Legislative Report 4/4/2016 - House Passes Budget – Round 1

The past two weeks saw the introduction of all the money bills the House has constitutional responsibility for developing. These include the Budget, the Miscellaneous Tax Bill, the Fee Bill, the Transportation Bill, the Education Funding Bill, and the Capital Construction Bill. Taken together, they constitute the plan for all the state spending in the next fiscal year from July 1, 2016, through June 30, 2017 (FY17) and the means to implement the laws and policies enacted by the Legislature. Indeed, they reflect in a concrete way the responsibilities of state government to provide for the safety, health, and general welfare of Vermonters. This article will focus on the Budget, the keystone of all of these bills, which encompasses all of state spending included in the others.

The FY17 budget fulfills the intent of last year’s budget bill by reducing state spending growth, eliminating dependence on one-time funds for ongoing programs, engaging in multi-year planning, and improving program accountability. The Appropriations Committee scrutinized programs to determine their impact over many years. They took testimony on program results and performance measurements from every department and agency and codified reporting of performance measures in Agency of Human Services grants. They invited input from every committee, from agencies and departments, and from individual legislators. The result is a budget that grew 2.7% this year, down from the five-year growth rate of 3.9% and last year's growth of 4.2%. So, what were the reasons and justifications for this spending growth?

The increased spending is not the result of adding new programs but of stabilizing existing programs. For example, it includes an increase in support for Vermont State Colleges ($800K), an additional transfer from the General fund to the Education Fund of $2.6M to help with property taxes, adds $1M to child care subsidies, and provides an additional $1.4M long-term to stabilize the Vermont Veteran’s Home. Other factors in spending growth are the increased number of children in the care of the Department of Children and Families (DCF) requiring an additional $1.8M, a net $71M increase in Medicaid caseload, and $13M for caseload increases in Choices for Care, Developmental Services and Public Safety. Finally, the budget makes investments for the future by increasing the Working Lands funding by almost $200K and providing $11.2M for the Weatherization program, both of which are job creation as well as environmental programs.

This budget addresses the problem of expenditures outpacing revenues that Vermont has been experiencing for the last several years since the budget growth is less than the projected revenues for FY17 by about 0.4%. Moreover, the Miscellaneous Tax bill identified new funding sources to help:
  • assessment of Rooms & Meals tax on private rentals of property, such as AirBNB;
  • an increase in the Bank Franchise tax on average monthly deposits exceeding $750M from 0.000096 to 0.000121; and
  • a 0.25% increase in the fuels Gross Receipts excise tax from 0.50% to 0.75%.

The increase in the Bank Franchise tax brings Vermont in line with other New England states. The increase in the gross receipts tax is dedicated to the Weatherization program, and at a fuel oil price of $2.00/gallon will cost the average homeowner using 700 gallons of fuel oil per year an extra $3.50/year.

No one likes to pay taxes. But taxes are necessary for government to function and provide those services we expect from government. Cutting services too much just leads to greater costs down the road. The Appropriations Committee took great pains to keep spending as efficient and limited to necessity as possible while fulfilling our obligation to protect our environment, to promote our economic growth, and to provide for the safety, health and general welfare of all Vermonters. These bills now go to the Senate for round two.

I always welcome your thoughts and can be reached by phone (802-233-5238) or by email (myantachka.dfa@gmail.com).