House Speaker Shap Smith and Gov. Peter Shumlin are as politically attuned to each other’s positions as any member of the same party could hope for. And in the governor’s first term, the two worked well together to balance budgets in tough times and make significant progress on steps toward health care reform, pro-business incentives and education.
Why, then, is there such a rift over balancing this year’s budget? In particular over the Earned Income Tax Credit program, and the House’s insistence to raise broad-based taxes on the rich?
A fellow editor and I spent two-and-a-half hours this past Monday talking with each leader in their respective offices trying to understand aspects of that conundrum. No clear-cut answers are apparent, of course, but here’s an observation: The governor is looking at the big picture and moving pieces of the puzzle around to make it all work; the House is immersed in the details, making sure each piece of the puzzle gets a fair hearing and the people affected are not put in jeopardy.
In this analogy, consider the puzzle as working components of the government with each piece reprepresenting departments and agencies, programs and sources of funding that affect individual Vermonters. It’s fair game to recreate pieces of the puzzle to craft a different portrait of the state. That happens more often than you might think: civil unions, gay marriage, renewable energy initiatives, education governance and school performance, the new face of welfare, farm to plate initiatives, clean water initiatives and health care reform, to name a few.
The governor sees his task as creating a vision in which the pieces of the puzzle create a healthy and vibrant state — an enterprise that functions well and within its means. Because things change and progress is mandatory to keep pace, it is essential that the vision — the picture the puzzle presents — changes to keep up with the times.
The House, in contrast, sees its role as being sure the individual pieces are made whole and are not changed in a way that disenfranchises those who may have benefitted from those services. The House is joined in that task by hundreds of nonprofits, lobbying groups and constituencies who are hell-bent to protect their turf.
The different perspectives between the governor’s office and the House are apparent in rifts such as the current spat over how to balance the budget: The House wants to add a slew of additional broad-based taxes, while the governor’s budget seeks to reallocate existing spending to make government work better while not increasing broad-based taxes.
It’s easy to understand how each side develops its particular perspective by observing their respective revolving doors.
At the Legislature, concerned constituents come to committee hearings to testify how some new proposed change will affect them. Lobbying groups hire experts to research nuances in how the legislation will have unanticipated consequences and testify why certain changes in the wording of a bill would be more beneficial. Those with the time make the trips to Montpelier; others try to catch their legislators in their hometowns. By and large, however, it’s a selective group that catches the legislators’ ears: either those with the time to complain or those who are paid to.
The governor, on the other hand, travels the state. He attends Rotary and service club meetings, Chamber of Commerce gatherings, business openings, industry get-togethers. He talks with agency and department heads and discusses ways to be more productive or do things better; he’s constantly seeking change within state operations to make improvements. The focus is almost always on the big picture — and the governor accepts that in making improvements, some changes might initially affect some people in a negative way. That happens. The bigger question is whether the state is moving in a better direction.
Consider:
• The Earned Income Tax Credit flap: The governor’s proposal would shift $17 million, out of the $24 million the state provides the federal program, to childcare subsidies. The governor believes that shift would create better benefits to the same low-income recipients. He’s not cutting the amount the state gives to the low-income population, rather he’s giving more to a specific sub-set within that group. He also notes that the state’s Reach Up program (welfare) is among the most generous in the nation, and that the spending could be better structured to ensure the money is used to the greatest benefit. “It is not the best welfare program you could create,” he says. “It could be restructured to be more effective.”
The House’s response is: These are good programs that have a proven track record of helping the low-income population. About 75 percent of those in Reach Up are able to get back into the workforce within three years. When you shift $17 million out of that program, the success will be diminished. Nor is providing childcare the only problem facing Reach Up recipients. A lack of transportation is the number one problem in rural Vermont; and we already have other programs devoted to childcare subsidies. Let’s hold this program harmless.
Both are reasonable positions. The question the House needs to ask is whether change to the Reach Up program could make it even better; and whether the current system is sustainable. In the past eight years, the state’s subsidy has increased 48 percent — more than double inflation.
• The House proposal to increase five different broad-based taxes to balance the budget: Necessary, Smith says, because the governor’s budget raises $30 million in new revenue but balances the budget on optimistic break-open ticket revenue, raiding all reserves and optimistic revenue forecasts. You can’t gamble on getting revenues from existing taxes in the hopes the economy will be stronger next year, Smith says. Revenue needs to be generated by those who can best afford it. In the end, he says, “we’ll probably have to settle on less new spending.”
The governor takes the approach that the state already spends enough and can live within the amount it currently raises, and that adding new taxes will do more harm to the general fund coffers than good. He also takes the position that the state cannot keep going back to the top 1 percent to increase their taxes, noting that the top 1,217 tax filers pay 20 percent of the state’s income tax receipts. Lose just a handful of those taxpayers and you lose millions of dollars; or, pick up a few more of those high-income taxpayers and the state will gain millions. The latter option, the governor says, is what the state ought to be doing to improve its financial picture. The governor likes to say he represents the Main Street perspective, while the House reflects the view under the Dome. “They need to get outside the Dome more,” he says, “and get a grasp of the bigger picture.”
“There are different ways to approach these problems,” Smith counters. “The governor’s vision isn’t the only one that makes sense.”
Tit-for-tat? Not really. Rather, we have two very different perspectives based on their inherent roles. The year-to-year challenge is putting together a continually evolving puzzle without changing the pieces too much. It’s the yin and yang of government.