Stimulus Package Can Help Vermont Avoid Budget Cuts

FOR IMMEDIATE RELEASE

January 22, 2009

Contact: 
Jack Hoffman
Public Assets Institute 
Montpelier, Vermont 
802-472-6222 
jack@publicassets.org

MONTPELIER – Vermont could receive hundreds of millions of dollars in federal aid in the next two years, according to a new analysis of the economy stimulus package now making its way through the U.S. House. Some of the funds would be tied to expanding specific programs and therefore would not alleviate pressure on the state’s General Fund  budget. However, the analysis shows that Vermont could get $124 million in “fiscal stabilization” funds, which would be targeted for education and general state expenditures, and perhaps as much as $250 million in additional Medicaid funding, which also could free up state dollars.

“Before we decimate programs that we’ll wish we had in a year or two, we should wait to see exactly what Vermont will receive through the new federal stimulus plan,” said Paul Cillo, executive director of Public Assets Institute. “The stimulus appears to be more aggressive than many people have been expecting. We need to understand it before we cut the state budget any further.”

The analysis of the American Recovery and Reinvestment Act was prepared by the Federal Funds Information Service in Washington, D.C., which tracks federal fiscal policies and appropriations on behalf of the National Governor’s Association and the National Conference of State Legislators. Additional analysis of increased Medicaid funding was prepared by the Center on Budget and Policy Priorities, also in Washington.

The stimulus bill has not been approved yet by the House and could see some changes before it is adopted. The Senate will pass its own version in the next few weeks, but it is not expected to be radically different from the House bill, at least in the funding to help the states. The analyses are based on the bill introduced by the House Appropriations Committee last week, and they are the best indications yet of the amount of funding that is likely to be available to individual states.

According to the analyses by Federal Funds Information Service and the Center on Budget and Policy Priorities, Vermont could get about $300 million in funding that could help reduce General Fund spending and close the projected budget gaps for 2009 and 2010. Some additional money also would be aimed at reducing cuts in education funding.

The Legislature’s Joint Fiscal Office estimates the current year budget gap to be $40 million-$55 million. The projected shortfall for 2010 is $176 million-$196 million.

The stimulus bill includes $124 million for “fiscal stabilization” for Vermont. According to the Federal Funds Information Service, about 60 percent of that money is to be used for education and the rest can be used to meet General Fund obligations. The Center on Budget and Policy Priorities has estimated that Vermont could get approximately $250 million in additional Medicaid funding between October 2008 and December 2010. Much of that money, too, would free up General Fund dollars, but the state would be required to maintain eligibility standards as they existed in 2008.

The House stimulus package contains money for special education and school construction, child care, highways, clean water and energy conservation programs. It is not clear at this point whether any of those funds could be used to reduce the need for appropriations from the state General Fund. The education programs, for example, include funding to help low-income, disadvantaged schoolchildren, construction grants and special education. Typically, whenever federal funding in those programs is increased, the additional money cannot be used to supplant existing funding. However, the specific requirements attached to the stimulus money won’t be known until the final bill is approved, probably in late February or perhaps early March.

For more information on preliminary analysis of the House stimulus package please click on the following links at the Center on Budget and Policy Priorities:

Medicaid:

http://www.cbpp.org/1-22-09sfp.htm

Other key provisions affecting low- and moderate-income individuals:

http://www.cbpp.org/1-22-09bud.htm

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