Update March 2008

In this issue:
-- Yes, There's a Projected Deficit. Now What?
-- Act 60 Lived Up to Hopes, Not Fears
-- A Better-Informed Public in Four Easy Steps
-- Bush's Budget Would Cut Deep in Vermont

Yes, There’s a Projected Deficit. Now What?
"Deficit" is not a word heard around Montpelier much this year, but it is clearly what the governor and the Legislature are struggling to avoid. Revenues are projected to drop next year, while the cost of fuel, health care, and salaries rise.

In January the governor said his budget was balanced. The House and Senate will offer their versions of a balanced budget later this spring. But so far the public doesn't have a full picture of the problem or the options available to deal with it.

The default position in Montpelier is to make spending fit available revenue. That may be a good practice in business or family finances, but government has a different role. If the state cuts back during a recession, it reduces services just when people need them most. In times of crisis, people want government to step in, not step back.

There are alternatives to cutting spending. Vermont has rainy day funds for just this situation. Instead of cutting back on infrastructure investment, Vermont could increase its bonding to do needed construction, repair, and maintenance, and provide jobs in the bargain.

Finally, the state could look for ways to increase revenue. Targeted tax increases are less harmful to the economy than spending cuts. Vermonters deserve to know all the options and the pros and cons of each before being told by Montpelier, You're all set. We've balanced the budget.

Read our report: "Vermont's 2009 Budget: The State Should Step In, Not Step Back"

Act 60 Lived Up to Hopes, Not Fears
Vermont's 10-year-old school funding system has reduced the disparities that used to exist among towns, but there is no sign that poorer communities have "gamed" the system in ways that some predicted.

In its recent report, Public Assets Institute looks at how Act 60 has affected school spending patterns since it was enacted in 1997. The study shows that the spending gap between property-rich and property-poor towns has narrowed — one of the law's hoped-for results. But there also were warnings 10 years ago that under a statewide tax system poorer communities would increase their school budgets excessively, because taxpayers in other towns would be picking up part of the tab.

Our study finds that those fears have not been borne out. In fact, the communities that get the most outside support under the new system are also among the towns that spend the least per pupil.

Act 60 did make it easier for property-poor communities to raise money for schools. However, the new law also was built on the principle that the more voters choose to spend, the higher their tax rates will be. That appears to discourage the kind of reckless school spending that some skeptics predicted.

Read our report: "School-Budget Voters Are Minding Their Own Purse Strings"

A Better-Informed Public in Four Easy Steps
Thanks to technology, Vermonters have more and better information about state government than ever before. But, as the saying goes, there's always room for improvement.

The Public Assets Institute, working with the One Vermont coalition, recommends four modest steps the Legislature should consider this session to make more budget-related information available or to make it available in a more usable and understandable form.

In our last update, we reported on one of these recommendations: requiring the governor to present the budget within a week of the opening day of the legislative session. The three others are:
1. Require the Department of Taxes to publish statistical data on income and property taxes for residents across all tax brackets.
2. Post online all iterations of bills that are distributed and available to people who attend Legislative committee hearings and deliberations.
3. Prepare reports on the sources and uses of federal funds and special funds that Vermont receives and spends each year. These would supplement similar reports now prepared for the General Fund, Transportation Fund, and Education Fund.

Read more.

Bush’s Budget Would Cut Deep in Vermont
President Bush's 2009 federal spending plan, released last month, proposes sweeping cuts in federal funds to the states. Under the president's new budget, Vermont would get $54 million less than it received in fiscal 2008 and nearly $100 million less than fiscal 2003, according to a recent report by the Center on Budget and Policy Priorities (CBPP).

Federal funds pay for almost one-third of the state services that Vermonters rely on every day. The President's proposed cuts affect key services including education, child care, clean water, workforce investment, community development, and low-income energy assistance. The plan's projected $15 million cut in federal education aid to Vermont would drive up property taxes for Vermonters at a time when the governor and Legislature are discussing ways to reduce property taxes. Investments in our communities through community development, community services, and social service block grants face a $6 million reduction. And the elderly and people with disabilities could lose help heating their homes if the $4.2 million proposed cut in LIHEAP (Low Income Home Energy Assistance Program) is allowed to stand.

As the country moves into recession, Vermont faces lagging revenues going into 2009. If enacted, the federal budget cuts would aggravate the problem. It is especially ironic that the President is proposing massive budget cuts that dampen economic activity at the same time he is signing an economic stimulus bill into law.

The 2009 federal fiscal year begins on October 1, 2008. The President's budget is now being discussed in Congress.

Read the report.

Public Assets Institute is funded by grants and donations. Please consider making a tax deductible contribution to support our work.

contact | privacy policy | unsubscribe | forward to a friend
Public Assets Institute, PO Box 942, Montpelier, Vermont 05601.