Daily Archives: March 24, 2015

The budget gap: an alternative story

A simple narrative has emerged to explain Vermont’s budget gap of roughly $113 million. Oddly, tragically, it’s pretty much the same narrative whether you’re Republican or Democrat.

The Republicans’ version goes like this: The Democrats are out of control! They’re taxing and spending like drunken sailors!

Some liberals raise a fundamental objection to this — but not Gov. Shumlin. Now, he couches it differently; his version is that Vermont’s economic growth has failed to meet expectations and that state spending has overreached. But his underlying assumption — the state has spent beyond its means — is very similar to the Republicans’.

Gee, no wonder he had trouble developing a clear narrative in the 2014 campaign.

It’s true that the economy has underperformed expectations — but that’s not a phenomenon unique to Vermont. Nor is it attributable to our alleged “tax, spend and regulate” ways. By many measures we’re doing better than our northeastern neighbors. And we’re doing a hell of a lot better than states with hard-core free-market governments like Wisconsin, Michigan and Kansas.

(The states where free-market ideology is credited for booming economies enjoy unrelated economic advantages: Texas and North Dakota’s fossil fuel wealth, Arizona and Florida’s retirement havens and influx of immigrants.)

(Yes, immigrants. Most of them are hardworking people who came here in search of a better life. They add energy and ambition as well as cultural spice to our melting pot. We could use more of them here in Vermont.)

There’s an alternate story to tell about how we got into this fix. Strangely enough, it actually shows the Shumlin administration in a positive light. If only the Governor was willing to tell it.

Part of our problem is the structure of our tax system, as previously discussed in this space. ur income tax system has an extremely narrow base because of how we calculate taxable income and allow itemized deductions.  We’re losing tens of millions in potential revenue because our sales tax system has more holes than Swiss cheese. (Sen. Tim Ashe, chair of the Senate Finance Committee, estimates that we’re losing $50 million a year because of Internet sales. That’s not new tax money; it’s money we used to collect and aren’t anymore.)

The rest of the problem is that the Democrats have been responsible stewards, even if it means short-term trouble. They’ve tried to manage state finances in difficult times while maintaining state programs that have a beneficial impact on our present and future well-being.

Programs like Reach Up and expanded health care access and substance abuse treatment aren’t giveaways; they’re aimed at giving Vermonters a way out of systemic poverty. There’s also an immediate benefit: money spent in programs like food stamps and LIHEAP and the Earned Income Tax Credit go directly back into the economy, creating much more positive impact than capital gains tax cuts or corporate tax breaks.

And here’s a great big item that, sadly, I didn’t even realize until Saturday when House Speaker Shap Smith addressed the State Democratic Committee. The Democrats have spent millions to restore full funding to public sector pension plans. Smith mentioned $60 million, and called it a significant reason for our budget troubles.

Which is true. But it’s also the responsible — nay, the legally required — thing to do. The pension gap was created through years of mismanagement under previous administrations. (You know, those administrations that featured budget hawk Tom Pelham in prominent roles.) They took the easy way out of budget predicaments: putting off the day or reckoning. As Smith said, “we’re making up for the sins of the past.”

Really, it’s the Republicans who are bad managers. They are so single-mindedly focused on cutting that they fail to develop any sort of vision for governing. And they undercut the good things that government can, and should, do.

Two more overdue investments. First, the current administration has instituted health care reforms that have produced some waste and a bug-riddled website, but have also cut our uninsured population to 3.7%, compared to a national average of 12%.

And second, it’s making a long-overdue attempt to clean up Lake Champlain. That’s another legacy of the short-sighted practices of past administrations: they ignored the problem and let it get worse. And more expensive to fix.

These are noteworthy accomplishments. They are the right things to do. They are not wild or radical or thoughtless. And they are big reasons why we’re in our current budgetary difficulties.

And that’s it. It’s not a narrative of spendthrift liberals bankrupting the state. It’s a narrative of careful investment in Vermont’s future weighed down by a legacy of bad management and an outdated, creaky tax system.

This is not to say that I agree with everything the Democrats do. They’ve been too careful for my taste. But they do have a compelling story to tell.

Too bad nobody’s telling it.

The nice and the necessary

Congrats to the House Republican Caucus, which finally came up with something like a budget plan, on the very day the House Appropriations Committee passed a budget. Three observations to begin:

— The committee vote was 11-0. Even so, the Republicans were lambasting the budget even before the vote was taken. Are the committee’s Republican members hypocrites, or is it harder to be a simple-minded partisan when the rubber hits the road and you’re in a small room with your Democratic colleagues, than when you’re facing the camera with fellow Republicans?

— The Republicans clearly didn’t take the budget-writing process very seriously, since they waited until Approps had finished its work before offering a single specific cut. Even worse, during the process Republicans frequently objected to cuts proposed by Democrats — again, without suggesting alternatives.

— The Republicans’ budget plan is unworkable on its face. Its major initiative is a call for zero growth, but that’s (a) impossible because some programs are growing, like it or not (Lake Champlain cleanup, for instance), and (b) an abdication of the Legislature’s responsibility to draw up a budget. The responsible course, as Approps chair Mitzi Johnson has pointed out, is to fulfill the legislature’s duty and make the hard choices. Across-the-board slashing is the coward’s way out.

The GOP caucus did identify some cuts they’d like to make — finally. Most of them are short-sighted as well as mean-spirited:

The cuts [House Minority Leader Don] Turner put on the table Monday include eliminating grants to substance abuse recovery centers, scrapping a childcare subsidy for poor mothers, cutting funding for state colleges by 1 percent, and taking $5 million from a fund that would otherwise provide college aid to Vermont students.

Republicans also say spending reductions on items such as the renter rebate, financial assistance for health insurance and the Vermont Women’s Commission are preferable to increasing revenues that would otherwise be needed to fund levels recommended for those programs in Gov. Peter Shumlin’s budget.

Okay, let’s make it harder for addicts to get clean, harder for poor mothers to hold down a job, make higher education less affordable, and make health insurance less accessible. All those cuts would save money in the short term, but cause even more expensive social damage in the long term. The Democrats are trying to walk a fine line, and craft a budget that’s not fiscally irresponsible while still helping to make Vermont a better place to live.

Which brings me to something that Senate Minority Leader Joe Benning said last Friday on The Mark Johnson Show. I don’t have the exact quote, but the gist was, “There are things that are necessary, and things that are ‘nice.’ At a time like this, we cannot do the things that are ‘nice.'”

That sounds good and responsible, but the devil is in the definitions.

Do you think low-income heating assistance is nice or necessary?

How about broadening access to health care? A social obligation, or an extra?

Let’s talk substance abuse treatment, at a time when Vermont is in the throes of an addiction epidemic. Necessary or nice?

The good Senator apparently believes all these things fall into the “nice” category. Many of us don’t agree.

Okay, now let’s look at some items that aren’t on the Republican cut list — and weren’t on the Democrats’ either, for that matter. Necessary or nice — you make the call!

— The state giving $2.5 million to GlobalFoundries, a move that will do nothing to keep the company in the state. On a worldwide corporate scale, that’s nothing. It amounts to a burnt offering meant to propitiate the corporate gods. And it takes a big leap of faith to think it’ll have any effect whatsoever. Necessary?

— The state continuing to let unclaimed bottle deposits go to bottling companies. That’s a $2 million item, I’ve been told. Is that a necessary giveaway? Hell, I wouldn’t even class that one as “nice.” “Noxious” is closer to the mark.

— When ski resorts purchase major equipment, they don’t have to pay sales tax. That’s another $2 million a year. Is that necessary, in any definition of the word?

— For that matter, we’re letting the ski industry make a fortune thanks in large part to bargain-basement leases of public lands. The industry is understandably loath to reopen the leases, but there are ways to get it done. Instead, we’re letting them ride. Necessary? Hell no. Nice? Only for the resort owners.

— Vermont is one of only a handful of states that exempts dietary supplements from the sales tax. Nice or necessary?

In addition, the state gives quite a bit of money in small grants to private and corporate groups. Here’s a few examples:

— The Vermont Technology Alliance gets a $52,250 grant. Why?

— The Vermont Captive Insurance Association gets $50,000 to pay for “promotional assistance.” I realize the industry is a strong positive for Vermont, but the grant is certainly not necessary.

— The Vermont Ski Areas Association gets $28,500. This is the same group that refuses to reopen the leases. Why are we rewarding their intransigence?

That’s just a few I happen to know about. I’m sure there’s lots more. Are grants to industry “necessary” or “nice”? If we’re asking the poor and downtrodden to take major hits to the social safety net, couldn’t we ask our industries to accept at least a haircut?

And if we want to promote business in Vermont, why not take back all these penny-ante grants, put part of the money into a coordinated statewide campaign (like the one proposed by Lt. Gov. Phil Scott’s economic-development crew) and bank the rest?

Also, the state Senate is considering a bill that would make Vermont’s economic development incentives easier to access. Supporters, such as Republican Sen. Kevin Mullin, posit the bill as an investment in Vermont’s future. 

Which is fine. But so is increasing access to higher education, providing child care for working mothers, and helping addicts get clean. Those social programs aren’t just “giveaways,” they are investments in a safer, healthier, more productive Vermont.

Unfortunately, they are investments on behalf of Vermont’s voiceless. LIHEAP recipients and working mothers and addicts and prison inmates can’t hire lobbyists or mount a PR campaign. So we too often fail to invest in them, while we’re more than happy to invest in corporations that might or might not use the money productively — but in either case, it’s definitely in the “nice” category, not the “necessary.”

So you see, Senator Benning, I agree with you. I just have different definitions of “necessary” and “nice.”