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 www.representativeannedonahue.blogspot.com
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 email@example.com.
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