Public Assets Institute > Policy Areas > Vermont Budget > Behind the budget drama

Behind the budget drama

There’s a case to be made that this year’s budget showdown in Montpelier was lot of high drama with little substance. After all the drama, the budget that was finally approved created one problem that the Legislature will have to address next year and ignored another that should have been addressed long ago. 

In May, after the Legislature had adjourned and gone home, Gov. Phil Scott vetoed the appropriations bill for fiscal 2019 and called lawmakers back to Montpelier for a special session. Then he vetoed the first spending bill passed in the special session. Finally, facing the prospect that Vermont would start a new fiscal year on July 1 without a budget in place, the governor sort of stepped aside for a third appropriations bill: he didn’t sign it, he didn’t veto it, he just let it become law. 

Vermonters may be surprised to learn that the standoff wasn’t over the amount of government spending, which is usually the case in budget fights between the governor and the Legislature. There was only a $1.3 million difference—point zero two percent—between the $5.9 billion budget the governor recommended in January, the two budgets he vetoed, and one finally adopted.

To be sure, how the $5.9 billion was allocated changed between January and June. School budgets came in lower than the governor anticipated when he presented his spending plan. That freed up some money that the Legislature put into some human services programs that the governor had underfunded initially.

But the governor didn’t really push back on the amount the Legislature appropriated. The big fight was over the use of so-called “one-time” money—revenue expected in fiscal 2019 but not in future years.

Such windfalls can be a big help when used to pay down future obligations. The Legislature proposed putting the money into teachers’ retirement, which would have reduced the state’s long-term costs.

But one-time funds also can be a trap when they’re used to pay for regular, recurring operating expenses. Governor Scott insisted on using one-time surplus funds to pay for public education next year—repeating the mistake made last year when the Legislature and administration also used one-time reserves to support the Education Fund. The governor wanted to use the surplus to artificially reduce property tax rates, when everyone knows property taxes will have to jump up dramatically when the one-time money is gone.

The Legislature, to its credit, wanted to stop playing games with the Education Fund this year. But in the end, it acceded to the governor’s demand to use some of the surplus to lower school tax rates, which simply leaves a problem to be addressed next year.

The problem the Legislature and the administration ignored—again—this year was the woeful treatment of children living in poverty through the underfunding of Reach Up. The statute couldn’t be more clear: the purpose of Reach Up is, among other things, “to improve the well-being of children by providing for their immediate basic needs, including food, housing, and clothing…” In practice, however, what Vermont does is provide less than half of these children’s needs—based on the 2004 standard, which is now 14 years out of date.

As the effects of the recession have slowly ebbed, fewer Vermont children and families have needed support through Reach Up. But instead of bringing the support for individual families up to the statutory level as the number of families has declined, the administration and the Legislature have simply reduced the Reach Up appropriation.

There was one small acknowledgment of the problem this year, though. The Legislature directed the Department for Children and Families to update its annual Reach Up reports. When reporting on the basic needs allowance, it will have to report the benefit level as a percent of current basic needs rather than needs determined in 2004.

So support for poor children will still be inadequate, but at least we’ll have an accurate measure of just how inadequate it is.

Posted by Jack Hoffman on August 8, 2018 at 4:05 am

Comments are closed.