Thursday, May 29, 2014

Legislative Wrap-Up 2014

Rep. Anne B. Donahue

Legislative Update: 2014 Wrap-Up


A Review of 2014

The vast majority of bills that come to the House floor are passed on a voice vote, usually unanimously or nearly so. They reflect necessary statutory updates or policy steps, but rarely have a major impact on the direction of the state.

Some significant ones this year included the battery recycling program, child product toxic chemical monitoring, criminal court diversion for drug treatment, and banning smoking in a vehicle with a young child.

The tough issues most often have to do with money, both in amounts and in priorities.

This year, the governor told school boards that they needed to keep their budgets below a three percent increase, but our general fund increase was 3.8 percent. That was greater than our revenues, so the difference was made up in discrete areas of new taxes.

We also maintained the structural deficit that means the state will begin the 2016 fiscal year budget already $72 million in the red, according to the nonpartisan Joint Fiscal Office.

Translation: we are not creating sustainable budgets.

Property taxes also took a hit. We’d like to blame that all on local spending, but we actually added to future school budgets in two ways. One was requiring access to pre-kindergarten for all 3- and 4-year-olds. The other was adding an assessment that starts at $1,072 next year for every new teacher hired, as a component for bringing retirement benefits into balance.

While the retirement pension issue was critical to address, it didn’t need that particular assessment to begin this year, and I believe it was bad timing to start it before we have done a comprehensive overhaul of education funding.

Our business community had a bad year with the legislature, and that won’t help with economic recovery or future tax revenues. Businesses picked up some of the biggest tax impacts, making up for part of the revenue shortfall through an increased health care assessment, and receiving a disproportionate share of the property tax increase.

The tax bill also reduced the tax credit for innovative, start-up businesses that we’ve been trying to foster.

The more conservative Senate Democrats and House Republicans were able to push back on a minimum wage increase that would have hit small businesses particularly hard by lumping it in a single year beginning in January of 2015. Instead, it will end up at a higher point ($10.50), but it will transition over four years.

Even without the new taxes, the 2014 ALEC-Laffer State Economic Competitiveness Index ranked Vermont 49th among the 50 states in its economic outlook, based upon state policy variables. We were listed number 48 in property tax burden, and 44 in the number of state employees per population.

By its own measures, we may do better than the outlook predicts. We’ve been 49th or 50th for the past six years, but our actual performance rank for last year was 36, with a rank of 40 for the cumulative growth of the state gross domestic product between 2002 and 2012. Better, but that is still in the bottom fifth.

The Structural Deficit

For years now, the Joint Fiscal Office has been trying to educate us about the fact that our budgets are not sustainable under current revenues. We may appear to end each year with a balanced budget, but in fact simply pass the deficit buck(s) on to the next year.

We did nothing to change that this year.

I’ve gone into considerable detail on how this works in a companion article that is too long for the purposes of this column, but is available on my blog at

Briefly, it uses two examples: the $7 million in “new” resources that we included to combat opioid addiction, and an example from Reach Up on the way “savings” are sometimes manipulated.

The money for substance abuse treatment actually comes almost all from hypothetical savings to be achieved through better service delivery. That is a terrific way to do it, if it works, but the evidence that it will work is fairly weak.

When it falls short, the cost overrun will show up in next year’s midyear budget adjustment and next year’s new base budget. So we didn’t actually budget for the money intended to be spent this year and it will be part of the new deficit next year.

On the other hand, my committee attempted an initiative to help families succeed in getting off Reach Up assistance benefits in a way that was truly budget-neutral. A reduction in everyone’s cash grant by $4 per week created the ability to increase the income disregard (the amount a person can earn and keep without losing the same amount in the grant) for those working, from $200 to $300.

That is a work incentive that helps a family get off of public benefits.

The Senate instead decided to fund it by making it contingent on projected savings next year, assuming the Reach Up caseload continues to drop in a recovering economy. That makes it sound as though it is another net-neutral funding mechanism.

The reality is that if those savings are not used to fund this new benefit, they would be used to balance other existing budget pressures.

Just last week, the governor announced that he was authorizing 16 new social work positions for the Department of Children and Families in the wake of Vermont’s second child abuse toddler death. He said it will have no budget impact, because it will be paid for by higher-than-anticipated savings from further reductions in this year’s Reach Up caseload.

No budget impact?

That money would be going somewhere else instead, and furthermore, those added positions will be in next year’s base budget, as a new piece of the increased costs of simply maintaining “what we already have.”

This is not to argue the merits of any of these. The point is only that we can’t pretend they come for free, and when we add costs, we have to increase revenues.

A Big Ticket Item

When it comes to under-estimating costs, the new Vermont Psychiatric Care Hospital in Berlin budget ranks high. Two years ago, in the governor’s proposal to reform the public mental health care system, the estimated operating cost for a smaller state-run hospital was about $1,460 per bed per year. Now it is opening at a cost of $2,250 per bed (other hospital units in Vermont providing equivalent care are operating at about $1,450 per bed apiece.)

That translates into bad news for the overall vision of shifting more care (and money) from hospital to community services. We have suspended some of the intended new community programs, because the money isn’t available.

The community expansions were supposed to be net neutral to the general fund because of federal matching funds that were not available to the old state hospital.

Instead, as of now, we’re spending $1.6 million in additional state funds.

Other Budget Pressures

Another route to becoming “locked in” to budget numbers is when we abdicate responsibility to set budget priorities. Last year, we authorized independent home care providers to form a union in order to negotiate for higher wages from… us. The contract came in at 1.8 million more than the administration projected in its budget, and that was one of this year’s last-minute budget pressures.

This year we authorized home child care businesses to unionize to negotiate higher child care subsidy rates from… us. The Joint Fiscal Office estimate of cost next year ranges from $1 to $2.5 million.

A Sleight of Appearance

One of the last bills of the session addressed education funding, and it looked good. The House had passed a six cent property tax increase to pay this year’s school budgets and the Senate cut it to four.

So less of a property tax increase? Not quite. The bill also reduced the state payment per pupil, leaving more to be paid by the local share of the property tax. You’ll pay the same; it will just be out of your other pocket.

One theoretical effort to address cost containment barely passed the House and failed to win Senate support: that was the school consolidation bill. Although I could see some benefits to the plan, it was misguided to assume this would have addressed our cost crisis.

A Lost Priority

I did have one priority for a budget item: to have the state repay the federal government for the processing errors we made in food stamp benefits, instead of leaving recipients to pay. Regrettably, my committee’s bill did not make it past the Appropriations Committee.

These were all folks who had no way of knowing they were receiving more than they should have. If they don’t have financial resources, they are now being “billed” for repayment through a reduction in current food stamps.

As our committee chair, Ann Pugh, told VT Digger, “The vast majority of Vermonters who rely on 3SquaresVT are children, elders and people with disabilities. They’re not squirreling away their food stamps.”

Lost Budget Language

The session ended on one sour note for me. In 2005, we passed a law that required that persons in a psychiatric crisis be restrained only to the degree necessary to protect safety when being transported to a hospital, and never in prison shackles (medical restraints are available if needed.)

There are only a few counties where sheriff’s departments are out of compliance and still routinely shackle every patient they transport. At my request, the House Appropriations Committee included budget language that permitted the Department of Mental Health to contract for transportation services only with departments that comply with the law.

The Senate struck the section, and it ended up as a request for a report.

One wouldn’t think telling folks to follow the law would be controversial.

I want to extend my thanks to all those who have stayed connected with our state legislature’s actions this year through my Northfield News columns, my email list, Front Porch Forum, and through your direct contacts and inquiries. This connection with constituents really helps make me feel that I can be effective as your advocate and representative. Remember that I’m your representative off-session, as well! Contact me any time with questions or comments, at 485-6431 or

I will be running again for the 2015-16 session, and I thank all of you who signed the petition to place my name on the ballot. As long as I feel able to make a productive impact -- and hopefully never for beyond that! -- I will continue the effort to achieve a responsive, transparent state government that meets the needs of its citizens, creates a sustainable budget, and promotes economic vitality.

Have a great summer.

Rep. Anne B. Donahue


All in a Day's Work? Budget Follies

What’s In a Day’s Work… and the Budget?

During the debate on the minimum wage this spring, I shared my belief that there is something wrong with the economics in our society if a full week’s work doesn’t pay enough to keep a family out of poverty.

Raising the minimum wage isn’t necessarily the answer to this dilemma. Economics is more complex than a governmentally-imposed wage solution. But straight-out subsidies certainly are not the best way to support families, and I often hear complaints that we are too generous in that regard.

Legislators received an excellent graphic this spring that illustrated the earnings and net income inclusive of all wages and benefits for a hypothetical single parent with one child. The dynamics change with every family make-up, but it gives at least one portrait.

What it shows is that in our efforts to help, we often shoot ourselves in the foot. Beyond that, the efforts my committee made to try to increase work incentives reveal some disturbing trends about how we squeeze budgets out each year.

We never actually pass balanced budgets in the long term. They just start out appearing to be balanced. We hide the imbalance and pay for it the next year. Both Reach Up and our opioid addiction investments (explained later) provide excellent examples.

Here is what happened with Reach Up:

The color-coded chart we saw for the two-person family showed that if the parent is earning an annualized rate of $6 per hour – about $13,700 – he or she is not eligible for a Reach Up grant, although still earning below the federal poverty line ( $15,730). The family does net about $3,000 from the federal earned income tax credit, and another $1,000 from the Vermont EIC.

The two largest benefits are subsidies for health care insurance (about $9,000) and child care ($7,000), followed by food stamps ($3,500), renter’s rebate ($1,500) and $1,000 each in the child tax credit and fuel assistance.

When all is said and done, a two-person family moves from a net of $31,000 in benefits with no earnings to just under $40,000 at the $6 per hour annualized income. That increases only very gradually to $44,000 once making $9.62 an hour ($20,000 per year), because earnings only slightly outpace benefits being lost.

Between $9.62 and $16.83 per hour, every increase in wages represents a loss in family net income until it drops back down to $42,000. That is what we call the “benefits cliff”: working to do better for oneself actually creates a loss in income.

Not until reaching $20.43 per hour does the family equal the net income that was coming in at $9.62 per hour. After that point, the climb becomes relatively steady, except for one blip when Dr. Dynasaur is lost for the child at the $30/hour earnings level.

What about someone earning below $13,700 per year? Since $6 per hour is below minimum wage, this means they are not employed full time. If a person is only working enough to earn $5,000 a year, the Reach Up grant is $3,000, for a net of $9,000. (At zero earnings, the grant is a little over $6,000.)

Between earnings of $5,000 and $9,500, as the Reach Up grant declines, actual net income only climbs from $9,000 to $10,500. In other words, increasing work hours by almost double only increases cash income by about 11.5%. That’s not exactly a work incentive.

This is the issue my committee’s Reach Up bill attempted to address this spring.

The challenge in addressing the benefits cliff is that it costs a lot more money if we try to help people keep more of their earnings until they are higher up on the pay scale. Our solution was to transfer money instead: to take a tiny bit from all Reach-Up grants, about $4 per week, in order to increase the initial income disregard from $200 to $300 per month, and extend the “slope” to keep 50% instead of 25% of further earnings for those who work, until leaving Reach Up.

The income disregard is the amount that is not counted against a reduction in the Reach Up grant. So it would have helped poverty-level families keep a little bit more of the income earned before losing Reach Up.

The Senate, however, could not tolerate the $4 per week reduction (barely more than $200 for a full year) in the Reach Up cash benefit. It also wanted to see the increase in benefits go into a higher child care subsidy, to be provided further up the income scale.

The bill as finally passed does increase the income disregard starting a year from this July, but only by $50 with no increase in the additional percentage retained. The rest of the new incentive goes to families already earning more than that, and for child care, not cash in the pocket.

The bigger problem, in my estimation, is where the money will come from. All of a sudden, instead of the trade-off in where the support was targeted, the Senate took it all from future “savings” in the Reach Up program.

As the economy improves, the Reach Up caseload has been going down. Fewer families are seeking assistance. When it goes down faster than we project, we have savings in the budget that were not anticipated: “extra” money.

The Senate made the benefit contingent. If we have savings in the year ahead, that will be invested in these enhanced benefits next year. That sounds pretty innocent, from a budget-neutral point of view.

But here’s the catch. Assuming those savings do emerge, and assuming we had not created this new benefit, that money would be budgeted somewhere else that it was needed. If it goes to the new benefit, that “somewhere else” will still have to be paid for.

Precisely because we budget every year based upon money that is not part of our anticipated revenues, we start each new budget year in a big hole in order to maintain the same level of (increased) spending.

As of the budget passed in May, we will begin our next budget year $72 million in the red. This is the “structural gap” that our Joint Fiscal Office reminds us of every fall. We spend more in the budget than our revenues, and then desperately look for band-aids every year. The new, one-time spending becomes part of the base budget for that next year.

When we say we need to raise a certain amount of revenue “just to stay even,” that is what we mean. Often, a part of that new revenue comes from squeezing some new federal money out of match rates. It works in the short term, but is high-risk revenue. Every time the federal budget is cut, or our match rate decreases, we have another big hole “just to stay even.”

This year, we passed a budget that was a 3.8 percent increase over what we project that we will spend by the end of this year, which is above the rate of economic growth – and above the rate the governor told school boards they should stay within.

Unanticipated expenses that arise and are paid for in the mid-year budget adjustment act are sometimes just another way of adding onto the budget bottom line. Administration officials sometimes slip up in testimony when asked about a probable funding need that isn’t in the budget, and admit the plan is to pay for it in the budget adjustment. That’s not exactly “unanticipated” need, but it avoids counting it in the budget being presented.

The projected Reach Up savings make for an excellent case-in-point regarding our budget. If we gain those Reach Up savings in the next year, they ought to be going towards that hole, instead of funding a new benefit – even as positive as that benefit may be.

But it has already gone well beyond that. In the midst of the crisis in our Child and Family Services Division, with two toddlers dead in the past six months, the governor has announced the creation of 16 new social work positions out of “extra money.” This extra comes only a month after we passed the budget, including the increase in some taxes to balance it!

The governor says it won’t cost anything in the budget, because it will come from unanticipated savings in… Reach Up. Not next year’s (which is targeted for the new benefits), but a greater caseload reduction than even already expected for the current year when the administration was building the budget.

I gave another example of budget games in my main session wrap-up this week, and I’ll go into a bit more detail in this analysis on the artificial investment into treatment for opioid addiction. That’s the $7 million into new treatment resources the governor committed to in his state-of-the-state address, and which the news media all reported as being achieved in the budget we passed.

The $7 million is in the budget, but where does it come from?

Almost $5 million comes from projected savings that it is hoped will result from more efficient delivery of services. Using money more efficiently rather than spending new money is a very good thing, of course.

However, it is deceptive to suggest that we are creating new resources, and those savings that are being projected are very tenuous. The administration took a small pilot in Burlington and found some significant savings over the course of a few months that came from better coordination of addiction treatment.

It extrapolated those savings statewide and year-round. The transferred money will go to the “Care Alliance for Opioid Addiction,” which has qualified as a “health home” (not to be confused as a “medical home”) under the federal Affordable Care Act.

The reductions include almost $1 million in residential treatment, $1m plus in physician services, and $2.8 in other outpatient services. (Another $3.6 in savings is projected to come in changing the independent lab used for drug monitoring.)

The House and Senate Appropriations Committees were skeptical that there was a sound basis to project this level of savings to fund the new services, but didn’t go so far as dismissing them. They added budget language demanding accounting to show the money trail:

“… the Secretary of Administration and the Chief of Health Care Reform are authorized to transfer Global Commitment funds from the Department of Vermont Health Access (DVHA) to the Office of Alcohol and Drug Abuse Programs for the Care Alliance for Opioid Addiction. A written notification shall be submitted to the Joint Fiscal Committee for funds transferred under this subdivision and shall include a description of the specific use of funds within the Care Alliance for Opioid Addiction … Anticipated or identified savings in DVHA or other departments of the Agency of Human Services identified as a result of the increase expenditures through the Care Alliance for Opioid Addiction shall be included in the notification set forth in subdivision (1) of this subsection.”

What happens if the savings in the Medicaid program do not match the increased spending in the new program? That “unexpected expense” will likely show up as an increase that needs to be funded in the mid-year budget adjustment next January.

So in fact, we may well end up spending new money instead of simply using money more efficiently, and the investment description won’t have been deceptive. However, that means that the budget we just passed won’t have actually been a balanced budget.

This is what sometimes gets called “smoke and mirrors.” More charitably, it might be called budgeting on “a wing and a prayer.”

Either way, it is another example of the structural problem that our Joint Fiscal experts keep warning us about. Our annual deficits will not go away. That means that in each new budget year, it does become impossible to avoid budget increases beyond the rate of economic growth without serious cuts. However, the reason is that the actual budget increases came in hidden places the year before, when we didn’t actually pass a balanced budget.

The other behind-the-scenes piece that will bite us in the future is the fact that the Alliance is an Affordable Care Act health home. This means it has been approved for a highly enhanced federal match rate (90/10) for three years. In theory, the new model will be so efficient that after three years, when the match rate goes back to the 50-50 range, the state won’t be paying any greater amount for those same services.

And I have a bridge in Brooklyn to sell you, for cheap…

Saturday, May 3, 2014

Legislative Update May 3, 2014

This week I’ll give a summary of votes I’ve cast on some of the significant bills that have come through in the past two weeks. For others of particular interest to you, please get in touch to ask me directly.


I voted to support this bill, which would require labeling of foods with ingredients from genetically modified sources, despite the near certainty of a lawsuit on constitutional grounds by GMO companies. My rationale is summed up in the vote explanation I placed on the record:

“I have always supported the consumer right to have information on the content of the food they buy. My better judgment would go against supporting a bill with such potential for a high financial liability. My constituents, however, strongly endorse it despite that potential cost, so I cede to that judgment and choice.”

School Consolidation

I think we need to move in the direction of larger districts so that our students have access to more opportunities and we gain from economies of scale and more consistent planning. I was therefore tempted to support this bill to get that conversation going.

We have the smallest districts in the country at 299 students per district. New Hampshire has average districts of 1,200 students and Maine 818. We know we have one of the highest per pupil costs, rising at an unsustainable level.

However, this bill does not address the fundamental problems of the dynamics of cost and of the property tax burden, and I fear that if it passes (having “done something”) we will lose focus and pressure on addressing these more critical underlying issues.

I voted no; the bill passed on a relatively close 75-62 vote, and it is now up to the Senate to react in the short time remaining this session.

Toxic Chemicals

The Senate sent over a broad bill covering all consumer products, and the House narrowed it to focus on chemicals that are of particular concern for exposure to children under age 12. An example: there are some very toxic ingredients in play cosmetics marketed for little girls.

These will be listed on a Department of Health web site, and there can be additions to the list if new ones are identified. My committee has spent a great deal of time in past years addressing chemicals on a case-by-case basis, and this bill will allow regulation without repeat legislative action. I voted to support it.

Raw Milk

The bill to permit delivery and pick up at farmer’s markets for customers who are already signed up and have visited the farm was a minimal expansion of current law. I voted yes, but regretted that it did not go farther.

Health Care

This bill adds detail to the information that needs to be gathered before the viability of a universal access health care system can be determined. It also gave the governor a new, January 2015, deadline for sharing a plan for financing it. He already is in violation of a 2013 legislative directive, and of his own promise to provide it a year late this spring.

The good news in this bill was the upfront acknowledgement that the plan cannot go forward without full fiscal analysis and that 2017 is not a target deadline of the legislature, regardless of what the governor may say.

The down side of dropping an artificial start date is extending the uncertainty about the outcome of this entire reform effort.

We are still a long way from even asking the right questions. For example, regulations for a federal waiver of the Affordable Care Act, which would have to be received before Green Mountain Care could get underway, include the required submission of a 10-year budget to show sustainability.

Our current law only requires a 5-year budget, and this new bill did not change anything in identifying what we mean by “sustainable.”

Most startling is the requirement in the bill for the administration to submit a “conceptual waiver application” to the federal government by this November 15 (two months before the new due date for a financing plan.)

I looked up the federal law and regulations and found no reference anywhere to anything resembling a “conceptual waiver application,” and under my questioning on the floor, the Health Care Committee chair acknowledged that no such application exists!

I asked for a vote to remove that part of the bill – suggesting it was an embarrassment to be directing the administration to pursue an impossible action – but the committee did not back down so the vote failed along party lines. I voted against the full bill as well.

Involuntary Medication

I co-presented the bill changing some of the procedures for when persons in a psychiatric crisis can be subjected to a court order for medication over their opposition if they do not have the capacity to make a medical decision.

This relates to persons who have already been involuntarily hospitalized because it is believed they are a danger to themselves or others. The medications are themselves controversial because of questions about whether long term risks outweigh the short term benefit of stabilizing an illness.

It is a terrible affront to human dignity to forcibly medicate someone. Both my Human Services Committee and the Judiciary Committee worked very hard to maintain the delicate balance between allowing as much time as possible for a doctor-patient relationship to result in a collaborative treatment plan, yet allowing for informed consent to medication to be decided by a judge when there is no other option. 

Our bill, which passed on a 132-6 vote, was narrower than the Senate version, so it will be going to a conference committee to resolve the difference.


My committee worked on a Senate bill making judicious revisions to our law protecting people from prosecution if using marijuana to relieve symptoms of specific severe illnesses. Our bill was hijacked on the House floor through an amendment adding a tax study on legalization of marijuana.

I don’t mind the idea of the study nearly as much as I minded mixing these two very different issues, and I voted against the bill that I had supported in my own committee. The Senate accepted our changes so the bill is headed to the governor for signature.

Coming from the Senate

I was pleased to see my Taser bill pass the Senate. It will require statewide standards for safe and appropriate use of Tasers, along with required training in mental health interventions for all police officers in the state.

The Reach Up work incentive bill from my committee is being sent back by the Senate with radical alterations. Instead of an internal, cost neutral budget by taking a small amount (less than $5 a week) from current public assistance grants, the bill would take the funding from caseload reduction savings. Since those savings would normally be used elsewhere in the budget, this is no longer a neutral shift.

It also uses the funds to supplement child care grants instead of permitting families to keep a higher amount of work income. This is clearly much less of a return on the investment in work, and eviscerates the bill. It was a bright star of this session, and hopefully will make it into law through another route.

Contact me with a message about any of the issues that will be coming rapid-fire through the legislature in these final days. You can call me at home at 485-6431or at the legislature at 828-2228, or by email at