Journal Q & A with Gov. Peter Shumlin

JOURNAL: What was your biggest disappointment with the session? Was there something that didn't happen that you had hoped would take place or some piece of legislation that might have gotten away or something that's now a top priority for next year?

SHUMLIN: Not really. I got to say this legislative session exceeded my wildest dreams. I put forth an extraordinarily ambitious agenda in January. I never thought that we'd be where we are right now and I've been in the statehouse, first [as a] house member and then [as] president of the senate for years and years, I have never seen them work as hard, get more results, and get home a week early, which saves taxpayers hundreds of thousands of dollars in a year that we need to save every penny that we can. So, I've to got to say my hat goes off to the leadership and all the legislators that worked so hard. We went in January and to start with we had a $176 million dollar budget problem. I said we were going to solve that the old fashioned way; by making tough choices not by raising taxes, broad based taxes. They did it. They delivered. They made the tough choices without raising broad based taxes and you know you won't hear a governor say this very often, but they actually improved our budget. Now in fairness to us, they had some information in April that we didn't have in January, which was a slightly better economic outlook. But the result was that they made exactly the same choices that I would have made. They restored some of the money to mental health that we've cut. They restored some money to some of the most vulnerable Vermonters that we didn't want to cut and they made the cuts that should have been made. So, mission accomplished in terms of solving a $176 million shortfall without raising taxes on hardworking Vermonters. The good news is I would be very surprised if we're back again next year having to solve $150, $170 million dollar budget problem. I think we really ... passed a sustainable budget. So, that's great news.

JOURNAL: With Vermont Yankee getting older what are some of the other resources you are either examining or pursuing?

SHUMLIN: That's a great question. We actually passed an energy bill in this session that expands our net metering. There's a CAP on net metering, which we helped to remove, which means that when you invest in solar or in wind or in biomass you can ship it back into the grid for the excess you don't use and get a fair price for that power. That was a good development. The second is, as an example, we're taking $7 million, Senator Bob Hartwell did a lot of work on this, but we're taking $7 million bucks from the capital bill and partnering with the city of Montpelier and moving to a biomass plant. Currently, the state uses primarily an oil fired system to heat state buildings in Montpelier. We're going to convert it to biomass. We're partnering with Montpelier so that we'll truck that heat into the buildings, homes and businesses in downtown Montpelier. So, in effect, it's an example of how state and local can partner to do renewable energy projects for an entire town, or city, in this case. But more importantly you know we're moving toward renewables as fast as we know how at the same time as we're cutting contracts, very competitive contracts, with Hydro Quebec, with other producers, that are better prices than we ever thought we would have gotten just five years ago. And we're trying to expand gas along the western side of the state here, which is transportation channels. So, big things are happening. Wind, solar, biomass, small hydro, geothermal, pellets. In this session we changed the rules for Efficiency Vermont because of a conversation we had right here in Manchester after I met with you last time. When we called up Efficiency Vermont and said 'hey, I'm paying four dollars a gallon for oil and I want to convert my system to pellets all grown in Vermont, lumber harvested in Vermont, furnance made in Barre, installers here and pellets produced here' Efficiency Vermont answers 'we can't do that. We don't have the authority to do that.' So we have changed that so that now they can start not only advising, but helping moving people from oil to pellets. It's good for the environment and it costs half of a gallon of oil right now to use Vermont burned pellets. So good things are happening. We just need to do more of it faster.

JOURNAL: With the cuts that have had to been made to education with the budget fallout this past year, how are you looking forward. Are you going to avoid schools having to cut extra curricular activities including sports as they try and make these tight budgets?

SHUMLIN: Well you know I hope that we've changed the conversation since January over the last eight years where there was a tendency for Montpelier to pit the greatest recession in American history and the tremendous economic pain we're all feeling as a result of that on our school children. They just seemed to take the blame. And the word from Montpelier is all of our problems are that we're spending too much on schools and school children are our problem. And you know I didn't quite see it that way. I thought that the problem was that we had a bunch of folks on Wall Street, AIG, Lehman Brothers, and the rest who put together some extraordinarily cockamamy schemes that hurt the people on Main Street and we had a huge recession because of that and lending practices that we are responsible. So, I said 'hey, let's end the rhetoric. No more picking on the school children, going after the teachers, school board members who work hard, superintendents and the rest. And instead lets work in a partership with them to solve problems. So, as you know, school spending is decided locally at Town Meeting. But what we have done is to I think shift the conversation from attacking them to partnering with them to make our schools better and stronger and to create kids who are ready to do the jobs of the 21st Century. I personally think the result was we saw more school boards pass last year than any time in recent memory on town meeting day and we saw the school boards reduce spending across the state by an average of negative one percent. Now that's a good thing for tax payers. The question is how do you make sure we don't cut so deeply that you do in important things like sports, art, music, dance. I think the biggest thing that's driving that boat is No Child Left Behind, not budgets. No Child Left Behind forces teachers to teach to tests; to teach to what I call the lowest common denominator on a multiple choice test. And I think that's where we should do the surgery; on getting rid of No Child Left Behind and letting teachers go back to emphasizing things that are important in kids' growth, which includes sports.

JOURNAL: I wanted to ask you a question about the healthcare bill. That's one of the biggest things that happened in the Legislature this year. But have to confess I was a little surprised by your position on the cigarette tax. Senator Campbell, now the Senate Pro Tem, wanted I believe a $1 a pack increase in the cigarette tax. I understand the argument about how it makes retailers, particularly on the eastern side of the state uncompetitive with retailers in New Hampshire, but isn't it a little inconsistent to be arguing for a healthcare bill that attempts to promote wellness while at the same time fighting an increase of $1 a pack and settling I think at .38 cents a pack is what wound up happening? I mean doesn't that seem like a little at odds?

SHUMLIN: You know in the big picture, we all want to get rid of cigarettes. We know that cigarette smoke kills you, number one. Number two, it costs all the rest of us a ton of money. The question is, are you really solving a problem or are you confusing public policy about cigarettes with tax policy? And I would argue that you're confusing the two and let me tell you why. Listen, as far as I'm concerned there is no end to the cigarette, to what the federal cigarette tax should be. We should get folks off smokes. However, we're not an island and one of the reasons the House and the Senate didn't have to make the difficult budget choices more difficult was because we had an additional $5 million dollars come in, in this year, from cigarette smokers who came to Vermont to buy cigarettes They call it $5 million dollars of unanticipated revenue in government speak. And it came in because, New Yorkers, primarily, were crossing the border of Vermont because there's a $2 a pack differential between New York and Vermont right now and I think if you cut that to $1 you lose the $5 million bucks. You don't pick up the money that they claim they were going to get, you lose it because they're going to stop importing sales to Vermont. So, the question is if you raise it a buck do you stop smoking or do you keep New Yorkers buying their cigarettes in New York instead of Vermont. The answer is, you keep New Yorkers buying cigarettes in New York instead of Vermont. When they cross the border, you go ask your merchants right along here, they go and they buy four or five cartons of cigarettes and shove them in the freezer and while they're here they pick up a number of other things, they gas up the car and get back to New York. So, let's talk about what's real here. The real conversation is do you want to sell New Yorkers cigarettes. I do. They're going to buy them anyway.

JOURNAL: Well, yeah maybe, but there's also some study to suggest that a .38 cent a pack increase may seem large, but it's not large enough to really deter smoking. And doesn't it seem logical that in the long run the number of costs that are imposed on the health system through smoking related illnesses far [exceeds] $5 million dollars a year, I would think?

SHUMLIN: Sure. And if you could really raise it a buck and solve the problem I'd raise it a buck. If you could raise it three bucks and solve the problem I'd raise it three bucks. But you don't. In a little narrow state of Vermont if you raise it a buck you accomplish one thing, you lose the $5 million bucks that we picked up this year that we didn't think we were going to get because you're no longer competitive with your neighbors. You're not lower than your neighbors, your higher and if you look at cigarette sales that's the way it's always worked in Vermont. When we raise it above our neighbors they do not come to buy cigarettes here. When you're lower, they do. So, the question is, do you want to raise revenue or do you want to stop smoking? If we could stop smoking by raising the cigarette tax I would go for it. The fact of the matter is you just buy them somewhere else. People don't stop smoking because of the tax on cigarettes. They stop smoking because for lots of other reasons they decide to quit.

JOURNAL: Okay, we just want to go back to the healthcare bill [for] a second. [Because] the healthcare bill has now been passed in the state how do you, I guess, plan on working with the federal government to work around, or with, the federal healthcare bill because I believe theirs is set to kick in before the state is?

SHUMLIN: Right. Right. Actually our bill will kick in intentionally in 2014 when their bill kicks in, but that's a really good question. Much of our healthcare bill, much of it sets up a board that's going to help us develop a single payer system that contains cost. The other half of the bill sets up a federal exchange that many governors are refusing to set up that's going to give us potentially hundreds of millions of dollars to help build the system that's going to save us money. So, we see the federal bill as a bridge towards our system. Now what do I mean? Be specific. Specifically, there's three ways we can save money in the system and maintain or improve care. The first is the eight to nine cents that we spend in the system shifting money around, which is crazy. We're trying to design the technology so that you can pay your bill when you come out of the providers office. Whatever the share of the copay is, you settle up there. That saves you eight to nine cents. That's huge money. Dr. Hsiao estimates that it's $500 million dollars in the first year. The second piece is we want that same card to be a pipeline to your medical records That federal money will help us get the pipeline to the technology we need to build a uniform system for medical records. Then the third piece is, the real money, is going to come from moving from a fee for service system where they bill you for every procedure they do to reimbursing providers for keeping you healthy and that means getting off cigarettes. We all have an interest in diet, exercise, all the preventative care, giving incentives for check ups instead of going to the emergency room when you're in crisis. That is where the real money is going to come from and the federal bill shares our goal in outcomes based medicine and using our healthcare dollars more wisely. So, it's a real help to us. It's a partnership with the federal government, no question about it."

JOURNAL: There was an interesting article in yesterday's Rutland Herald about the whole broadband by 2013, which is something I know that's very important to you governor. But it suggested that VTel and Sovernet were kind of lagging behind in terms of spending money, some of the federal IRA money that [has] come our way. Are you worried that we're not going to make the 2013 deadline?

SHUMLIN: Yes. And I'm not worried that we're not going to make it. We're going to make it. We have to make it and I'm confident that we can. But the reason, if you read between the lines of the story, that they're having trouble spending the money is that you can't get through the permit process. If you read what really got in the story it said that there were regulatory issues that precluded them from starting to build. So that's where the bill that we just passed is so critically necessary. It basically provides a streamlined process where they can work directly with us to get the transmission system in place that's going to help us get service. So, I think this piece of legislation is critical to getting that problem solved."

JOURNAL: What did you think of the Internet Sales Tax bill and how it ended up?

SHUMLIN: I felt better about where it ended up than where it started. I had real concerns, here's the thing, who is against Internet sales tax? Certainly not me. I don't think anyone in their right minds is against it. You got folks right here in downtown Manchester struggling to keep their doors open, paying rent and or owning buildings, having tremendous infrastructure costs where with a push of a button on the Internet you can have that delivered UPS or Federal Express. The challenge we have is that and the rest of them are bullies and what they say to little states like Vermont is 'you pass that bill,' they've done this to other states including big ones like Texas, 'and we will basically not do relationships, have business relationships with our partners, your partners in Vermont that use us as a resource for making sales.' So, we came up with a provision instead that says the minute 15 other states have passed this bill, Vermont joins them. So, that puts pressure on other states to do it. We've got three or four that have so far. When it gets to 15 it's enough of a critical mass so I bet Amazon can't say 'hey 15 states we're not doing business with you anymore' and we win the war without killing small businesses that are struggling to do Internet sales in Vermont right now. So, that's a good compromise I think."

JOURNAL: Here in Manchester we have a lot of vacant store fronts compared to five, ten years ago. I keep on hearing all kinds of numbers, 30 or 40 storefronts that are no longer in business. And one of the factors that someone I'm sure you know well, Tom Pelham, the former tax commissioner, pointed out to me, at least in his opinion, was that it was because of the commercial property tax rate. That it was throttling downtowns and basically stiffling a lot of businesses. Do you share that view that the nonresidential property tax is one of the villians in the piece there or is it other factors?

SHUMLIN: Well, full disclosure, I am the owner of commercial property in Vermont. I have a real estate company that does commercial property on the other side of the ridge here in Brattleboro, Putney and that area. So, I might not be as objective as some. Having said that, it is a question that I think bears more scrutiny. There's no question that nonresidential property taxes have risen. Now, so have residential property taxes as we all know. So, you know really we have a property tax problem and I'm not sure if you ran, Tom's evidence suggests that the nonresidential rate has grown more quickly than the residential rate. The only question that I ask is, if you look at it historically my judgement is that the nonresidential rate had some room to grow and the residential rate had been growing exponentially for years and the nonresidential rate had not. So, the question is did we make up for a disparity between the two property rates that was fair or did the Act 68, which Governor Douglas passed under Tom Pelham, I might add who was working for him, or did we create a problem? And I just don't know the answer to that. All property taxes are high in Vermont and the question is are we being unfair to one group over another. I want to have a very smart commission look at that question. But it's worth exploring. I just don't have the answers."


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