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Update August 2008
In this issue: The Government's Energy Bills Just like the citizens it serves, state government is facing sharply rising energy costs. If oil prices continue at this summer's level, the state is likely to face a $33 million energy bill for its buildings and vehicles this fiscal year—nearly $5 million higher than last year's. This is in spite of the state's energy-efficiency efforts, including cutting back on the miles state employees drive their personal vehicles on state business, thus reducing reimbursements. The prices of the petroleum-based energy sources the state purchases increased between 50 percent and 85 percent from July 1, 2007, to June 30, 2008. As energy prices increase, efforts to improve the efficiency of state buildings and vehicles become even more critical, especially as policy makers struggle to keep the budget balanced. Read our issue brief: "Rising Energy Costs Plague State Government, Too" Gas Tax: It's Not About the Money State transportation spending could be cut as much $8 million as part of the administration's budget-cutting plan unveiled this month, which the Legislature's Joint Fiscal Committee has approved. The cuts will mean further deterioration of Vermont's already crumbling roads and bridges. There's an easy solution to this $8 million problem: a two-cent tax increase on motor fuels—gas and diesel. But the administration is unwilling to consider anything but cuts. "Raising taxes is not an option," Administration Secretary Michael Smith wrote in a letter to lawmakers this month. Citing two economists, he said, "Increasing the gas tax would be counterproductive, in that with higher gas prices, revenues would actually decrease." Motor fuel taxes are based on the number of gallons sold. As prices increase, consumers buy fewer gallons. Fewer gallons mean lower tax revenue. Secretary Smith's comment suggests that pushing fuel prices up further by increasing the tax would lead consumers to buy even less, and drive revenues down. But would a two-cent increase really have that effect? Are we supposed to believe that consumers will make a different choice if fuel costs $3.69 a gallon instead of $3.67—even though they were paying more than $4 a gallon six weeks ago? It's clear now that this is not about the money. It's about ideology. The administration opposes fuel taxes because it opposes raising taxes, period, whether they're necessary or not, and the Legislature has gone along. The governor and the Legislature appear more committed to the idea of not raising taxes than to maintaining the state's public services. 2009 Budget Gap The administration has just outlined its plans for addressing a $32 million budget gap for the current fiscal year. Following the pattern established in the last session, the administration and the Legislature appear determined to cut their way out of this budget deficit. The current shortfall, however, is a sign of things to come. Even a modest increase in General Fund spending for 2010—to cover things like higher energy costs, increased caseloads, and pay raises for state employees—could create a gap of $100 million or more. Read our report, "Beyond Belt-Tightening," on the problems the new Legislature and the next administration will face in January. Vermonters Still Digging Out New data just released by the U.S. Census Bureau show that incomes of average Vermonters did not recover fully from the last recession, and now the state is headed for another downturn. The Census released two sets of data. Viewed separately, they paint a somewhat confusing picture. One, the American Community Survey (ACS), is based on a much larger sample and provides information on an annual basis. The other, the Current Population Survey (CPS), is based on a smaller sample and averages results over a two-year period. Even with the two-year average, the margin of error is higher with the CPS. The Center on Budget and Policy Priorities in Washington, D.C., recommends using the ACS data whenever possible. That survey shows Vermont's median household income, after adjusting for inflation, was lower in 2007 than it was in 2002, the start of the last recession. It also shows that the percentage of Vermont children in poverty grew sharply from 2002 to 2006, but then declined in 2007. Charts of some of the Vermont survey data are available here. Read the Center on Budget and Policy Priorities analysis on what the latest Census data say about the national economy. CONFERENCE 2008 Choices for Vermont: Rebuilding When we talk about economic development—growth of businesses, jobs, real estate values, income, and tax revenue—we usually assume it will produce secure, fulfilling lives for everyone. But that's not always true. Economic development does bring wealth to the state. But it also often brings pollution and sprawl and drives out good-paying jobs and affordable housing. Economic development, in other words, is not the same as prosperity. How can we balance the need to produce wealth through private enterprise with the imperative to maintain the public structures—from schools to roads to government institutions—that ensure both Vermonters' quality of life and a healthy business climate? How can we be sure that the benefits of economic development are shared and its burdens do not fall disproportionately on working and low-income people? How can citizens engage in crucial decision-making about Vermont's future and thrive in a sustainable economy? This year's conference, Choices for Vermont: Rebuilding the Foundation of Prosperity, will explore a new vision for shared prosperity. Register early and join us for a stimulating day of presentations and workshops, followed by a gubernatorial candidates' forum. David Cay Johnston, Pulitzer-Prize winning journalist and author of Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You With The Bill), will give the conference luncheon address as well as a public reading and book signing the evening before. Pre-conference reading and book signing: Conference Public Assets Institute is funded by grants and donations. Please consider making a tax deductible contribution to support our work. |
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