New Report: Vermont Must Address Both Budget Problems

MONTPELIER—The promise of health care reform in the future doesn’t compensate Vermonters for the pain of budget cuts today. While they address long-term budget problems, the governor and the Legislature also need to build a bridge to reform by adequately funding the programs and services that citizens need today.

That’s the conclusion of a new report released today by the Montpelier-based Public Assets Institute.

“The state has two budget problems: one short term related to the recession, the other a long-term structural problem,” said Paul Cillo, president of Public Assets Institute. “Gov. Peter Shumlin has begun to address Vermont’s structural budget problems by proposing reforms to the health care system and corrections policies, and he deserves credit for those initiatives.”

“But budget savings from health care reform are still several years off. And Vermonters, still reeling from the effects of the Great Recession, need help now,” he said. “The governor and the Legislature are proposing to inflict additional budget cuts that disproportionately hurt low- and middle-income Vermonters to solve recession-driven revenue problems. Instead, they should be maintaining essential state services by using temporary revenues, including rainy day funds and taxes on those with higher incomes, to build a bridge to reform.”

The Public Assets report points out why the Governor Shumlin is right to focus on reforming health care and reducing the prison population. Health care and corrections costs have been growing faster than the economy for more than decade.

According to the report, Vermont also has revenue problems that are not being addressed. Taxable sales have been growing more slowly than the economy overall. Consequently, state revenues do not keep pace with economic growth. The Blue Ribbon Tax Structure Commission recommended in January that Vermont extend the sales tax to services and lower the rate, which would correct this problem. But so far the governor has rejected that proposal.

The report notes that Vermont will continue to have problems developing sustainable fiscal policies until the Legislature and the governor address these structural problems.

Looking at the fiscal 2012 budgets proposed by the governor and the Vermont House, the Public Assets report points out that neither is adequate to maintain existing human services. Citing figures from the Joint Fiscal Office, the report says the governor’s proposed budget was about $80 million below what’s needed. While the House restored some of the cuts proposed by the governor, its budget is still short by about $68 million, according to the report.

Public Assets Institute is a nonprofit, nonpartisan organization that promotes sound budget and tax policies to benefit all Vermonters. Additional information is available at www.publicassets.org