ANGELO LYNN

Gov. Phil Scott’s expected veto of the budget last week, and his more recent veto of a legislative pay raise, struck their mark with the expected outrage by the Democratic-dominated Legislature. But our bet is that many Vermonters may be shaking their heads in agreement with the governor, if not outright approval.

Here’s the skinny: The budget presents a spending proposal that is 12.1% higher than the year before. That’s at least double inflation, and almost everyone agrees that such increases can’t be maintained, particularly since the federal pipeline that has been sending extra federal aid is not expected to continue. All year, Gov. Scott has been preaching that it’s time to start curtailing spending before the state runs up huge deficits.

Tom Pelham, the former finance commissioner under Gov. Howard Dean and Tax Commissioner under Gov. James Douglas and who served on the Vermont House Appropriations Committee as an Independent, makes this point well in a recent essay. In that column, he compares the current budget quandary with the 1990-91 recession that led to Vermont’s then fiscal crisis. Pelham recalled that the Legislature in 1986 had authorized $480.3 million in spending, but by 1990 had increased it (during a time of statewide growth) to $715.8 million — an average annual increase of 10.5%, far exceeding the 4.1% growth of Vermont’s economy.

Then the 1990-91 recession hit and Vermont’s economy tanked. Unemployment went from an all-time low of 3% in 1988 to 7.7% in the spring of 1991 and stayed over 7% for a year. Vermont lost 15,000 jobs. Declining state revenues led to a massive budget deficit that forced Govs. Richard Snelling and Dean to raise taxes and curb spending for the next four years before the debt was paid off.

The state’s bond rating was cut, Pelham continued, and didn’t recover until 1998.

The pandemic has brought on similar changes in Vermont’s spending with the federal government doling out over $10 billion in total aid. One of the consequences of that aid is that Vermont’s budget has seen average spending increases of 9.49% over the past four years, growing from $1.84 billion in FY 2018 to $2.64 billion in FY2022, and the FY 2024 budget of $2.71 billion calls for a 12.1% increase of General Fund and Transportation spending over the $2.42 billion budget in FY 2023.

As Vermont’s spending has skyrocketed, the Federal Reserve is actively working to slow down the economy with interest rate increases, purposefully engineering (if all goes well) a slight recession to cool the economy.

Pelham is not suggesting Vermont’s economy will tank like it did in 1990-91, rather that it doesn’t take much of a dip in a small economy to make a big difference and cause years of fiscal pain down the road. Rather, he’s suggesting that a little austerity now might prevent years of suffering as the state witnessed in the early 1990s.

To that end, Gov. Scott’s budget veto sends a timely warning to the Legislature, whose best intentions are to extend too much help to too many.

It wouldn’t hurt Vermont to have this veto sustained and have the Legislature trim a few of the budget’s excesses.

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Among those excesses is S.37, which doubles the salaries of legislators by 2027 and, more egregiously, extends health care coverage for the legislator and family for the entire year. Lawmakers currently receive $14,616 plus allowances for food and lodging during the 18-week session, which runs from January to mid-May. Under the new legislation, rank-and-file salaries would jump to $29,766 annually by 2027, starting in 2025. (That’s $1,210 per week versus the current $812.) The law also extends the same health care benefits that full-time state employees receive — a benefit that yields $9,946 for a single person and $27,300 for a family. Lawmakers, like other state employees, would pay 20% of the insurance cost.

The total cost of the added wages is just under $5 million, which isn’t a budget buster and there are some valid reasons for it, but we agree with the governor that locking in higher salaries as the state prepares for more austere budgets ahead doesn’t make good sense.

Plus, there are other options, such as keeping the same salaries as they currently have for a 90-day session, which ups the weekly wage but discourages what very few Vermonters want — a full-time Legislature. Indeed, this bill didn’t get the media, or public, attention it deserves; a redo next session would be the best outcome of the governor’s veto.

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We take a similarly tough approach to ending the federally supported program to house those unable to find housing in area motels.

The Legislature spent most of four months this session knowing the funding was going to run out and chose to do nothing about it. They worked on housing issues, certainly, but assumed (as did the governor) that the state would not step in to fund a temporary federal program that was pandemic related. It was only after public outcry that Democratic leaders suddenly were accusing the governor of being heartless by not continuing the program and advocating for more funding to continue the program — this time on the backs of Vermont taxpayers.

There was a reason the Legislature didn’t act sooner: it was never a program the state funded before, the state doesn’t have firm data on how many of those currently housed in motels (a bit over 2,000) will be homeless or will be able to find housing as they did prior to the program, and the budget is already over-extended. That hasn’t changed.

A rational way forward is to let the federal program expire, create emergency funding for those families most in need and who have prospects for long-term employment, and get a better grasp of the numbers of homeless that deserve the state’s help. For those who are just freeloading off the state (hey, that’s a reality and as long as the state offers to pay for a free motel room, there are people who won’t seek other solutions), let them know the free motel stay is over. An emergency session can be held in September to appropriate new money if needed, but at least by then the state will have a more realistic assessment of how many folks need help and how best to get that to them.

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This is not to say the Legislature has increased this year’s budget without reason, nor without good effect. 

Expanding the childcare benefits is crucial to the state’s long-term economy as it restores affordability for those young Vermonters hoping to be able to raise a family here. Similarly, many of the measures to support more housing, provide reasonable health care and a good education, and implement measures to protect the environment, are the necessary building blocks of any state that expects to thrive. Gov. Scott has been slow to recognize that the state needs reasonable investments in such assets (including tax increases to add the childcare benefits) just as much as it needs a frugal approach to spending.

Both are needed. That said, the practical reality is that any revision to this year’s budget would necessarily be modest to gain Democratic support. The real benefit would be a possible change in the legislative mindset for next year — perhaps even a move to set budgets over the next few years not to exceed the state’s rate of economic growth. That, in itself, would be as monumental as it is necessary.

Angelo Lynn