The spending and revenue bills have passed from the House to the Senate. Spending growth this year was primarily due to unexpected increases in the costs of Medicaid. It is not clear whether those costs will stabilize, which is disturbing in terms of planning for future budgets. To balance this year's budget it was necessary to raise taxes and fees by tens of millions of dollars, on top of the natural increase in tax revenue from the growth of economic activity. These "revenue enhancements" included another increase in the employer's health care assessment, which can hit small businesses particularly hard, which is unfortunate.
For several years now the state has had to increase taxes and fees to cover the growth in costs, at a time when the economy is growing. If the economy slips into a recession – and sooner or later it will – tax revenues will decline with the decline in income and purchases, but state spending likely will not. I do not think it probable that the Federal government will be able to support state budgets again as occurred during the last recession. So what is the plan in that case? I am not aware of one, other than perhaps crossing our fingers for luck.
In addition to the absence of comprehensive reform of benefits programs that drive state spending growth, there has been no fundamental tax reform. The recommendations of the Blue Ribbon Tax Structure Commission have not been followed. Many tax exemptions, deductions, credits, and subsidies are really spending programs that do not receive the scrutiny that budget lines get. I voted against the budget and revenue bills.
There was one particularly egregious aspect of the budget that illustrates poor judgement on the part of House Leadership. For several years we have struggled with how to either repair or replace the Vermont Health Connect (VHC) software systems that many Vermonters use to obtain health insurance. Although a lot progress has been made, significant dysfunctionality remains. Back in February an independent information technology expert who has been monitoring VHC for the Federal government gave the Legislature some advice. He said that we should not spend any more money trying to fix the VHC system until we got a thorough independent evaluation of the situation. We need to know if we can put our existing software together in a more effective way, following the example of Hawaii, which has used the same basic components, or whether we have to switch to some other system. House leadership says that they support doing this study, but they did not fund it in the Budget, which seems like giving lip service.
Governor Shumlin's Administration doesn't even think we need to do the study. At least they are consistent: they have pretty much ignored a lot of expert advice along the way with VHC, and they are still ignoring it. Perhaps they are just running out the clock until the next Administration comes in. Perhaps they are just crossing their fingers and hoping that the system gets better on its own.
If you think that it is important to either repair or replace the Vermont Health Connect website, please contact Lawrence Miller (who works on health reform) at 802.989.0569 or Lawrence.Miller@vermont.gov and Secretary of Administration Justin Johnson at 802-828-3322 or Justin.Johnson@vermont.gov. Let them know that it is a disservice to Vermonters not to obtain independent expert advice on this issue. It is deeply irresponsible to leave the problem to the next Governor without having guidance for the solution.
Transportation Spending and Funding.
The spending for Transportation is voted on in a separate bill. This contains all the spending for state roads and bridges and all the programs that support town projects. There was an increase in some of the fees connected to transportation to finance some of the increase. These fee increases seem tolerable as many had not been raised in several years as costs increased, and I know that this revenue goes directly to the transportation projects that all of us use every day. I voted for both the Transportation Bill and the Transportation Fee Bill.
Education Property Taxes.
According to the bill passed by the House, the base Residential property tax rate will go up slightly: this is the rate on Vermont residences, and it will vary with local school spending. The Nonresident property tax rate will go down slightly. This covers all commercial property and houses not serving as primary residences for Vermonters. It is the same across the state. Because of the education spending penalty thresholds in place this year from Act 46 the total increase in education spending has been moderate, but both the school districts and the state have used accumulated reserves to fund some of the spending. Now that those local and state reserves are used up, what will happen next year? Shall we cross our fingers, hoping that there will be no big increase in property taxes?
There were a number of policy changes within this Education bill in addition to setting the tax rates. I was even more concerned with what was NOT in it: no easing of the rules for Act 46 mergers and no requirement that the state take full responsibility for the costs it has put into the Education Fund, which means that property taxes continue to be higher than they otherwise would be. I will return to these issues in a future column.
Cynthia Browning is a representative to the state legislature from the district which includes Manchester, Arlington, Sunderland and Sandgate.