New budget thinking

The Legislature adopted three new provisions in this year’s appropriations bill that should move us all to start thinking differently about the budget and working together to re-shape state fiscal policy.

First, at the urging of the Vermont Workers’ Center, there is now a clear statement in law that the purpose of the Vermont budget is to provide for the wellbeing of the citizens of the state. That’s a great advance. Typically, budget talk is all about numbers. Was the budget balanced—that is, did the Legislature come up with a way to match spending to anticipated revenue? How much did spending go up or down?

That’s how House Speaker Shap Smith (D-Morristown) and House Minority Leader Don Turner (R-Milton) talked on Vermont Public Radio recently, in offering their post-mortems on the session. Smith pointed out that during the depths of the recession, the Legislature confronted budget gaps of $200 million or more. This year, the projected gap at the session’s start was about $50 million, and the Legislature successfully balanced spending and revenue.

Turner gave the Legislature generally good marks. But he was disappointed that the fiscal 2013 budget will increase General Fund spending by about 6 percent, following on a similar increase in fiscal 2012. (In fact, spending on General Fund programs went down by 6.6 percent in fiscal 2012, according to figures from the Legislature’s Joint Fiscal Office, which take into account federal funds used to replace General Fund revenue during the recession.)

Certainly, maintaining a balanced budget is responsible fiscal policy. But the goal should be sustainable growth rate over the long term. In recessions, revenues take a dive just when spending goes up, because more people turn to public services for help. When things improve, the state catches up. Revenues don’t have to match spending every year. What’s more important is meeting people’s needs when times are tough.

The second important change is a requirement that the administration prepare an annual “current services budget.” That’s an estimate of the cost of the services the state is legally required to provide. For example, if the state were behind in investigating reports of elderly abuse or processing Medicaid claims, the current services budget would have to include the cost of additional staff to bring the state into compliance. Now when the Legislature cuts back on services to save money, the assumption seems to be that the services are no longer needed. Cuts made one year are carried forward to a subsequent year, which is part of the reason for the shrinking budget gap that Speaker Smith described. The current services budget should help Vermonters understand the cumulative effect of cuts and see whether we are adequately funding existing services and programs.

The final change provides for the first time an opportunity for Vermonters to weigh in as the governor is developing his budget. Currently, citizens get to comment on the budget only after the governor submits it in January.

There’s more to do. We should be tracking how Vermonters are faring and whether the $5 billion we’re spending each year is creating a state that works for everybody. Both the administration and the Legislature appear committed to developing the kind of performance indicators that measure Vermonters’ wellbeing. But these three new provisions (page 121-3) are moving us in the right direction.