The People vs. the Bean Counters

Balancing the 2012 budget will be tougher than anything the administration has had to deal with during this recession. If Montpelier uses the same “manage to the money” approach it’s been following so far, however, Vermonters will be out of luck.

The official state projection of the fiscal 2012 budget deficit is $112 million, about 9 percent of projected General Fund spending. This assumes that $33 million in new cuts under the Challenges for Change initiative have already been made for 2012 (they haven’t) and that all $38 million in fiscal 2011 Challenges savings will carry forward into fiscal 2012 (they won’t).

But even if we assume the consensus number is correct, the task of filling this budget gap is a killer.

Here’s why.

The recession started in the middle of fiscal 2008. State revenues nosedived over the next two years; they’ve only begun to recover this year. Federal recovery (ARRA) funds combined with state budget cuts plugged more than 90 percent of the hole between what the state needed to spend to maintain state services and what it took in for revenue during fiscal 2009-2011.

The good news is that the gap is much smaller in 2012 than in the previous years, and revenues are recovering.

The bad news: ARRA funding—which filled more than half of the hole over three years—will no longer be available in fiscal 2012.

More important, though, 2012 will be the fourth year of major budget cutting. The administration is preparing a budget that would reduce state appropriations to about 85 percent of what the state needs to do its job.

In general, the easiest and least harmful cuts are made first—and they’ve been made. There is little left to cut without undermining essential state services to Vermonters.

How did we get here? In short, by mixing up our priorities. Policymakers have followed the fiscal principle called “manage to the money.” This approach suggests that the state needs to function on reduced recession-level revenue even as Vermonters have greater need. Little attention is focused on that increased need.

In other words, the focus of state policymakers has been money—raising and spending less of it. In fact, despite the revenue shortfall, the Legislature actually cut taxes this year. While this might sound good to Vermonters who don’t like the thought of paying more, it is undermining education, health care, clean air and water, transportation, communications—the things people need.

“Managing to the money” is putting money ahead of people. And that’s not only bad for people, it’s bad for the economy.

During the last major recession, 20 years ago, the state put people first and then worked out the money part. It raised income taxes on the wealthiest and other taxes as well. It even ran a deficit for a couple of years. Vermont came out of the recession stronger than it went in.

We’ll have a new administration in January and it needs to get its priorities straight. It has to bring new thinking to the job it is taking on: making government work for Vermonters, not just counting beans.