Legislative Update
May 17, 2015
Rep. Anne Donahue
We wrapped up the 2015 session passing a state general fund
budget that was up by 4.1 percent, despite revenues that have increased only
2.4 percent. That vote came only a day after we passed an education bill that
demands that schools restrain their funding to an average growth of two percent
in each of the next two years.
Hypocritical? Clearly.
This update will have a lot of numbers in it, to attempt to
sort some of it out. The general fund budget, as passed, rounds off to $1.469
billion. With special accounts added (including the transportation fund of $266
million), it goes to $2.354 billion. The Education Fund is $1.552 billion. The
federal government contributes $1.929 billion. Thus, our total state spending
budget for next year is $5.532 billion.
There were multiple variations on how to raise money. In the
end, the $46.2 million in new revenue to balance the increased spending looks
like this:
Income tax changes will raise $22.9 million. These will mostly
affect only persons who itemize deductions from their income. Deductions will
no longer be allowed for income that is spent paying state and federal taxes,
and most other deductions will be capped.
The House decision to cap deductions for charitable donations
and for high medical expenses, however, was reversed.
Instead, the final compromise accepted a Senate proposal on
an “alternative minimum tax” of three percent for persons making more than
$150,000 per year. That means that regardless of any type of deductions, the
bottom line can never be less than a three percent state income tax.
Everyone will see a slight increase in the tax that is
charged for items bought out of state (e.g., on the Internet), where a Vermont
sales tax was not charged. This is the spot on your tax return where you can
choose to pay the automatic assessment, or you can provide verification that
you purchased less than that. The current rate is .10 percent. It will increase
to .15 next year and .20 the year after, and then automatically increase based
upon the consumer price index.
After income taxes, the next biggest revenue stream is
expected to be the change in the sales tax food exemption. “Soft drinks” will
no longer be considered food, and so will be subject to the regular six percent
sales tax.
That is expected to raise $5.1 million for the general fund.
Soft drinks have a broad definition; it’s not solely soda. They include all
flavored and sweetened beverages (including artificial sweeteners) unless
containing more than 50 percent juice. As a whole, taxing soft drinks will
bring in $7.9 million, but a percentage of sales tax revenues go to the
Education Fund, so $2.8 million of it goes to the Ed Fund.
Vending machine products will now be taxed at the same rate
as restaurant meals (9 percent), which is projected to raise $1 million. A new
program to garnish wages or attach bank accounts for unpaid taxes is expected
to raise $2 million.
That’s the bulk of new taxes, but there is another $14.3
million in increased special funds or fees. A cigarette tax increase of 33
cents per pack will raise $3.2 million for several specific health care line
items. An increase in the property transfer tax will raise $5.3 million for the
water clean-up bill.
Filing fees for various court actions (filing a will in
Probate Court, for example) will raise an added $.7 million for the judicial
branch budget, and additional fees for agriculture and developers will bring
another projected $2.1 million for the water bill. The routine increase in
professional licensing and other fees will raise another $2.9 million.
The grand totals raise $30.4 million for the general fund,
$2.2 for the Ed Fund, and $13.6 for specially targeted funds (including the
$7.5 million water clean-up bill), making the total $46.2 million.
Is there good news in that?
Yes! The versions passed in the House totaled $55.8 million;
the Senate, $50.9; so the final version was pared back slightly. The two
biggest proposed increases that were eliminated were an increase in the
assessment on small businesses that cannot afford to provide health insurance
(the Senate proposed to raise $5.1 million with it), and the cap on charitable
and medical deductions on income tax (the House income tax changes would have
totaled $33.2 million in new revenue, rather than the final $22.9, as passed.)
Much was made of the report that we “closed” a budget gap of
$113 million. That was based on an assumption of a much larger increase in
spending. Although we reduced some of that increased spending, and increased
taxes, we already are projecting a gap of $50 to $70 million in next year’s
budget – assuming that we continue to spend at the same rate, and that revenues
(including the new revenues sources) continue to grow at the same (lower) rate.
We can only change that trajectory by spending less or by
growth in the economy as a whole. That leads to the importance of the economic
development bill, which also passed on the last day of the session. It invests
$425,000 in initiatives to spur growth.
Health Care Reform
The session began with a proposal from the governor to raise
$90 million in a new employer payroll tax to fund major health care
initiatives. The largest piece was a jump in Medicaid payment rates so that
private insurance rates wouldn’t have to be paying for Medicaid underpayment –
as they do now. The concept was flawed, but beyond that, the economy clearly
could not tolerate that kind of tax increase.
That tax package proposal, however, included health care
budget items that would normally have been included in the general fund budget.
Leaving them out of the general fund meant two things. First, the general fund
total was misleading because it did not include budget lines that would
normally be included. Second, the most essential funds were placed at risk,
since they were separated in a “stand alone” budget that required additional
revenues.
The governor’s proposal left my committee reduced from $90
to $53 million; it left the House tax committee cut back to $20 million; and it
left House Appropriations cut down to $10 million. The Senate cut it down to
about $7 million, and it ended up about there. (The $3.2 in tobacco taxes is
matched by federal funds.) That leaves no money invested in any reform efforts.
It maintained the existing level of support for low income persons (those just
above Medicaid eligibility) who purchase insurance on the Health Exchange. It
provided tiny increases in some provider payments.
At the same time, we learned that Medicaid costs from use of
services is “running hot” at about $15 million over budget in the current year,
and projected to continue at that rate next year. That was not included in the
fiscal year 2016 budget we just passed. As of this particular moment in time,
tax revenues have shown a spurt upward. That, it is hoped, will cover the
shortfall in the current year budget.
If we are very, very lucky, we will end up with a little bit
of leftover in the current budget. If so, $5 million will be set aside first
for low income heating assistance next winter, and then another $13 million
will be set aside for additional Medicaid costs. (That was money that is
supposed to go towards repaying the Teacher’s Retirement fund loan that we
borrowed from ourselves last year… but that’s another, much longer story.)
Education Reform
The education bill deserves more discussion, and I will
include it in a later end-of-session update. The short version is that it
creates strong financial incentives to create larger school districts of at
least 900 students. Since there is only one Education Fund, incentives for some
means, in effect, financial penalties for those who move more slowly.
In addition, there is a spending increase threshold that
averages 2 percent, but varies based upon how a school district’s per pupil
cost compares to the state average. Northfield is just a hair below the state
average and thus would be allowed slightly more; Berlin is a bit above, so it
would be held to below 2 percent. If the threshold is exceeded, it triggers the
existing excess spending penalty.
Childhood
Immunizations
(This report was shared last week on Front Porch Forum.)
Before the final week of budget wrap-up, we had an intense
debate over elimination of the philosophical exemption from required
immunizations. I want to thank constituents from both sides who shared views on
removal of the “philosophical exemption” from mandatory childhood
immunizations. I also want to share my conclusion, which was that we had a
better option for achieving the vital need to increase immunization rates. I
presented a proposal for that option which was rejected by a razor-thin, 73-71
vote.
These are the comments I made in explaining my amendment on
the House floor:
I grew up with a father who was deeply committed to civil
rights. But he also taught us – and I did not know at the time that he was
quoting a Supreme Court justice – that “your right to swing your fist ends just
short of my nose.” We do not have the right to place others at risk of injury,
and it is the obligation of society to protect those who are vulnerable to
injury. It is clear from the medical evidence that if our levels of
immunization are not high enough, other children in our day care centers or
schools are placed at risk.
We also do know that throughout all of history, science has
been capable of errors in what is believed at a point in time. I have deep
sympathy for parents who are concerned about vaccines, despite current medical
knowledge, because of my own experience with a medical treatment which was
identified as being safe. After decades of research, the reports of serious
adverse effect were declared to be “nonsense,” and as being based on a fringe,
anti-medical minority view. I suffered severe and permanent side effects. In
our state legislature, before I became a representative myself, when I
testified about the need for state oversight, a medical expert testified that
my perception of an adverse effect was solely based upon my underlying illness
and an effort to seek attention. I continued my own research, and later met
with a researcher who was a leader in the country on the treatment, and who
told me about the emerging new evidence that now recognized that the effect I
experienced was a rare, but actual, adverse effect resulting from that
treatment. Patients today receive informed consent information about that
reality.
So we need to understand what we are asking of parents. We
are asking – we are mandating -- that they surrender the ability to choose what
they believe to be in the best interests for the wellbeing and safety of their
child – a decision that they otherwise have the right to make – in order to
meet the greater good of others in society. Taking away individual rights in
this way is something that we must do when necessary to protect others. In this
situation, the evidence is clear that we must increase our immunization rates
in this state. As a result, if this is the only way to achieve that, I support
our obligation to do so.
But if there is another way to achieve that goal – in fact,
to improve the likelihood of achieving that goal – without taking away the
rights of parents to decide upon the best interests of their own children –
then that is what we should be doing. This amendment is that other way. If this
approach will increase vaccination rates, as I believe it will, it will meet
the important goals of the underlying bill without interfering with that very
small group of parents who would choose a different health care approach. And I
believe it will be more effective in reaching that critical goal.
This amendment follows the evidence we heard in our
committee that if we increase the barriers to access an exemption, it will
reduce the rates of exemptions. Our own Commissioner of Health – and to be
clear and not distort his position, he remains explicit that he believes we
should eliminate the philosophical exemption – but he testified that the harder
it is to seek exemptions, the less they will be used.
We have the evidence of that from Oregon, where in a single
year, exemption requests dropped by 17 percent, based upon required use of an
online module that took time to complete, and despite grandfathering those with
existing exemptions. It offered an alternative of meeting with a doctor for
that purpose. It only requires the process a single time. My proposal requires
both the module and a consultation with a prescribing practitioner, repeated
annually. It requires that a person affirm under penalty of perjury that they
are following a health care practice – not just ignoring health care – that is
based upon religious, moral or ethical beliefs. It thus applies to both ethical
and religious beliefs.
The underlying amendment eliminates the philosophical
exemption but leaves the religious exemption untouched, with merely the
existing requirement of reading brief information and checking a box. We know
that many parents will simply check “religious belief” instead of
“philosophical objection.” Thus it is less likely to meet our common goal of
increasing immunization rates.
I firmly believe in and support the importance of increasing
those rates. I simply believe this is a better way to achieve it.
****
Please keep sending me
your thoughts and concerns – they are important to me. Contact me any time via
messages at home (485-6431) or by email: counterp@tds.net. You can read my past
updates on my blog site, www.representativeannedonahue.blogspot.com.
