Legislative Report 01/28/2015 - Setting the Stage for Economic Sustainability

A Governor has the primary leadership role for making policy. Governor Shumlin laid out his policy agenda in two major speeches, in his inaugural speech and, a week later, in his budget address. In the latter he focused on health care, education, and the economy.

Gov. Shumlin addresses the General Assembly

Because Vermont's economy has been growing at a roughly 3% rate while expenses have grown by about 5%, the projected gap between revenues and spending for next fiscal year is $94M. Governor Shumlin's first priority was to propose a way to balance the budget. To do this he is looking for a combination of efficiency improvements through restructuring of departments and programs and cuts to some services while simultaneously investing in programs that deliver more economic value than they cost. But efficiency improvements and program cuts won't bridge the gap without additional revenues. So, he is proposing to close an income tax loophole that allows Vermonters to deduct from the current year’s income the state taxes they paid the previous year. Reforming this loophole will cost taxpayers who use it an average of $175 and raise an expected $15.5 million.

Since the Governor stepped back from his "single payer" health care initiative, he still recognizes the need to pursue health care reform. Vermont needs to continue to move from the current quantity based, fee for service system to one that pays providers for the quality outcomes they produce. To build on the early success this effort has shown in bending the cost curve while ensuring high quality health care for Vermonters, the Governor’s budget more than doubles payments to Medicaid providers with a new $4.5 million appropriation. Since the Medicaid cost shift drives up private insurance premiums by $150 million every year, the Governor is proposing to invest $25 million beginning in 2016 when new insurance rates begin for increased payments to health care providers. This will mean $50 million in cost shift reduction per year and enable a reduction in insurance premiums by up to 5 percent from what they would have been for all Vermonters. To pay for these health investments, the Governor is proposing a 0.7% payroll tax on Vermont businesses. Every dollar raised will draw down $1.10 in federal funds, more than doubling the money raised through the payroll tax. This tax would amount to 7 cents for every $10 of payroll expense. For a small business that pays employees $10/hour, it would mean an extra $2.80 per 40 hour week per employee, but would reap big benefits for both employers and employees.

With student enrollments down 20 percent since 1998, a 10 to 1 average student to staff ratio, and property taxes rising fast, the Governor outlined a number of proposals to help address the education spending problem in Vermont while improving education quality. These include placing a moratorium on any new legislation that adds costs to districts, phasing out expensive incentives including the small schools grant and the phantom student provision, targeting construction aid for districts that are actively trying to right-size through a merger, and prohibiting strikes and board-imposed contracts while requiring arbitration when contract negotiations reach impasse. Some of these ideas are already being discussed in the House Education Committee which has had more than 500 suggestions submitted by legislators, organizations and citizens.

Building on expanded dual enrollment and early college programs, the Governor hopes to implement a new program to create a pathway for Vermont Technical College (VTC) students to earn a free Associates Degree in Engineering Technology as a pipeline for Vermont employers looking for skilled employees. Through a partnership of the state, VTC, and private employers, high school seniors who sign up for an Engineering Technology degree at VTC will get their first year of higher education free while finishing high school, then will be guaranteed a summer internship at the partnering employer to gain critical job skills. When they return to VTC for their second year, the employer will pay for their first semester’s tuition (about $5,000). The Vermont Strong Scholars program will then pay back their loans for their final semester if they stay and work in Vermont after graduation.

Now it is up the the legislature to take those ideas, meld them with their own, and change Vermont's laws to accomplish the desired results. I continue to welcome your thoughts and questions and can be reached by phone (802-233-5238) or by email (myantachka.dfa@gmail.com).