MONTPELIER — Gov. James Douglas threw down the gauntlet in his final state-of-the-state address on Thursday, urging lawmakers to enact a series of initiatives he believes will advance economic development and reduce school spending.
Douglas, a Middlebury Republican, pulled no punches in an address that took just over 40 minutes to deliver and was interrupted 10 times by applause from a General Assembly heavily dominated by Democrats.
The governor spent the bulk of his speech urging lawmakers to hold the line on spending — particularly in the area of education — and to make Vermont more business-friendly, through the expansion of broadband Internet access and cell phone coverage.
Douglas warned that since the state is looking at a potential $150 million budget shortfall for fiscal year 2011, lawmakers will need to make some fundamental changes in the way state government delivers services.
“Our successes are threatened by massive budget shortfalls, unfunded liabilities and a broken system of education funding,” Douglas said.
“The trajectory of the Vermont economy for the next decade will be shaped by our decisions this year,” Douglas added. “If we are content to limp out of this recession, hobbled by flat job growth, we can choose to recycle old ideas and hope for a different outcome. But if we want to spring out of this recession — strong and nimble — we must have the heart to reform, the wisdom to act and the courage to stand against those who will say it cannot be done. Mere ‘recovery’ is not enough for Vermonters who have persevered through this long season of decline.”
Douglas pitched several ideas to help get the state’s fiscal affairs in order:
• Cuts and consolidations in the state’s judiciary. Douglas referred to recommendations recently advanced by the Vermont Commission on Judicial Operations. Those recommended that the Addison, Rutland and Bennington county probate courts be consolidated into a single, tri-county district presided over by one elected judge who would commute to courthouses within that region.
“The recommendations of the (commission) provide a blueprint for a stronger and more affordable system of justice,” Douglas said. “I know some ideas are controversial, some changes depart from long-held traditions, and the necessary rebalancing will affect certain districts and constituencies. But like all of our decisions this year, narrow interests must take a backseat to the broader public interest.”
• Streamline the manner by which human services are dispensed.
“To assure that Vermont’s safety net is sound even in the most challenging economic times, we must reform,” Douglas said. “Our redesigned system will be easy to navigate, with a single point of entry and flexible options, catering to individual needs.”
• Reduce Vermont’s tax burden. He specifically proposed reinstating a 40-percent exemption on capital gains and increasing the estate tax exemption from $2 million to $3.5 million. The Legislature made those switches last year during similar tough economic times.
“This action will send a clear signal to Vermonters and businesses that we are listening to their concerns and working to meet their needs,” Douglas said.
• Removing the current $10 million cap on the Vermont Employment Growth Incentive (VEGI) economic development program. The VEGI program awards tax incentives to new or existing companies that pledge to create new jobs in the Green Mountain State.
Tayt Brooks, commissioner of the Vermont Agency of Commerce and Community Development, said in a press briefing that there are three VEGI applications under review right now that would create a combined total of more than 800 new “clean and green, good-paying jobs.” He said the current $10 million cap would preclude the state from fully considering those applications.
“These tax proposals are a critical step in our efforts to restore employer confidence and send a message that Vermont is ready to compete for jobs,” Douglas said.
• Slightly reduce unemployment benefits while narrowing qualification requirements for recipients, in an effort to keep the state’s unemployment insurance trust fund solvent.
• The use of $9 million in federal stimulus money for job creation. He advocated that around $3.2 million of that sum be used to promote the expansion of broadband telecommunications infrastructure in rural areas of the state through a “Backroads Broadband” program “to spur local providers to build last-mile connections.” Also, Douglas is proposing that $1 million of the stimulus money be used to help Addison County businesses hurt by the sudden closing of the Champlain Bridge.
• Reducing public education costs by asking teachers to pay at least 20 percent of their health care premiums; increasing student-teacher ratios from the current 11-1 average to 13-1; filling only one of every two teacher retirements; merging schools with dwindling populations; streamlining school administration and programs; and revising the “income sensitivity” provisions of the state’s education funding law that currently allow two-thirds of Vermont households to get a break on their school taxes.
The state has already announced it will hike the base statewide education tax rate by 2 cents for fiscal year 2011, which will shift a greater proportion of school expenses onto the property tax.
“Our goal must be to reduce the need for exemptions over time with responsible school spending decisions and a robust tax base that allows for lower rates,” Douglas said. “My proposals for education reform go to the heart of runaway spending and, taken together, stop the projected two cent (statewide education property tax) increase, plus drop the rates by another penny.”
LEGISLATORS REACT
Local lawmakers gave mixed reviews to Douglas’s final state-of-the-state address. Some legislators said Douglas was on target with his cost-cutting initiatives, while others said the governor took too somber a tone and failed to acknowledge industries — like agriculture — that will need a lot of support and attention this year.
Rep. Willem Jewett, D-Ripton, said Douglas was right to focus on the state’s tough budget situation and potential $150 million revenue shortfall. But he said that other goals — in addition to financial ones — could have appeared on the governor’s agenda.
“We know we have a huge budget problem, $150 million, but when the gavel comes down in the spring, a balanced budget alone will not be a success,” Jewett said. “I’m, looking for things that provide some inspiration, some things we and Vermonters can be proud of. I’m concerned that as we do what’s necessary to balance the budget, if we get too focused on that, we’re going to miss some of the other stuff that I think Vermonters rightly expect from us.”
That other stuff, according to Jewett, should include additional healthcare reform, environmental protections and boosting the quality of public education.
Jewett said healthcare costs should be of equal concern as education costs, in terms of the impact on people’s wallets.
“Let’s spread the fiscal prudence around and not just talk about education (spending),” Jewett said.
Rep. David Sharpe, D-Bristol, gave kudos to Douglas for his stated desire to preserve “the Vermont way of life. And I recognize that his service has been long and true to the citizens of Vermont. Though we disagreed on most things, I think he was trying to do his best for the state.”
Sharpe took issue with several emphases of Douglas’s speech — including his assertions that Vermonters were losing local control when voting for school budgets because of the state’s current education funding law. Douglas alleged that Act 60 is not transparent and does not present a full a full picture of the local school budgets on which people are casting ballots on Town Meet Day.
But Sharpe contended that by advocating such things as increasing student-teacher ratios and slowing the hiring rate for teachers, Douglas was endorsing a policy of “Montpelier dictating to local school districts what they were going to do. That doesn’t sound to me like preserving local control.”
Sharpe said he shares Douglas’s support for “distance learning” opportunities for students, through video conferencing, the Internet and other means.
“It is imperative our department of education creates a distance learning model and provides resources that small communities and schools can use,” Sharpe said.
Rep. Steve Maier, D-Middlebury, said he appreciated Douglas’s acknowledgement of the strides the state has made in healthcare reform and how those ideas have been drawing national attention. He also credited Douglas’s 37 years of public service.
But Maier said he was disappointed to have not heard many new ideas on how the state could emerge from its economic malaise.
“It seemed like rehashing old ideas, or new visions of (old) ideas,” Maier said.
“I didn’t really come away from the speech with a positive sense of leadership and vision about what the state of the state is, or should be” Maier said. “It seemed to be more of a negative, or low-energy speech.”
Rep. Will Stevens, I-Shoreham, a member of the House Agriculture Committee, was among those disappointed to have not heard more about the plight of farmers from Douglas.
“We are in a total crisis, looking at a complete bloodbath … and it bugged me,” Stevens said of the omission of agriculture.
He said he agrees with Douglas’s call to hold down school budgets and property taxes.
“Whether we have the political spine to influence that in a way that respects local school boards’ ability to do their job and stand up to powerful union interests remains to be seen,” Stevens said.
EDUCATION REFORM EYED
Rep. Greg Clark, R-Vergennes, was particularly interested in Douglas’s references to education finance reform.
“What he said is that everything needs to be discussed,” said Clark, a teacher and a member of the House Education Committee. “There needs to be some reform. We can’t just continue operating the education bureaucracy the same way we’ve always done it.”
Clark said he believes the Legislature will be willing to consider all options in dealing with school funding problems. The notion of asking teachers to pay a minimum of 20 percent for their health care premiums has merit, according to Clark.
“I think it’s got to be discussed and it’s a fair proposal.
Sen. Harold Giard, D-Bridport, gave generally good marks to Douglas for his speech and his call to reduce school spending.
“I think education is ready for reform,” Giard said.
“I can’t disagree with much of what he said,” Giard said of the overall substance of his address.
Rep. Christopher Bray, D-New Haven, gave Douglas generally good marks.
“A lot of (his address) seemed to be oriented to better management of government, which I think is something we could always improve on,” Bray said. “If we want to continue to build our services to continue our way of supporting each other, the only way we are going to be able to do that is to run the business of government more efficiently.”
Like Stevens, his colleague on the House Agriculture Committee, Bray was disappointed to have not heard more about agriculture. He noted Vermont lost 52 farms — one per week — last year.
Lincoln Democrat Rep. Mike Fisher said he wished the governor had struck a less “gloomy” tone.
“I found it fairly down,” Fisher said of the tone of the speech.
FAIRNESS IN TAXATION
Fisher took issue with some of Douglas’s property tax break strategies, noting his proposals to repeal the capital gains and estate tax changes of last year will only add to Vermonters’ property tax woes.
“He wants to decrease taxes on the wealthiest Vermonters … and increase corporate welfare,” Fisher said. “At the same time, he said, ‘These are tough times, we need to share the pain.’ It seems to be he doesn’t want us to share the pain.”
Rep. Betty Nuovo, D-Middlebury, echoed Fisher’s concern that Douglas’s call for rolling back the capital gains and estate tax hikes will only create a bigger budget problem next year.
“That’s means we will have to come up with another $28 million (in cuts elsewhere),” Nuovo said of proposed tax rollback.
Rep. Diane Lanpher, D-Vergennes, said she was pleased to hear Douglas talk about economic development, but was disappointed the governor did not mention the rapid deterioration of the state’s roads and bridges and the impact that fixing those can have on job creation.
“This is something that is happening in his own backyard,” Lanpher said, noting the closing of the Champlain Bridge in Douglas’s home county.
Douglas will lay out his budget priorities more specifically in his budget address on Jan. 19. He believes he laid a solid foundation for that speech during his state-of-the-state.
“I felt it was important to lay out the challenges we face and some opportunities to address them,” Douglas told the Addison Independent. “This is the toughest budget year I have confronted. The magnitude of this shortfall is greater than we have ever seen. It is going to require some creativity and some bold decisions that are outside our comfort zone. We can’t put the problem off to another day.”