Deputy Transportation Secretary Sue Minter summed it up best in a New York Times story last week. The Shumlin administration received well-deserved front-page kudos for getting the state’s highways and bridges fixed and functioning in record time.

“The attitude,” said Minter, “was, ‘We’ll do the work and we’ll figure out how we’re paying for it, but we’re not waiting.’”

In other words, the administration was committed to rebuilding the state’s infrastructure after the flood regardless of where the money was coming from. That was the right attitude and it’s not a surprise that it got results.

It’s the opposite, however, of the usual manage-to-the-money approach where the state estimates its annual receipts at current tax rates and then decides what it can and can’t do.

We’re still waiting, for example, for the state to investigate the backlog of reports alleging abuse and neglect of elderly and disabled Vermonters. Organizations representing the victims felt compelled to sue this week to force the state to take action. We’re still tying to figure out how to pay for state policies that we know will reduce poverty—11.7 percent of Vermonters lived in poverty in 2010, up from 9.4 percent in the 2000 Census. And we’re still waiting to have adequate and affordable childcare for Vermont’s working families.

If we had managed to the money with post-Irene repairs, we would still be reading about impassable highways and stranded residents. The state would still be in crisis.

And in fact, the state is in crisis, but not in ways that make headlines. At least 70,000 of us live in poverty, and our middle class is losing ground. But our elected leaders aren’t showing the post-Irene, can-do attitude to tackling these problems.

After Irene, the state had a clear goal of rebuilding roads and bridges and our public officials kept at it until we achieved those results. We need to bring the same approach to the rest of state government and to state budgeting. Instead of allocating a certain sum each year to anti-poverty programs, the Legislature should adopt a budget that will reduce poverty. Instead of arguing that we can’t afford to hire more investigators, our political leaders should be saying we can’t afford to allow elderly or disabled Vermonters to be abused or neglected.

In other words, Montpelier needs to use the new thinking that guided the flood recovery – a commitment to results – to create a state that works for all Vermonters.

Now that deficit reduction has been become the crisis du jour, most of the current reporting and discussion are focused on how much and how quickly to cut federal spending—few are questioning whether to cut.  National Public Radio, therefore, deserves credit for broadcasting one interview at least that challenges the conventional wisdom. What Stiglitz said wasn’t new or unusual for him. It just wasn’t the kind of thing you hear very often in the echo chamber that the mainstream media have become.

I don’t need to summarize the points Stiglitz makes; you can listen to or read the interview. I will say this, though: His comments at the end on the role of government are a refreshing change from the rhetoric of the last 30 years, which has only gotten more shrill.

During the current federal deficit reduction debate, as the deficit hawks grow more righteous, it’s important to remember that we had this problem solved 10 years ago. Clinton raised taxes during his first term—despite dire warnings that it would destroy the economy—and by 2000 the federal government had a record annual budget surplus of $236 billion. According to Congressional Budget Office forecasts at the time, the public debt was projected to drop from $3.5 trillion in 2000 to $1.2 trillion in 2009.

When George Bush took office, he evidently saw no problem with leaving our children and grandchildren saddled with debt. Never mind that we still owed trillions of dollars, he said a surplus meant the government was taking in too much money, and pushed Congress to cut taxes.

It’s also worth noting here that in 2001 Bush correctly concluded that cutting taxes would reduce the amount of revenue flowing to the federal government. A couple years later, when the federal budget was back in the red, he reverted to supply-side economic theory and called for more tax cuts—this time, under the delusion that it would increase federal revenue.

We surely have enough evidence by now that cutting taxes and starving government does not produce prosperity for the large majority of Americans. It’s time to start addressing the questions that Stiglitz poses: “[W]hat kind of society do we want to create and how do we get there? What is the appropriate role of government and what does that cost and how do we best finance that?”

It was refreshing that the governor appears to recognize that improving the efficiency of state government will take time and probably additional investment. The governor reduced his expectations of the savings that can be achieved in 2012 through Challenges for Change, the plan to improve government services while reducing the cost. The goal was a worthy one. But first state government needs to restore its capacity to assess performance and measure whether Vermonters are actually getting better services for their hard-earned tax dollars.

We are cautiously optimistic about the governor’s commitment to improving Vermont’s infrastructure, in particular, its broadband network.  We remember that four years ago, we heard a similar promise from the previous administration: high-speed Internet throughout the state by 2010.  We’re still waiting.

We are disappointed, however, that the governor’s budget relies so heavily on spending cuts, including cuts to human services that will hurt the most vulnerable Vermonters, and cuts for education that will only add to the upward pressure on property taxes. What new revenue the governor uses is mostly windfall revenue—an unexpected surplus from 2011, unanticipated federal funds, and additional taxes on health care providers that will enable Vermont to draw down additional federal money. Unfortunately, the governor has ignored the fact that Vermont has additional tax capacity for the next two years, thanks to Congress’s decision to extend the Bush tax cuts. The extension of those tax cuts will save the wealthiest Vermonters $190 million in 2011 and a similar amount in 2012.

The official state projection of the fiscal 2012 budget deficit is $112 million, about 9 percent of projected General Fund spending. This assumes that $33 million in new cuts under the Challenges for Change initiative have already been made for 2012 (they haven’t) and that all $38 million in fiscal 2011 Challenges savings will carry forward into fiscal 2012 (they won’t).

But even if we assume the consensus number is correct, the task of filling this budget gap is a killer.

Here’s why.

The recession started in the middle of fiscal 2008. State revenues nosedived over the next two years; they’ve only begun to recover this year. Federal recovery (ARRA) funds combined with state budget cuts plugged more than 90 percent of the hole between what the state needed to spend to maintain state services and what it took in for revenue during fiscal 2009-2011.

The good news is that the gap is much smaller in 2012 than in the previous years, and revenues are recovering.

The bad news: ARRA funding—which filled more than half of the hole over three years—will no longer be available in fiscal 2012.

More important, though, 2012 will be the fourth year of major budget cutting. The administration is preparing a budget that would reduce state appropriations to about 85 percent of what the state needs to do its job.

In general, the easiest and least harmful cuts are made first—and they’ve been made. There is little left to cut without undermining essential state services to Vermonters.

How did we get here? In short, by mixing up our priorities. Policymakers have followed the fiscal principle called “manage to the money.” This approach suggests that the state needs to function on reduced recession-level revenue even as Vermonters have greater need. Little attention is focused on that increased need.

In other words, the focus of state policymakers has been money—raising and spending less of it. In fact, despite the revenue shortfall, the Legislature actually cut taxes this year. While this might sound good to Vermonters who don’t like the thought of paying more, it is undermining education, health care, clean air and water, transportation, communications—the things people need.

“Managing to the money” is putting money ahead of people. And that’s not only bad for people, it’s bad for the economy.

During the last major recession, 20 years ago, the state put people first and then worked out the money part. It raised income taxes on the wealthiest and other taxes as well. It even ran a deficit for a couple of years. Vermont came out of the recession stronger than it went in.

We’ll have a new administration in January and it needs to get its priorities straight. It has to bring new thinking to the job it is taking on: making government work for Vermonters, not just counting beans.

The promise was that cutting taxes would bolster the economy and create jobs.

But the record shows just the opposite. The national rate of job growth during George W. Bush’s tenure was the worst since the government starting counting in 1939.

The tax changes didn’t do much for Vermont, either. Job growth so far this decade is worse than any decade since the 1940s. We have fewer jobs today than we had in 2000.

The federal tax cuts were clearly good for some, though. Vermonters with incomes of $200,000 or more saved a total of about $660 million between 2003 and 2008 on their federal tax bills.

But did those tax savings lead to investment in job-creating activities to benefit the rest of us? A report from the Congressional Budget Office last February casts doubt on the theory that they did—or ever would.  “[I]ncreasing the after-tax income of businesses typically does not create much incentive for them to hire more workers in order to produce more, because production depends principally on their ability to sell their products,” the report said.

It’s impossible to know what would have happened without these tax policy changes. Many factors influence the economy. Still, there’s reason to be skeptical when tax cuts are offered as the cure for all problems.

Bush first proposed tax cuts in response to a modest budget surplus: The government was collecting too much money, so we should cut taxes. But then the economy slid into recession in 2001 and revenue looked weak, so Bush trotted out the supply-side argument: We needed to cut taxes in order to stimulate the economy and generate more revenue.

The corollary to tax-cuts-make-everything-better is that tax increases make everything worse. That’s exactly what a lot of people predicted when Clinton proposed raising taxes, primarily on the wealthy, in the early 1990s. For Vermonters, this was on top of state tax increases Governor Snelling and the Legislature had already enacted—again, largely on the wealthy—to solve a budget deficit.

Now here’s an interesting fact: In the 1990s, after these federal and state tax increases, Vermont’s private sector jobs increased 22.7 percent.

Jobs are always held up as the reward for tax breaks. And when we offer tax credits to businesses in return for creating jobs, at least we ask for proof that they have, in fact, added new positions. (We’re less demanding of proof that the jobs would not have been created without the tax credit.)

With broad tax cuts, however, we’re supposed to take it on faith that lower taxes will translate into more jobs. Only after the money is gone do we get a chance to tally up the return on our investment.

After this last round, it appears there is little to show at either the national or state level for the money that stayed in the bank accounts of the wealthiest among us. That money could have been spent on early education or colleges, building new fuel-efficient mass transportation, or getting broadband to people and businesses who desperately need it. All these activities would be good for everybody: rich, poor, and in-between.

And unlike tax cuts, they are proven economy-boosters. That means jobs.

“Scissors, Glue, Pencils? Check. Cleaning Spray?” describes how other states are responding to the wave of school funding cuts that have occurred during this recession. Having already shifted the cost of routine school supplies onto families with schoolchildren, administrators in some states are now asking those families to pack toilet paper, paper towels, and cleaning supplies in their kids’ backpacks as they ship them off to school.

This is the kind of false savings we’re likely to see in Vermont if we allow the commissioner of education to dictate school budget amounts for every district in the state. One way to meet artificial budget targets is to simply move items off budget. Instead of buying toilet paper or Windex with tax dollars, ask local residents to pay for them. The community doesn’t save any money. In fact, without the benefit of bulk purchasing, families are likely to spend more on the supplies than the school would. But the school budget will be smaller, and we can pretend we’re better off because taxes are a fraction lower.

The school board in Williamstown recently reduced bus service in response to pressure to cut its budget. Perhaps the parents who now will have to drive their kids to schools will use less fuel than the buses, but it seems unlikely. Like many of the state budget cuts in the last couple of years, the Williamstown action will reduce school spending by shifting costs, but without a net savings to the community. It’s true that only the parents of schoolchildren will have to bear the additional cost, but that hardly seems fair when everyone has an interest in making sure our kids are well educated.

We’re coming up on the 30^th anniversary of Ronald Reagan’s declaration that government is not the solution to the problem, government is the problem. Three decades of anti-government, anti-tax rhetoric have created such a phobia about taxes that we’ve lost sight of our self-interest. We pool our money to buy and operate buses because it’s the most efficient way to get kids to school in a rural state like Vermont. We don’t (yet) ask kids to bring heating oil, chalk, fax paper, toilet bowl cleaner, or dry macaroni to school because it’s cheaper and more efficient to buy that stuff in bulk. But we’ve gotten so freaked out about taxes we’ll do almost anything to avoid them—even if ends up costing the community more than the taxes would.

That’s not good management. You can’t give people 75 percent of the resources they need and expect them to get all of their work done. It’s unfair to the employees, a disservice to the people they’re serving, and often a waste of the money you do spend.

If we had been having an honest conversation about the state budget, everyone would know what the choices were. If we cut the budget, these are the services we might want to eliminate. If we decide we want the services and need additional revenue, these are the options for generating more money. That discussion also should include an objective assessment of what’s working and what’s not.

Challenges for Change, the government reform program passed by the Legislature this year, holds out the promise of getting better services for less money. But while the main focus of Challenges has been doing more for less, the latest progress report on the new efficiency program points to one area where Vermont may be able to do less and save more. The report doesn’t come right out and suggest we eliminate the Department of Economic Development, but it certainly raises the question.

Challenges’ first economic development goal is achieving “a sustainable annual increase in nonpublic sector employment and in median household income.” That really goes without saying; more jobs and higher wages is the essence of economic development. But look at the administration’s take on the government’s role in achieving this goal:

“We do not believe that the State spends anywhere near enough to actually affect median income. Other much more influential factors will affect medium[sic] income much more than any program or group of programs we could afford to implement. Factors such as cost of fuels, the weather, interest rates, inflation, etc will affect medium [sic] incomes far more than anything this Agency can do. We believe net new, nonpublic jobs are also more dependent on national and international forces more than our programs.”

If these programs really don’t work, why does the administration keep pushing tax credits and claiming that they’re creating jobs and boosting wages. And if we’re trying to reduce state spending, shouldn’t we start with programs we know are ineffective before we cut services that are going to diminish the lives of some Vermonters?

Vermont is a great place to live and work and an attractive place to do business because of the investments we’ve made over the years in our public structures like parks, courts, schools, and environmental protections.

With state budget cuts and state employee layoffs for the past several years, we are starting to see cracks in those public structures. In the Cracks in the Public Structures series published in our bi-monthly newsletter, we’ve looked closely at several areas of state government where the signs of deterioration are showing.

We are interested in knowing the places where you see cracks. Have you or someone you know noticed a reduction in services, or change in Vermont’s quality of life as a result of state budget cuts?

Email sarah@publicassets.org with your thoughts.

Despite feverish efforts by elected officials to find cuts to close a $154 million budget gap next year and even larger gaps looming in future years, this is one budget cut Gov. Douglas doesn’t like. He was chiding the Legislature this week for not giving businesses a bigger tax break.

Challenges for Change looked good on paper early in the session. The Minnesota consultants who prepared the report said Vermont could improve the delivery of services and save money to boot—$38 million in fiscal 2011 and $72 million the following year. The Legislature—and the administration—promptly booked the savings and left the details to be worked out later.

However, as the administration began outlining implementation plans for Challenges, buyer’s remorse set in. Some questioned whether it was possible to come up with $38 million in efficiency savings in just five or six weeks—especially from an administration that had been in office for nearly eight years and was on its way out the door. Others had doubts that the proposed reforms would really result in better services.

Now the Legislature feels stuck. Many lawmakers don’t like the implementation plans, but the savings have already been booked, and they want to end the session this weekend. If they don’t get all of the efficiency savings they were counting on, they’ll have to make other cuts.

One alternative is to simply tell the administration to find the remaining savings. But that’s a bad idea on two counts. First, it’s an abdication of responsibility and cedes power from the legislative branch to the executive branch. It’s true that the Legislature has done this in the past, but it wasn’t right then, either. Second, the Legislature should have learned by now that the administration will make cuts regardless of the effect on the delivery of services. Last year, the Legislature gave the governor’s office authority to find $14 million in “labor savings.” Now even some budget hawks are saying government services are suffering because the administration cut too many state workers.

A better approach is one that allows the Legislature to maintain leverage over the Challenges for Change process and makes revenue available if the administration falls short of the Challenges promise. The Legislature can give the administration a few more months to develop plans that will result in real efficiency savings. But the Legislature will have the final say in whether the plans are instituted. If the plans simply reduce spending and diminish services, the Legislature can reject them and use General Fund reserves to fill any remaining budget gap.

In a memo to legislative leaders a year ago, state Treasurer Jeb Spaulding laid out what he thought were appropriate uses of the reserve funds. He said it was safe for Vermont to use some of the reserves in 2010—“I would recommend utilizing less than half of the available reserves.” Another appropriate time to use the funds, the treasurer said, was “when revenue declines are close to bottoming out and are predicted to pick up in the near term.”

Vermont did use some of the human services reserves in 2010 and is planning to replenish them next year, but the General Fund reserve is still intact and holds about $55 million. According to the current forecast, General Fund revenues should end their decline in fiscal 2010 and begin to grow again in fiscal 2011. With Spaulding’s memo in hand, the Legislature should commit to using less than half of the General Fund reserves as a backstop to Challenges for Change if they’re doubtful that the administration can find real efficiency savings.

Legislative leaders were probably overly optimistic to think they could institute reforms in time to produce $38 million in savings in fiscal 2011. But there’s no harm in trying as long as they have an alternative and aren’t forced to cut services if things don’t work out.

The governor has opposed spending the reserves. Perhaps pledging them to guarantee the Challenges saving will provide an extra incentive to make sure Vermonters really do get better state government for less money.