same. Most of the money in the General Fund comes from broad-based taxes: income, sales, rooms and meals, and business taxes. Property taxes supply the bulk of the money in the Education Fund.

So while the governor says property taxes are making Vermont unaffordable, his plan shifts $50 million in new costs onto the property tax. To avoid having to raise property taxes, the governor wants to cut the other expenditures covered by the Education Fund—payments to public schools.

Most school districts have completed work on the fiscal 2018 budgets, and the Agency of Education estimates spending will increase around $38 million next year. The governor said he was only asking local schools to level fund their budgets for the next school year. But his budget recommendation would require them to cut $55 million from what they determined they need next year.

And even if they did make those cuts, it wouldn’t reduce property taxes. The bottom line is that by shifting costs to the Education Fund, the governor’s plan will use 6 cents on the average homestead property tax rate to cover what have been historically General Fund obligations.

The governor’s new spending initiatives are laudable. Vermont does need to put more resources into higher education and early education. But instead of shifting costs onto homeowners or reducing opportunities for Vermont schoolchildren, the governor should look to those who have prospered the most during the recent economic recovery to help insure that others have the same chance.

 

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Statement on Gov. Phil Scott’s Jan. 24, 2017, Budget Address http://publicassets.org/blog/statement-on-gov-phil-scotts-jan-24-2017-budget-address/ http://publicassets.org/blog/statement-on-gov-phil-scotts-jan-24-2017-budget-address/#respond Tue, 24 Jan 2017 23:50:59 +0000 http://publicassets.org/?p=11199 In his first budget speech today, Gov. Phil Scott proposed to address what he calls Vermont’s affordability crisis by curbing state spending. But he didn’t have much to say about the main reason many Vermont families are having trouble making ends meet: While the economy is growing, most Vermonters aren’t benefitting. Read more

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In his first budget speech today, Gov. Phil Scott proposed to address what he calls Vermont’s affordability crisis by curbing state spending. But he didn’t have much to say about the main reason many Vermont families are having trouble making ends meet: While the economy is growing, most Vermonters aren’t benefitting. Their incomes have been stagnant since at least 2000. Vermont is experiencing the same growing gap between the rich and everyone else that we see nationally.

We agree with the governor taking a more expansive view of education. We think public education should include pre-kindergarten and at least two years of college. And this will require an additional state investment. But there are better ways to fund it than to add these obligations to the Education Fund without adequate General Fund support to cover them. The governor’s proposal leaves school districts with the choice of cutting $50 million from K-12 education or increasing property taxes.

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At year-end, some promising news for workers http://publicassets.org/library/publications/some-promising-news/ http://publicassets.org/library/publications/some-promising-news/#respond Tue, 24 Jan 2017 20:57:50 +0000 http://publicassets.org/?p=11182 Vermont closed 2016 with the first year-over-year increase in the labor force in six years. The state’s labor force—people employed and those actively looking for work—grew after the official end of the Great Recession in 2009, then shrank for five straight years. Last month, however, the labor force rose to nearly 345,000, approximately 1,800 more workers than at the end of 2015.

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F1-MJB090Vermont closed 2016 with the first year-over-year increase in the labor force in six years. The state’s labor force—people employed and those actively looking for work—grew after the official end of the Great Recession in 2009, then shrank for five straight years. Last month, however, the labor force rose to nearly 345,000, approximately 1,800 more workers than at the end of 2015.

 

 

3.1 percent joblessness F2-MJB090
Vermont’s unemployment rate dropped to 3.1 percent in December—tying it with Utah for the seventh-lowest rate in the country. In New England, only New Hampshire (2.6 percent) and Massachusetts (2.8 percent) had lower rates. Low unemployment makes for a tight labor market, which should push up wages. Last month 10,600 Vermonters were officially unemployed—that is, without a job and actively looking for work—the lowest number in nearly 16 years.

 

 

 

700 more jobsF3-MJB090
After gains last winter and spring and losses in the fall, Vermont’s private sector ended 2016 with about 700 more workers on payrolls than at the end of 2015. The biggest gains were in accommodation and food services, professional and technical services, and health care and social assistance.T1-MJB090

 

 

 

 

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New year brings a new opportunity for shared prosperity http://publicassets.org/press/press-releases/opportunity-for-shared-prosperity/ http://publicassets.org/press/press-releases/opportunity-for-shared-prosperity/#respond Thu, 29 Dec 2016 15:58:29 +0000 http://publicassets.org/?p=11175 FOR IMMEDIATE RELEASE: December 29, 2016

CONTACT: Paul Cillo or Jack Hoffman paul@publicassets.org jack@publicassets.org 802.223.6677

New year brings a new opportunity for shared prosperity

Public Assets Institute releases State of Working Vermont 2016

MONTPELIER – While Washington and the rest of the nation sort out the meaning of a Donald Trump presidency, new leaders in Montpelier have an opportunity to address the needs of low- and moderate-income Vermonters for whom a secure middle-class life seems unaffordable and out of reach. Read more

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FOR IMMEDIATE RELEASE: December 29, 2016

CONTACT:
Paul Cillo or Jack Hoffman
paul@publicassets.org
jack@publicassets.org
802.223.6677

New year brings a new opportunity for shared prosperity

Public Assets Institute releases State of Working Vermont 2016

MONTPELIER – While Washington and the rest of the nation sort out the meaning of a Donald Trump presidency, new leaders in Montpelier have an opportunity to address the needs of low- and moderate-income Vermonters for whom a secure middle-class life seems unaffordable and out of reach. A higher minimum wage, access to high-quality child care, an expanded public education system including at least two years of college, and a program to help workers save for retirement can address the affordability problem for Vermonters struggling to make ends meet.

Those are among the findings in the 2016 State of Working Vermont report published Thursday by Public Assets Institute in Montpelier.

“This is the 10th year that Public Assets has put out this annual State of Working Vermont report. It’s discouraging to see how little has changed for low- and middle-income Vermonters,” said Paul Cillo, president and executive director of Public Assets. “The message from voters this election—from Bernie Sanders supporters on the left to Trump supporters on the right—was that our political and economic systems need to serve everyone, not just the wealthy and well-connected.

“Here in Vermont, we have a new slate of political leaders in the State House who can take the state in a new direction. We hope this report will help focus their attention on the problems that many Vermonters face and offer some constructive ideas for addressing those problems.”

Public Assets produces the State of Working Vermont each year in conjunction with the Economic Policy Institute in Washington, D.C. This report highlights how working Vermonters and their families were faring economically at the end of 2015—the latest year for which most data are available—and how conditions have changed, for better or worse, in recent years. It is based on data released by the U.S. Census, U.S. Bureau of Labor Statistics, and other state and federal agencies in 2016.

State of Working Vermont 2016 is published in readable chartbook format with brief explanatory captions. The report can be viewed or downloaded at http://publicassets.org/library/publications/reports/state-of-working-vermont-2016/

 

Public Assets Institute is a nonprofit, nonpartisan organization that promotes sound state budget and tax policies that benefit all Vermonters. More information at www.publicassets.org

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State of Working Vermont 2016 http://publicassets.org/library/publications/reports/state-of-working-vermont-2016/ http://publicassets.org/library/publications/reports/state-of-working-vermont-2016/#respond Thu, 29 Dec 2016 15:52:01 +0000 http://publicassets.org/?p=11167 While Washington and the rest of the nation sort out the meaning of a Donald Trump presidency, new leaders in Montpelier have an opportunity to address the needs of low- and moderate-income Vermonters for whom a secure middle-class life seems unaffordable and out of reach. A higher minimum wage, access to high-quality child care, an expanded public education system including at least two years of college, and a program to help workers save for retirement can address the affordability problem for Vermonters struggling to make ends meet.

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At year-end for workers, it’s ho ho ho hum http://publicassets.org/library/publications/ho-ho-ho-hum/ http://publicassets.org/library/publications/ho-ho-ho-hum/#respond Fri, 16 Dec 2016 21:27:36 +0000 http://publicassets.org/?p=11153 Nonfarm payroll jobs decreased in November to 315,000—a drop of more than 1,000 jobs since January. But the total number of employed Vermonters, both payroll workers and those who are self-employed, has held steady for most of 2016, up less than 1 percent since the start the year.

Race matters

Newly released U.S. Census data show that nearly a quarter of black Vermonters live in poverty, as do 20 percent of those who check two or more races on the Census form.

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f1-mjb089Nonfarm payroll jobs decreased in November to 315,000—a drop of more than 1,000 jobs since January. But the total number of employed Vermonters, both payroll workers and those who are self-employed, has held steady for most of 2016, up less than 1 percent since the start ot1-mjb089f the year.

 

f2-mjb089Race matters
Newly released U.S. Census data show that nearly a quarter of black Vermonters live in poverty, as do 20 percent of those who check two or more races on the Census form. More than a quarter of the 1,900 American Indians and Alaska Natives in Vermont are poor—the highest percentage of any category. The poverty rate is lowest for white Vermonters: 11 percent. Although the sample size for nonwhites is small, the estimates take in five years of data, increasing the reliability of the picture.

 

More college degreesf3-mjb089
More Vermonters had high school diplomas in 2015 than a decade earlier. Since 2005, the proportion of Vermonters without a high school degree has shrunk, while the share with a four-year college degree has grown. The U.S. as a whole has also seen improvement in both the share completing high school and those finishing college, but Vermont remains better educated than the nation.

 

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The budget gap solution http://publicassets.org/library/publications/the-budget-gap-solution/ http://publicassets.org/library/publications/the-budget-gap-solution/#respond Wed, 30 Nov 2016 15:05:39 +0000 http://publicassets.org/?p=11147 “Vermonters need to smoke more.”

That was the eye-catching headline to a recent column by Jon Margolis on vtdigger.org. It was a great way to explain Vermont’s chronic budget gaps without putting everyone to sleep talking about “structural revenue problems.”

Margolis was right. Part of Vermont’s budget problems are due to the state’s reliance on revenue that is tied to an ever-shrinking tax base.

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“Vermonters need to smoke more.”

That was the eye-catching headline to a recent column by Jon Margolis on vtdigger.org. It was a great way to explain Vermont’s chronic budget gaps without putting everyone to sleep talking about “structural revenue problems.”

Margolis was right. Part of Vermont’s budget problems are due to the state’s reliance on revenue that is tied to an ever-shrinking tax base.

There are fewer cigarette smokers. It’s a good thing. We want people to quit. But because cigarettes are taxed by the pack, we take in less money unless we keep raising the tax rate. It’s the same with gasoline. A portion of the gas tax is levied by the gallon. As vehicles get more efficient, or are powered by something other than gasoline, the state takes in less money to repair roads and bridges. Driving more was another of Jon’s prescriptions.

A few years back, a commission appointed to study Vermont’s tax structure found that the state’s sales tax base, if not shrinking, certainly wasn’t keeping up with consumers’ changing buying habits. The commission recommended the sales tax be levied on most services and on online Internet purchases. By broadening the sales tax base, the commission said, Vermont could lower the sales tax rate.

Modernizing Vermont’s revenue system would help to address the state’s recurring budget gaps. Policy makers and elected officials also need to do a better job managing the ups and downs of the economic cycles— build up adequate reserves and be willing to use them.

We heard a lot this fall about matching state budget growth to the economy as a way to deal with budget gaps. While the two generally need to be in sync over the long term, budget growth and economic growth aren’t going to move together every year, nor should they.

The late Gov. Richard Snelling understood the idea of countercyclical budgeting—and was known to lecture reporters on the subject during news conferences. When the economy tanks, as it did most recently at the end of 2007, state revenues fall at the same time that there is greater demand for public services: food stamps, home heating assistance, unemployment compensation, welfare, housing for the homeless, and the other things families need when people lose their jobs. That’s exactly when government needs to step in, not pull back.

To be sure, Snelling advocated for “sustainable” budget growth. But in 1991, when Vermont was in the throes of another recession, he and the Legislature spent money the state didn’t have—Vermont ran a budget deficit—rather than slash critical services trying to match budget growth and economic growth in the short term. They also raised tax rates to pay off the deficit, and later rolled back the tax rates after the economy recovered.

In today’s political climate, it is unlikely we’ll see the state run temporary deficits again. But Vermont can further develop another fiscal tool: reserves. Revenue volatility, which some economists warn has gotten worse in recent decades, could be mitigated if the state had larger reserves to manage through an inevitable downturn. The Center on Budget and Policy Priorities recommends reserves equal to at least 15 percent of the budget.

Long-term budget sustainability is an important goal. So is fiscal stability. State government will function better and Vermonters will be better served by a combination of revenue modernization and sound, steady fiscal management than by erratic, unpredictable funding of state services driven by annual cash flow.

The purpose of the state budget, according to the statute adopted in 2012, is to “address the needs of the people of Vermont in a way that advances human dignity and equity” and “[s]pending and revenue policies will … recognize every person’s need for health, housing, dignified work, education, food, social security, and a healthy environment.” Those are the criteria our elected officials should use in determining spending in the state budget.

 

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Fewer are working as the holidays approach http://publicassets.org/library/publications/fewer-are-working-as-the-holidays-approach/ http://publicassets.org/library/publications/fewer-are-working-as-the-holidays-approach/#respond Fri, 18 Nov 2016 18:42:12 +0000 http://publicassets.org/?p=11129

f1-mjb088Both the labor force and the number of jobs shrank in October. Vermont lost 2,100 non-farm payroll jobs last month, and ended up with 550 fewer people in the labor force, which includes the self-employed. October was the third straight month that jobs decreased and the fourth that the labor force contracted.t1-mjb088

 

 

 

 

Weak net gain in jobsf2-mjb088
Vermont’s private employers added 22,700 jobs in the 12 months that ended last March. That was better than most years since the recession. During the same period, however, Vermont lost about 22,200 private sector jobs—the most in the last six years. That left Vermont with a net gain of only about 500 private sector jobs. The average annual gain for the previous five years was about 3,200 jobs.

 

 

 

 

New businesses, fewer positionsf3-mjb088
For the last two decades, about 1,900 new private business establishments opened in Vermont each year. That number remained fairly constant, even through the recession. But the number of jobs created by those new businesses has dropped. Before the recession, Vermont gained more jobs from startups than it lost to business closures. Since the recession, the state has seen a net loss in jobs.

 

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