One-Time

May 27, 2018

It was early May.  The legislature had passed a budget that not only kept spending growth to 1.3%, it also refrained from raising taxes.  The governor's response was: veto.  He demanded that the State impose budgetary constraints on local school districts.  After adjourning, the legislature got called back into session to address a manufactured budgetary crisis.

 

Sound familiar?  That was the scenario that played out in 2017.  And it's being repeated again this year.  Last year, the governor issued the second budget veto in VT's history.  This year he has taken sole possession of first place among VT governors by issuing his second budgetary veto, and the third in the 227-year history of our state.

 

It doesn't have to be this way.  Governor Scott requested a state budget with no new taxes or fees.  The legislature delivered...and then some.  The budget the legislature passed two weeks ago actually cuts taxes.  Surprisingly, it didn't get much press.  This budget cuts income tax rates for over 95% Vermonters.  For seniors, it exempts Social Security from VT taxation for couples with up to $60,000 in income.  These tax cuts for Vermont families and seniors are not on the credit card and do not burden our children.  They are part of the legislature's balanced budget.

 

Earlier this year, the governor demanded that school boards across the state hold local budget increases to less than 2.5%.  And school boards delivered keeping spending increases to less than 2%.  96% of these school budgets were approved by local voters.

 

So, with a state budget that lowers taxes and controls spending, and with school boards doing their part by keeping budget growth to a minimum, what is this "tax increase" the governor is howling about?  It's the property tax approved by voters who supported local school budgets.

 

Let's rewind.  The budgetary compromise that the legislature acquiesced to when Governor Scott vetoed last year's budget used one-time funds to paper over last year's property tax increase.  "One-time funds" can come in a variety of forms:  money that the state receives from a legal settlement with tobacco companies; funds taken from a reserve account maintained for the next recession or financial emergency; grant money from the federal government.  But "one-time" means just that: these are receipts the State won't be getting again.  It is bad financial management to use them for ongoing expenses.

 

Why is using one-time funds for ongoing expenditures bad financial management?  Let's take a hypothetical using round numbers.  Assume that $1 billion has to be raised to fund the school budgets approved by Town Meeting voters across the state, and that education costs go up 3% each year.  Let's say that with current property tax rates, $980 million would be raised to fund these budgets.  Where do we find the extra $20 million?  One way is to raise property taxes to pay for the increased spending.  Another way would be to find some one-time funds to plug the hole.  But here's why using one-time money is short-sighted:  next year, school spending will be $1 billion + $30 million, but you will still have a tax system that only raises $980 million.  Now we've got a $50 million hole to fill.

 

The budgetary compromise we gave into last year did exactly that by using one-time funds.  This year's budget not only has to fund the very conservative school budgets that local voters approved, it also has to fill the one-time funding hole we created last year.

 

The governor and the legislature arrived at different places in how to solve the shortfall in this year's budget.  Governor Scott is doubling down on last year's plan; he wants to use one-time funding again this year.  He insists that if Montpelier mandates student-teacher ratios for local school districts, the savings generated over the next five years will pay for the one-time funds he wants to use again this year.  Three weeks ago his budget team insisted his plan would save $300 million.  Now they are saying it would save less than $200 million, and the Administration's numbers continue to wobble as they are more closely scrutinized.

 

The other thing the governor's team let slip this week:  the governor's "no increase in property taxes" plan would actually result in higher property taxes for half the towns in the state.  Huh?!

 

Back here on Earth, the budget passed by the legislature, which incorporates the needs of school budgets passed by local voters in March, would include an average 2.6-cent property tax increase (that's about a 1.7% increase).  While no legislator likes to support a tax increase, this budget is in-line with what local voters supported in their school budget votes in March and accounts for sins of last year's compromise.

 

What about the one-time money used by the governor to dig a deeper budgetary hole, while hiking property taxes for half of Vermont towns?  What does the legislature do with that one-time money in its budget?  Two important things.  First, it shores up the reserves of some underfunded state accounts.  The next recession we find ourselves in, we'll be glad we did.  Second, we put $34 million toward paying down the state's underfunded pension obligation.  Reducing this liability this year will save Vermonters $100 million over the next 20 years.  Guaranteed.  No fuzzy math.

 

I think back to the cliche that Governor Scott likes to use: when you find yourself in a hole, stop digging.  This year, maybe we can fill in some of the hole.

 

 

Right & Below:  April 29th was Town House cleanup day in Strafford.  As a reward after the work was done, Rocky Fuller took us on a tour of the rafters and out to the steeple.  My grip on the beams in the steeple was much, much tighter than Jon Stableford's!!

 

Below:  April 25th the House Health Care Committee passed the Universal Primary Care Bill in a tense 6-5 vote.  I co-sponsored the bill and voted in favor along with committee chair Bill Lippert, to my right.  I took this pano picture to show the 41 people (a record) in our committee room.

 

 

Right:  Linda Gray, representing Norwich's Energy Committee, spoke to us in the Climate Solutions Caucus on April 26th.

 

 

 

 

 

 

 

 

 

 

 

 

Left: On May 3rd,  Wally and Barb Smith were honored in Montpelier with a VT Tree Steward Award for their work in creating the Edible Pocket Park in South Strafford.

Last year, the Town of Strafford was recognized with a Tree Steward Award for the community's work.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Right:  Dan Fraser was recognized by Vital Communities as one of the Upper Valley's Heroes & Leaders on May 3rd.  I got to introduce the team from The Family Place, another of the Heroes & Leaders.

 

Below:  Dan could have won the award for Coolest Shoes in Upper Valley.  Perhaps the category will be added by Vital Communities next year.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Right:  Senator Leahy paid a surprise visit to the House Democratic caucus meeting on May 8th.  One of my favorite people, and the best boss I've ever had.

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