The budget’s in the black—but did it do its job?

By JACK HOFFMAN, VTDigger.org, July 30, 2012

The Shumlin administration just released the latest revenue figures, and it looks like Vermont finished fiscal 2012 at the end of June with about a $12 million General Fund surplus, which is earmarked for flood repairs at the Waterbury complex. Still, revenues were more than the regular spending approved by the Legislature. That’s good news, right?

If the goal of the budget is for the outgo to end up lower than the inflow, then we could conclude that Vermont was in good shape at the close of fiscal 2012. But while balancing the budget is an important element of sound state fiscal policy, we also need to look at what the budget is doing for Vermonters and how much it costs to get the job done. After all, meeting Vermonters’ needs is the real job of the budget. Or should be.

We know we’ve fallen behind since the recession hit in the middle of fiscal 2008. If Vermont’s General Fund spending continued on the same path after 2008 that it had followed through both Democratic and Republican administrations for the preceding 25 years—over good times and bad—the budget this year would be about $240 million higher, roughly 20 percent more, than the Legislature appropriated. That’s a conservative estimate because it doesn’t take into account that more Vermonters needed help from the state over the last five years.

Some say that the state has simply increased efficiency and therefore doesn’t need to spend as much. In fact, the state has cut back services, shifted costs onto property taxes and health insurance premiums, and eliminated state positions that do planning and evaluation. In some cases, the Legislature not only cut funding for certain services but also shaved back the state’s obligation to provide those services—despite warnings that the need was as great as ever. Efficient? You could call it deficient.

This may come as a surprise to those who don’t follow the state budget closely, but the fact is the budget process doesn’t start with an assessment of what state services actually cost. Each January, the governor presents his proposed budget to the Legislature. In that document, we see how much the administration is willing to spend in the next fiscal year. At about the same time, economists hired by the administration and the Legislature present their consensus estimate of how much tax revenue the state can expect to collect in the coming fiscal year. A lot of research and analysis goes into those revenue forecasts.

What we don’t get is a similar analysis on the expenditure side: What it would cost to carry out the services the state government has legally obligated itself to provide for the coming year. Without an assessment of how much everything costs, it’s impossible to tell whether a budget is adequate.

That’s all supposed to change next January, thanks to a new provision added to the budget bill last session. Now, when the governor presents a budget, he also must provide a current services budget—that is, an estimate of the cost of providing existing services with adjustments for known changes, such as additional caseloads, higher fuel costs, statutory changes to a specific program, and other foreseeable variables.

The current services budget we get next January won’t show all of the ground we’ve lost in the last five years. But going forward, it should give Vermonters a clearer picture of how well state policies are addressing citizens’ needs. Then Vermonters will be able to weigh in on how well their government is serving them.

Jack Hoffman is a policy analyst for Public Assets Institute (www.publicassets.org), a non-partisan, non-profit organization based in Montpelier.