State budget features $68M gap

VERGENNES — State lawmakers and Gov. Peter Shumlin are trying to resolve a $68 million revenue shortfall in the fiscal year 2017 general fund budget. While state politicians agree on the magnitude of the financial problem, it’s clear that there is far from consensus on how to mop up the red ink.

Rep. Diane Lanpher, D-Vergennes, provided an update on the fiscal year 2017 budget at Monday’s legislative breakfast in Vergennes. Lanpher is a member of the House Appropriations Committee, which considers funding requests for state agencies and programs.

While Lanpher and her colleagues would like to see balanced books, she took some solace in the fact that the current revenue gap is narrower than in recent budget years. And she is optimistic that gap will be closed without a lot of pain to state programs.

Lanpher noted that last year lawmakers had to reconcile a $113 million shortfall. Though the financial conundrum is less this year, the main culprit is a familiar one: Medicaid program expenses. Lanpher said 75 percent of the $68 million deficit is related to Medicaid.

Lanpher is pleased Shumlin hasn’t recommended raising any broad-based taxes and hasn’t suggested using any one-time funds to shore up the 2017 spending plan. He has instead proposed to trim the spending plan by $38 million and raise $30 million in additional revenue through doubling Vermont’s mutual fund registration fee from the current $600 to $1,200; and imposing a provider tax on dentists and physicians, according to Lanpher. The provider tax proposal has generated far more controversy than the mutual fund fee hike, lawmakers acknowledged.

“I am not sure if there is enough support for (the provider tax), but if we don’t do that, we will have to do something else,” Lanpher said.

Rep. Fred Baser, a member of the House Commerce and Economic Development Committee, said he and his colleagues supported the proposed increase in the mutual fund registration fee.

“We feel $1,200 would put us in line with other states — and actually is still a bargain — and it will also not have an impact on Vermonters in the same fashion that raising fees on doctors and other kinds of fees and taxes would have,” Baser said. “This seemed like a pretty reasonable one to do.”

But lawmakers at are odds, according to Lanpher, on Shumlin’s proposal to save $5 million by expediting the current legal process through which the state pursues involuntary treatment for mental health patients.

“It is not being received well,” Lanpher said of the proposal. “The Legislature wrestled with this issue two years ago… ”

The next few months will see legislators in both chambers interview stakeholders and Shumlin administration officials as they sort out fiscal year 2017 budget priorities.

Meanwhile, Sen. Chris Bray, D-New Haven, said the size of the budget revenue shortfall should be placed into context. While $68 million is a large sum of money, he said it represents roughly 1 percent of the state’s total $5.5 billion spending plan.

“We always have to close that gap, but I just want to remind us all how close we are to meeting (the goal),” he said. “We are already 99 percent on the mark. There is always going to be some gap.”

Rep. Fred Baser, D-Bristol, disputed Bray’s contextual representation of the revenue shortfall. He said the $68 million should be reflected as a percentage of the state’s $1.53 billion general fund budget, and not the overall spending plan that includes the education fund, federal aid and other items.

“The general fund is the portion of the budget where taxes, primarily, go into,” Baser said. “Solving the problem relates to a 1.5 billion budget, not necessarily the larger number.”

Lawmakers on Monday collectively lamented what they agreed is a discouraging trend in state budgeting: Raising program fees.

 “Fees are not supposed to be profit centers,” Bray said, but rather should be looked upon as money needed to cover the true expenses of the program(s) they are intended to subsidize.

Rep. Harvey Smith, R-New Haven, is a veteran member of the House Agriculture Committee. He noted several proposed increases in farm-related services.

“The terminology that was used in our committee by the administration when they came in and presented a fees bill to us was, ‘With the substantial downward pressure on the budget, we have to raise fees in order to cover our costs,’” Smith said. “We actually are using that fees bill as a tax bill. I’m very concerned about that.”

Smith noted that passage of last year’s Clean Water Bill required seven new hires with the Vermont Agency of Agriculture. Now the agency is seeking fee increases to help bankroll those new positions, some of which were established to further regulate the farming industry, Smith said.

Rep. Dave Sharpe, D-Bristol, was a longtime member of the House Ways & Means Committee, and thus spent a lot of time studying the state’s tax laws. He said he shares Smith’s opposition to using fee increases as a form of taxation.

“We needlessly fund government with fees, instead of taxes,” said Sharpe, now chairman of the House Education Committee. “But we live in an incredibly anti-tax environment, and there has been a reluctance over the years to pay for government services through general taxes, so the trend in the last administration and this one has been to move toward a fee-based way of funding government, which I disagree with.”

Addison resident Paul Boivin warned that increasing fees, combined with high property taxes, could close farms and drive other businesses out of state. He urged lawmakers to refrain from fee hikes to solve short-term budget woes.

“Let’s start thinking 15 years down the line, not just covering the budget shortage this year,” Boivin said.

Reporter John Flowers is at [email protected].

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