Level funding: The words suggest two things: no cuts, no increases.  For that reason, politicians love to use them. But what does level funding really mean?

Any one of three different things, depending on the speaker and the context.

1. We’ll maintain services, hold the status quo: In hard economic times like these, maintaining existing levels of service usually requires higher spending. More Vermonters need services, and some costs are difficult to control, like oil and health care. Providing the same services from year to year can require a 5 percent to 7 percent increase in dollars spent.

2. We’ll keep up with inflation: Even though inflation is low these days—2 percent in the Northeast in 2010—prices are rising. Level-funding the budget in real terms—that is, after adjusting for inflation—will result in somewhat higher spending. But there also will be services cuts, thanks again to costs that rise faster than general inflation and also to increasing human need. State officials like to say that they can make up for the difference through greater efficiency. That’s possible once in a while, but not year after year.  Using this definition, level funding means real cuts to state services.

3. We’ll spend the same next year as this year: If the state spends $1.2 billion for General Fund services this year, a budget of $1.2 billion for next year would result in even deeper cuts than with the inflation-adjusted approach. Again, there are some increases that simply can’t be avoided, and covering those increases means taking bites—big ones—from other areas of the budget.

At best, the term “level funding” creates public confusion. At worst, it’s an opportunity for mischief. The citizen thinks: “Phew, at least we won’t see budget cuts this year.” The speaker means: “We’re making aggressive cuts again.” Our advice: Strike “level funding” from the official fiscal lexicon and tell it like it is.

That’s not surprising. Legislatures rarely make big changes to what a governor proposes. The fights that generate the most heat often are over relatively small amounts of money.

But you can see for yourself. Four versions of the fiscal 2012 budget are now available for a side-by-side comparison on Vermont Transparency: the governor’s proposal, the House-passed plan, the Senate plan, and the final compromise between the House and Senate that was passed and sent to the governor on May 6, the last day of the 2011 session.

Visitors to the site can see how much was appropriated by line item for each of the major functions of state government: general government, protection, human services, labor, education, natural resources, commerce and community development, debt service, and transportation. They can view the appropriations from all sources of funding, including federal funds. And they can look at appropriations by individual funding sources, such as the General Fund.

The side-by-side comparisons are available on the Current Session page. For those who want to see how this year’s appropriations compare with prior years, budget data going back to 1994 are available on the State Spending page.

Good Jobs First, December 2010

http://www.goodjobsfirst.org/showusthesubsidies

Good Jobs First examines the subsidy disclosure practices of the 50 states (and D.C.). See which states do a good job of reporting on where the money is going and which keep taxpayers in the dark.

Challenges for Change started as a legislative initiative to find $30 million in efficiency savings in the state’s General Fund budget. A Minnesota consulting firm produced a study in December suggesting ways to save $38 million while maintaining or improving the quality of the services delivered. The main areas identified for potential savings included:

• Education
• Human services
• Corrections
• Contracting with private service providers
• Environmental regulation
• Economic development
• Bureaucratic rules

The consultants’ recommendations were turned into a bill that was introduced on Feb. 5, 2010. Within 20 days, it passed the Senate and House and was signed into law. Now committees comprising private citizens and state employees, like the Education Design Team that met on Monday, have until Mar. 25 to come up with plans for implementing the consultants’ recommendations. These implementation plans will include, among other things, proposed changes to state laws and other regulations that are deemed to be barriers to efficiency.

The Dover School Board was the first to formally protest the decision to exclude the public from the design team meetings. As word gets out that other committees are holding secret meetings, the complaints are bound to grow louder.

In human services, for example, the Challenges for Change bill gives the secretary of administration the authority to cut up to $46 million in services. In spite of this seemingly big reduction spending, however, the General Fund will go down only $16 million. That’s because Vermont forfeits federal matching funds—in this case about $30 million—when it cuts certain programs. With Medicaid, for example, the state gets more than $2 in federal funds for every $1 it spends. So for every $1 the state tries to “save,” Vermonters will lose $3 in services, which they either will pay for out of their own pockets or do without.

One of the promises of the Challenges for Change bill is that the spending cuts will “give our citizens better results with less money.” How the Human Services Design Team proposes to cut $46 million and produce better results is a discussion that surely would interest lots of Vermonters—those who receive the services as well as those who are paid to deliver them.

Tom Evslin, the person overseeing these Challenges for Change committees and evidently the one who directed that the meetings be closed, told WCAX and other news organizations that excluding the public would allow for a free exchange of ideas.

“The reason is so people can explore ideas without worrying about sounding stupid,” Evslin told the Brattleboro Reformer.

But saying something stupid isn’t the risk in these meetings. The purpose of Vermont’s open meeting law—and the benefit of government transparency regardless of legal requirements—is to keep public officials from doing something stupid. There’s no guarantee, but if they tell the public what they’re planning to do before they do it, they have a better chance of avoiding a misstep and gaining public support.

City councils in both Montpelier and Burlington heard howls of protest when residents found out they had been kept in the dark about certain financial dealings. Secrecy in government only breeds distrust. The reforms and reorganization necessary to institute Challenges for Change will be hard enough under any circumstances. Not letting the public in on the planning needlessly restricts opportunities for new thinking and galvanizes opposition from the start.

Paul Cillo and Jack Hoffman (December 2007)

Everyone who is part of the state budgeting process needs timely information. The Vermont Legislature can gain precious time for itself — and for the public — by moving up the deadline for the annual release of the governor’s budget.

Each session of the Vermont Legislature begins in January, and soon after lawmakers have gathered in Montpelier, the governor delivers the budget address to a joint assembly of the House and Senate. This address marks the first time legislators and the public get to see how much the governor is proposing to spend and for what purposes.

Approving a budget is one of the Legislature’s most important jobs. Without a budget passed by both the House and Senate, state government cannot operate. Nevertheless, Vermont’s citizen Legislature is expected to do this critical job in a relatively short time.

By statute, the governor is required to present the budget by the third Tuesday of each legislative session. Depending on when New Year’s falls, that date can be as early as the 17th or as late as the 29th.  In 2008, the deadline for the budget address will be Jan. 22, and the governor announced recently that that would be the date of his speech and the release of his plan for spending more than $4 billion in the next fiscal year.

Given the usual pressure for the Legislature to adjourn by early spring, that won’t give legislators or the public enough time to review the governor’s proposal and respond with their own priorities for spending the taxpayers’ money.

End-of-session pressure marginalizes most lawmakers and citizens.

In Vermont, the legislative part of the budget process typically begins in the House. The House Appropriations Committee takes up the governor’s budget as soon as it is delivered. The committee hears public testimony, questions administration officials, and reworks some of the governor’s priorities. The full House then debates and votes on the bill and passes it on to the Senate, where it goes through a similar process. After the Senate adopts its version of the Appropriations Bill, the two chambers have to resolve their differences and come to a compromise. The compromise bill must ultimately be approved by the full House and full Senate. Typically, that occurs in the final hours of the final day of the session.

Rarely is an Appropriations Bill vetoed by the governor. As the House and Senate Appropriations committees are making their adjustments, administration officials closely monitor the changes from the governor’s proposal and work to keep them to a minimum. The bill, which is typically the last to be voted on each session, is in fact a compromise among the House, the Senate, and the governor.

The administration has more than six months to prepare the spending plan. However, that work is done without any direct input from citizens. The budget address is the first time both lawmakers and the public get to see what the governor wants to do. And only then do voters and advocates get to weigh in on the proposal; that process takes place in the Legislature.

A plan to spend more than $4 billion is a lot to digest — even for experienced legislators. But by late April or early May, the pressure begins to build for the Legislature to wrap up its work and adjourn for the year. The governor, regardless of political party, is typically among the first to start calling for the Legislature to go home, often citing the daily or weekly cost of keeping the session going. The pressure to adjourn creates a fast-paced, end-of-session process that leaves most legislators and citizens out of the important decision-making. Beginning the budget process earlier in the session would relieve some of the late-session pressure  and make the process more accessible to citizens.

Recommendation: Move the deadline for the budget address to the second week of the session.

The statute establishing the deadline for the governor’s budget address that took effect in 1988 reads:

32VSA§ 306. Budget report

The governor shall submit to the general assembly, not later than the third Tuesday of every annual session, a budget which shall embody his or her estimates, requests and recom mendations for appropriations or other authorizations for expenditures from the state treasury.

Over the past 20 years, there have been four different governors. While all four governors have operated under the same statutory requirement, the governors prior to 2002 typically submitted their budgets well in advance of the deadline. By doing so, they started the legislative budget process earlier in the session. The sessions on average were shorter.

As Figure 1 shows, from 1988 to 2001, the sitting governors submitted their budgets to the Legislature on average on the sixth calendar day of the session. From 2002 to 2007, the governor’s budget was submitted on the 17th day — 11 days later. Coincidentally, the sessions have lasted longer, on average, in the past six years than in the previous 14. As the chart shows, the average length of the session from 2002 to 2007 was 10 days longer than the average session from 1988 to 2001. Also, the percentage of the session that has elapsed by the time the governor delivers the budget has more than doubled in recent years.

Moving the deadline for the budget address to the second week of the session would give the Legislature and the public crucial additional time. The first few days of the session are taken up in organizing activities, especially at the opening of a new biennial session when newly elected members are getting their bearings. But by the second week, most legislators are eager to get down to business. There is no need for them to wait another week before they see the budget. And, as in the past, the governor can always deliver it sooner.

Recommendation: Release the official revenue forecast sooner.

The official estimate of how much revenue the state expects to collect for the year — the revenue forecast — is revised each Jan. 15 and updated on July 15. This is when the administration and the Legislature meet to agree on this figure, which is used in deciding how much money is available for the budget.

Past administrations have released their budgets in advance of the January revenue forecast (Figure 2).  In those years, lawmakers adjusted spending plans when the revenue estimates were released. In recent years, the January adjustment has been an increase over the previous estimate rather than a decrease. That may explain why the budget address has gotten later: the upward adjustments make it a bit easier for the administration to balance the budget.

If the governor wants this revenue estimate available before releasing the administration’s budget proposal, then the deadline for the official revenue forecast should be moved up, too.

If the revenue revision were done in the first week of January, the budget address deadline could be moved from the third Tuesday of the session to the first Tuesday after the opening day, which would be at the start of the second week of each session. If this practice were in place for 2008, the governor’s budget could be delivered one week earlier — Jan. 15 instead of the Jan. 22.

Download a PDF of the report