Vermont House Speaker Shap Smith, D-Morrisville, held a press conference in his office Wednesday to explain the House budget bill, H.789, to reporters.
He commended members of the House Appropriations Committee, and singled out Rep. Martha Heath, D-Westford, chair of the committee, and Rep. Mark Larson, D-Burlington, vice chair, for their work to close a $155 million budget gap for fiscal year 2011.
“You can’t overestimate the challenge we faced in January,” Smith said. “The fact we have put together a budget that addresses the needs of Vermonters, and fills the $155 million hole without raising broad-based taxes, is a tribute to their hard work and diligence and creativity.”
Smith said the Legislature responded quickly to the collapsing economy when the Great Recession started three years ago. Revenue downgrades have had a significant impact on the state’s ability to maintain levels of spending for services, he said, and lawmakers tried to address the budget challenges as quickly as possible, “understanding that if we did, we would be able to get in front of problems.”
“Throughout this time, we have tried to be diligent in facing the shortfalls the state faces on an almost just-in-time basis,” Smith said.
The recession caused the state’s decline in revenues and a dramatic increase in demand for services, which, like a “cruel joke,” he said, widened the yawning gap between the state’s income and expenditures.
As Larson put it, “It really is a confirmation that by taking a multi-year approach, and not panicking on some of the estimates we saw originally, that we really demonstrated we can maintain our commitment to one another and be fiscally responsible at the same time.”
On Monday, Jim Reardon, the Douglas administration’s budget writer, was cautiously optimistic about the legislation, but he stopped short of endorsing the proposal.
“Nobody from the administration has called me to say that they support the budget,” Smith said. “We’ve tried to keep them informed, and we’ve met that obligation. The marker that this is a good budget is the 11-0 (bipartisan committee) vote.”
The budget bill restores cuts suggested by the Douglas administration for children with special needs, the elderly and the very poor. Heath said some of the proposals would have saved money potentially in the short run, but would become costly over time.
“If you don’t give the services people need to live independently,” Heat said, “then they will have to enter nursing homes, and that costs the state a whole lot more than those services would cost.”
When a reporter asked whether the $15 million decline in tax receipts for January and February would undermine the budget proposal, Smith said: “It’s too early to make any predictions about what’s going to happen with the revenue. … We’re monitoring carefully what’s going on in March. I think that we ought to wait until July to have the full-year picture.”
Smith said a House Ways and Means bill regarding a tax loophole for manufacturers had been “mischaracterized.” He prefaced his remarks on an amendment to H.783, a “miscellaneous” tax bill, by stating that all told tax loopholes and deductions cost the state $1 billion in revenue.
“We asked the tax committee to close $2.5 million in loopholes,” Smith said.
One tack House Ways and Means took was to block an increase in a federal manufacturing tax deduction. Smith said the deduction cost more than originally expected, and because other states in New England have blocked the increase, it wouldn’t affect regional competition. Under the proposal, the state wouldn’t reimburse $4 million to manufacturers. The savings would be used to keep residential and nonresidential property tax rates at the current level, Smith said. (They had been expected to increase by about $20 million.)
The budget does not include $100 million that may come to the state through federal health care reform legislation.
“What we’ve put together is still difficult, but it’s less difficult than what the governor’s recommend is,” Smith said, “and it’s putting us in a better situation than would have been predicted previously. We have kept a clear eye on what the future looks like, because we know when we come back here next year, we’re going to have to solve that problem.”
Next year’s deficit, based on the proposed budget to be discussed on the floor of the House Thursday, will be about $94 million, according to calculations from the Joint Fiscal Office.