Gov. Shumlin calls for cuts, no broad-based tax increases

NEAL P. GOSWAMI
Staff Writer
BENNINGTON — Vermont Gov. Peter Shumlin proposed $83 million dollars in spending cuts Tuesday in his first budget address as the state looks to close what he said is a $176 million projected deficit.

Shumlin, a Democrat, was sworn in earlier this month. Despite the massive deficit, Shumlin said in his address to a joint session of the Legislature that he will not look to

Gov. Peter Shumlin

raise broad-based taxes on Vermonters, such as the sales or income taxes. Nor will he look to tap into the state’s rainy day funds, he said.

The inaugural address delivered just two weeks ago “was a day for Vermonters to challenge our own imagination for what we must make possible,” Shumlin said. Tuesday, however, was about presenting “a budget that is as sobering as it is necessary,” he said.

“My budget puts Vermont on a solid and sustainable path to fiscal responsibility. Facing our fourth consecutive year of budget shortfalls, I am committed to making the painful choices today that will help ensure that we are not back here next year making drastic cuts,” Shumlin said. “We must match the promises government makes with the capacity of Vermont taxpayers to support those promises.”

Shumlin said health insurance companies and nursing homes will be asked to pay more. For years hospitals and nursing homes have paid into a fund that leverages federal health care money. Shumlin said they will be asked to kick in more, adding $18.7 million to the general fund.

Now, insurance companies and dentists will also be asked to contribute to that “imperfect but effective revenue stream,” adding an additional $9.2 million to the general fund as revenue, Shumlin said.

“My administration understands that in these difficult times, every dollar that we draw down from the federal government is a dollar saved for Vermont taxpayers,” Shumlin said.

He told lawmakers that his $4.8 billion spending plan will close the budget gap, in part, by cutting about $83 million from the general fund. It also proposes to use $29 million from an existing caseload reserve and utilizes $27 million in unanticipated revenues to close the deficit.

Included in the cuts are:

• A $23 million ongoing reduction from the general fund transfer to the education fund
• $12 million in government labor, private contract, health insurance and retirement savings
• $7.2 million savings in the corrections system
• $5 million from rolling the Catamount Health program into the existing Vermont Health Access program, creating a single health care pool for the state
• $4.6 million in reduced funding for our regional mental health agencies

“My administration takes no pleasure in delivering this budget, and we will work in partnership with the mental health, health care, and human service community to ensure that vulnerable Vermonters are protected,” Shumlin said.

He addressed anticipated critics head-on about why many of the proposals he advocated for Tuesday were ones that he decried when pitched by former Republican Gov. James Douglas. “They will rightfully ask, “What has changed?” Shumlin said. “My response is simple: What we face in this budget year is the reality that the hundreds of millions of stimulus funds that were allocated by the federal government to cushion the blow of the worst recession in American history are now gone.

“We all knew that this day would come. It is now our responsibility to make difficult choices, and to find a balance between compassion for our most vulnerable citizens and the imperative to put our state on solid fiscal footing. I believe this budget achieves that balance,” he said.

The deficit — previously believed to be about $150 million — has increased because a government efficiency plan Shumlin championed last year as president pro tem of the Vermont Senate is not expected to achieve its predicted savings. “While Challenges for Change was a well-intentioned initiative, we simply cannot budget $26 million in
savings that may not likely be realized, and I won’t,” he said.

Using rainy day funds to help ease the burden on Vermonters is not prudent, Shumlin said, because there is no guarantee the reserves can be replenished in a timely way. “My budget team cannot provide me with that assurance for fiscal years 2013 or 2014, and therefore we must not tap into those funds this year,” he said.

Shumlin also asked lawmakers to boost the reserve from 5 percent of the budget to 8 percent when the state’s economic lot improves.

Similarly, raising taxes is not an option, according to Shumlin. He said Vermont already has higher income tax rates than states that used tax hikes to close budget holes. And temporary tax increases like ones enacted by former Republican Gov. Richard Snelling would not work today, he said.

“The sales tax was 4 percent; today it is 6 percent. Our rooms and meals tax was 7 percent; today it’s 9 percent. The Snelling solution made sense then, but it would be counterproductive now,” Shumlin said.

Despite the fiscal challenges, Vermont has opportunities to find long-term savings. Enacting a single-payer health care system could save Vermont $500 million in the first year, according to a report delivered by a consultant to lawmakers last week, he said.

“We will work together to pass a bill that takes the first step in putting Vermont on a solid road to single payer health care, and we must do it before we adjourn this spring,” he said.

He also launched a “war on recidivism,” promising savings in the state’s Corrections budget by shuffling prisoners to different facilities and providing nonviolent offenders with resources aimed at keeping them from committing new crimes. Those and other reforms will save about $2 million, he said.

“I ask the Legislature to join me in investing $1 million in prevention and alternative justice in community-based programs across Vermont to help keep nonviolent offenders out of jail,” Shumlin said.

Bennington County Democratic Sen. Dick Sears, the chairman of the Senate Judiciary Committee and vice chairman of the Appropriations Committee, said he believes the state “can be more aggressive” in seeking Corrections savings. The state could possibly begin to see savings in the second of the 2012 fiscal year, Sears said.

The state, Shumlin said, must look to boost pre-K education funding. Shumlin said it will cost about $14 million to fund early education for half of the state’s eligible children between the ages of three and five.

“The evidence is irrefutable: The years up to age five are a critical time for brain development,” he said.

And while the state must replace its state hospital, Shumlin said current plans for a 15-bed facility that will not allow for expansion should be scrapped. Instead, he promised his next budget will include “a state of the art new State Hospital to meet Vermonters’ needs for the next 50 years.”

Other budget address highlights include:

• $13 million toward universal broadband Internet and cell phone service
• $4.8 million for workforce training
• $7 million for weatherizing low-income Vermonters’ homes
• Full funding for the Vermont Housing and Conservation Trust Fund
• $106 million for improvements to bridges and culverts as well as preventive maintenance work on other structures
• Funding for the Morrisville Truck Route and the Bennington Bypass
• Investments in the western rail corridor

Shumlin expressed some optimism that the state will recover if tough choices are made this year.

“Let us make the hard decisions that this work requires of us, always mindful that balancing our budget gap is one step in our climb to a brighter economic future for the people that we serve,” Shumlin said. “Let us never lose sight that at this time of economic hardship, our best days are still ahead of us.”

The budget address drew plenty of concern.

“I’m concerned about some of the cuts that may be coming, particularly in some of the [United Counseling Service-type] programs for the developmentally disabled, as well as for some of the substance abuse programs,” Sears said. “I’m concerned about some of what I heard in the speech today, but we’re going to have to look at it line-by-line.”

Arlington Rep. Cynthia Browning, a Democrat, said she is excited to see more details of the proposed budget, but remains a skeptic.

“I don’t understand how some of the things he talked about are going to work, but that’s always how it is when you hear the budget address,” she said. “Of course I’m skeptical. Why wouldn’t I be skeptical? It’s the rule of the Legislature to be skeptical of any governor, regardless of who it is.”

Floyd Nease, the executive director of the Vermont Association for Mental Health and a former Democratic lawmaker, was far more critical.

“Once again, those requiring mental health and developmental services are being asked to bear a disproportionate share of the pain. The budget proposal violates the fundamental principles the Governor laid out for his health care plan, which stated that Vermonters will get the right care at the right time,” Nease said. “Furthermore, it flies in the face of his stated intention to provide an increased level of intervention for those currently in jail who he intends to release to the very communities whose services are being cut.”

Contact Neal P. Goswami at ngoswami@benningtonbanner.com