Budget Adjustment Act

January 30, 2015

It’s budget adjustment time at the Statehouse and the choices legislators are faced with in making cuts are never good.  By way of background, Vermont’s fiscal year runs from July 1st to June 30th.  We are currently a little more than halfway through fiscal year 2015.  Because Vermont balances its state budget every year, when the legislature comes back in session in January, if it looks as if the budget is headed toward a deficit for the year, we look for spending cuts to plug the gap. 

 

The news in early-January was that the budget gap for the current year would be approximately $12 million (on top of $22 million in cuts already made in August).  While programmatic spending levels have been in line with expectations, receipts from income tax collections are down.  Some of the headlines from the budget adjustment included reductions in the Low Income Heating Assistance Program (LIHEAP), maintaining extended judgeship vacancies, and cutting state spending on Medicaid programs.  While LIHEAP and Medicaid cuts feel draconian – these are programs that help some of our most vulnerable citizens – the cuts were made easier because applications for assistance were less than expected when the original 2015 budget was adopted.  The extended judgeship vacancies are concerning because they are leading to significant delays in our criminal justice system.

 

An adjustment in the 2015 budget that is receiving much attention relates to funding for the build out and maintenance of Vermont Health Connect (the “Exchange”).  The original 2015 budget called for $11.1 million; the budget adjustment provided an additional $3.5 million of state funds.  While there have been some improvements in the operation of the Exchange, I am being diplomatic in describing the legislature’s confidence in the cost controls and efficacy of this project as “shaken.”  I will have more to share regarding the Exchange in a future post.

 

As challenging as this budget adjustment was, it was a mere warmup act relative to the massive budget challenges Vermont will face in the coming year.  The most recent estimate is that we will need to fill a $112 million budget gap relative to current spending and tax levels.   With a general fund budget of $1.4 billion, covering an 8% deficit is going to be a massive undertaking.  This is Vermont’s “structural deficit,” another topic for a future post.

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