The budget mess, again

One of the annual features of the Shumlin Era is the battle to close a budget gap*. There are reasons for this: the rising costs of (1) operating a government (mostly health care), (2) operating public schools (mostly health care), and providing social services (mostly health care).

*To be fair, it was also a feature of the Douglas Era, but the dynamic was different: Republican governor versus Democratic legislature. 

And then there’s the revenue side. Vermont is suffering from a creaky tax system that doesn’t reflect current economic realities, and is bringing in less and less money over time.

The Legislature is now in the throes of dealing with Budget Gap 2016, which has many of the features of past editions. Cries of doom, unexpected revenue upgrades, patently unworkable/unpopular money-raising ideas from Shumlin’s crack policy staff, and lawmakers trying to find alternatives. This year, we also have a significant difference between administration and Legislature over the size of the budget gap; per VTDigger, House budget writers say the administration omitted more than $9 million in basic government operations from its proposed budget…

…including a pay increase for state workers (estimated at $2 million to $6 million, depending on the results of a fact finder’s report and ongoing contract negotiations), pay increases for child care and direct care workers ($1 million each), and funding for the Low Income Home Energy Assistance Program ($4 million).

Shumlin’s modest proposals for new spending have already been killed by the House Appropriations Committee, whose first priority is closing the gap between current obligations and state revenue.

It’s a depressing Rite of Mud Season that has drained the energy of the Democratic caucus, party, and electorate.

How fondly I recall the halcyon days of the early ‘Tens, when it looked like the Democrats would enjoy perpetual dominance. When the question was not “When will the Republicans elect another governor?” it was “Will there ever be another Republican governor?”

And the usual answer was, “Probably not.”

It could have been different. There is a blueprint for dealing with our budgetary miasma, which has been sitting on a shelf since 2011. I refer, of course, to the Blue Ribbon Tax Commission, a bipartisan panel that came up with a decent, sensible plan for updating our tax system. It would have stabilized revenues while more closely mirroring our changing economy.

The fate of the Commission’s report is one of the great missed opportunities of the Shumlin administration. The Governor entered office with so much political clout that he could have taken some forward-thinking steps. The kind of steps that cause short-term anguish, but can pay off big-time in the longer run.

Instead, the Shumlin administration tinkered around the edges of tax policy. The Governor himself seems to think that Vermont’s tax system is just peachy keen the way it is. Doesn’t need an overhaul.

Which is kind of like an auto mechanic screaming “I DON’T HEAR A NOISE” over the racket of a malfunctioning engine.

Here are the problems, undealt with. Sales tax revenue is in decline thanks to (a) the rise of online retail and (b) our economy’s dramatic shift from making stuff to providing services. The gas tax is a per-gallon levy, and revenues are falling thanks to ever-more-efficient transportation. (Just wait till we start switching en masse to hybrids and electrics.) The property tax unfairly burdens low-income landowners — and our attempt to fix that has strained revenues.

The overall state tax system weighs too heavily on the already-struggling middle class. The highest earners pay the least, when you include all state and local taxes. Vermont’s method of determining taxable income is overly generous to the wealthy.

And in this age of Wall Street, more and more wealthy people make their money from investments, not income. Capital gains are taxed at a much lower rate.

Which is not even to talk about the massive responsibility shift from private business to the public sector. Low pay and lousy benefits mean increasing reliance on government help. (Taxpayers effectively subsidize low-wage industries like big-box retail and fast food, because even full-time workers aren’t making enough to get by.)

The Blue Ribbon Tax Commission’s final report makes for instructive reading. A bit depressing, sure, because it represents such a lost opportunity.

The last time I heard someone talk about reviving the panel’s recommendations was during last year’s legislative session. Senate Finance Committee chair Tim Ashe was actively talking about a real reform of Vermont’s tax system, using the Commission’s report as a foundational document.

Haven’t checked in with him lately, so I don’t know where that effort stands. Seems like it’s up on that same dusty shelf.

I can’t say I’m surprised or even disappointed. Now is a bad time for fundamental overhauls; it’s a very contentious election season with a Republican candidate who may very well be our next governor.

The time to act would have been 2013, with Shumlin coming off a dominant re-election campaign and Tropical Storm Irene receding in the rear-view. Shumlin’s first priority at the time was health care reform, perfectly well-intentioned but an ongoing fount of headaches. Health care became Shumlin’s briar patch; any other big reforms were put on the back burner.

Thus, the next governor will have to face this same depressing tax and budget situation. If it’s Phil Scott, you can expect more tinkering and less facing of hard realities. Because, despite his claim to Leadership, Scott is not a big-change kind of guy. He’s more go-along, get-along. Which is fine if you want a nice siesta after the struggles of the Shumlin years, but not if you want a fairer tax system that provides for our needs.

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3 thoughts on “The budget mess, again

  1. Dave G.

    Never ceases to amaze me how these politicians can ignore the need to revisit Vermont’s tax policies, and look at some of the ideas in the TC report you talk about here. Meanwhile Shumlin is pissing away millions on technology failures and he’s put some real boneheads in some key positions, and they can’t manage so it all fails and costs money to boot. Politicians don’t want to address the real failures of this Governor, and they should. His mistakes have cost Vermont dearly, in more ways than one. It would be interesting to hear what plans Scott and the others have to address these every year crisis, outside of digging into public services again and again and again and again…

    Reply
  2. ApacheTrout

    I’d like to see you, VT Digger, and others shine the spotlight on Vermont’s inability to set up and manage databases. The failure of Vermont Health Connect is an obvious case in study. Coming up, the State is hoping to spend Really Big Dollars in the near future to update its IT structures.

    Reply
  3. Walter Carpenter

    “Which is not even to talk about the massive responsibility shift from private business to the public sector. Low pay and lousy benefits mean increasing reliance on government help. (Taxpayers effectively subsidize low-wage industries like big-box retail and fast food, because even full-time workers aren’t making enough to get by.)”

    Thanks for bringing this up. This is one of the most unsung and hushed up reasons why we are constantly in these crazy budget deficits every year. No one wants to talk about it, especially those “low-wage” industries who always yelp about being taxed too much.

    Reply

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