Public Assets Institute > Press > What Others are Saying > Diverting surplus has Ed Fund trade-offs

Diverting surplus has Ed Fund trade-offs

Gov. Jim Douglas and Senate President Pro Tempore Peter Shumlin are taking the prudent course by waiting to commit an unexpected $20 million surplus in the Education Fund in the face of the extraordinary challenges awaiting the architects of the fiscal 2010 budget.

Policymakers must carefully weigh the trade-offs between keeping the money in the Education Fund to lower property tax rates for the coming year and diverting the surplus to shore up deficits in other parts of the state budget.

State budgeteers must make the case as to why money collected from Vermonters to pay for public schools should be used for any purpose other than education or reducing the education tax rate.

The state’s fiscal crisis might make that case on its own. Policymakers can make an immediate case by laying out under what conditions and for what purposes they would use take the surplus from the Education Fund.

Tax Commissioner Tom Pelham said he is holding off on setting the statewide education property tax rate, a calculation that would take into account the surplus, in order to give the Legislature and the administration flexibility in dealing with the budget crisis.

Paul Cillo of the Public Assets Institute estimates applying the surplus to next year would result in a 2-cent reduction in the tax rate. At minimum, the raid on the Education Fund must not result in a heavier tax burden. That means more than keeping the statewide education tax rate stable. That means no increase in the tax bills property owners receive.

State Treasurer Jeb Spaulding sees next year’s budget falling short by as much as $150 million, including a decline in revenues and a projected increase in spending. Shumlin puts the number as high as $250 million. That’s on top of the $60 million-plus in cuts officials must find in this year’s budget of nearly $1.2 billion, which has already been trimmed by more than $30 million.

In a season of such bleak news about state finances, the unexpected surplus presents a great temptation to budgeteers squeezed for solutions to the state’s financial problems. Yet the policymakers must keep in mind that the money has already been spoken for, that the surplus would normally be used to reduce next year’s school property tax rate.

A tax cut Vermonters have already paid for that fails to happen is, in effect, a tax increase, and Douglas and Shumlin have repeatedly ruled out tax increases to deal with the budget. That’s a pledge we hope they will keep.

If there is no way to meet Vermont’s budget problems without turning to additional revenues — in higher fees, new assessments or by foregoing a tax decrease — then those who make that decisions must be open about what they are doing.

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