The state budget is on an unsustainable path and raising more revenues to fill the $113 million deficit is a mistake, Republicans say.
A majority of the Republican caucus will not support the budget proposal that is set to be taken up by the House on Thursday because it includes $35 million in income tax increases. (Four Republican members of the House Appropriations Committee, however, voted for the budget, which was approved in a rare, unanimous vote.)
Instead, the caucus will offer an amendment that proposes to restrict state employee overtime, tighten state contract payments, shrink the number of community mental health programs, phase out the homeowner and renter rebate programs, insurance assistance and prescription programs for the elderly.
Republicans say their objective is to level-fund the fiscal year 2016 budget.
Rep. Don Turner, the minority leader, told reporters at a press avail on Monday that Republicans heard Vermonters “loud and clear” in the last election cycle “that they did not want us to raise their taxes.”
“Our caucus will not support raising taxes further,” Turner said. “Raising taxes only postpones the eventual cuts which based on history will only be larger and more painful in the future.”
Turner led a group of freshman lawmakers (all men) from the caucus in a casual meeting with reporters. One by one, they blamed the Democratic majority in the Legislature and the Shumlin administration for the state’s structural budget problem in a series of “I-told-you-so” political digs interspersed with ideas for level funding the state budget.
Turner said the Democrats have used up the state’s reserves year after year to cover ongoing deficits.
“Our Republican House caucus has been predicting this day would come for seven years,” Turner said. “This practice creates an unsustainable future for our state and you do not need to be an economist to see it.”
State spending is 2 percent higher than state revenues, according to Joint Fiscal Office figures. Corporate and income tax receipts have been harder to predict because of volatility in both sectors of the economy. State revenues have been lower than projected by state economists for several years.
As a result, the state has had an ongoing budget gap, and this year’s $113 million hole is the largest the Legislature has faced in the post-Recession period. The gap is projected into the foreseeable the future unless lawmakers and the governor can make longterm cuts to state spending. The projected deficit is $48 million, according to JFO.
Democrats, the GOP freshman say, have expanded programs and added several hundred employees to the state’s payroll over the past five years, exacerbating the state’s ongoing fiscal budget hole.
Rep. Fred Baser, R-Bristol, said the state must take steps to build reserves and refrain from adding new programs. Baser also said the state needs to budget ahead several years in order to better anticipate changes in tax receipts and spending trends.
“Our budget problem, we believe, has been created by single party rule, not by Vermonters,” Baser said. “Increasing taxes in our mind is the easy way out.”
Rep. Bob Bancroft, a Republican from Westford and a self-employed economist, said there are only two ways to correct a structural deficit: reducing spending or expanding the economy.
“Expanding the economy is the long term solution to our problem in this state, but that’s going to take a number of years before we see any significant expansion,” Bancroft said. “So what we’re confronted with in the next four to five years is budget cuts, and we need to address that. If we don’t address that now we’ll be right back here next year having the same discussion.”
Two Republicans on the House Appropriations Committee, Reps. Bob Helm and Peter Fagan, said they supported the budget because the 11 members of the committee worked hard to find $53 million in budget cuts.
“We didn’t really reduce the size of government as much as I would like to, however we did an extreme amount of cuts, and I think when you do the amount that we did you need to stop and let it simmer for a year before you try to do any more or you can go too far,” Helm said. “We got to a reasonable place and we got a plan for the year ahead and the year after that.”
Fagan, the vice chair of the committee, said lawmakers made cuts to state expenditures that will have a longterm impact. “We took an enormous first step,” Fagan said.
“The more we got into the process, the more I realized that we were doing that,” Fagan said. “And as we started doing that, I realized this is something I can support.”
House Speaker Shap Smith said he and Rep. Mitzi Johnson, the chair of House Appropriations, incorporated ideas that Republican and Progressive lawmakers offered the committee in the budget.
“It’s always a tricky balance, and we are solving the budget problem largely through reductions in spending, and I think the balance we found was the right one,” Smith said.
Johnson said the committee “scrubbed and scrubbed” the fiscal year 2016 budget and set up a longterm sustainable budget process for next year.
“I have asked everybody under the sun for ideas, and I have yet to see an idea put in front of me that can level fund this budget with no revenue,” Johnson said.
Some of the specific ideas the Republican caucus want the Democratic majority to consider include phaseouts of the following programs over a four year period: the homeowner property tax rebates and renter rebates; health insurance cost sharing assistance; insurance premium assistance and pharmacy payments for the elderly.
The Republican House caucus also suggests:
- Phasing out state grants to the Vermont Humanities Council, the Vermont Council on the Arts, the Vermont Symphony Orchestra, sportsmans groups and other organizations “that are not core to government functions”
- Mandating that state and school labor contracts be reopened if health care plans tip are affected by the “Cadillac tax,” a federal assessment that could affect state workers and teachers as soon as 2018.
- Restricting overtime provisions for state workers
- Limiting retirement “spiking” through overtime
- Requiring state contracts to fall at or below the rate of state gross domestic product growth
- Instituting a legislative mandate that would require the budget bill to come in at 95 percent of projected revenue. The remaining 5 percent would be automatically put in a reserve fund for future use.
- Purchasing Medicare supplement policies for the 17,000 elderly Vermonters who are also eligible for Medicaid.
- Requiring the departments in the Agency of Human Services (the largest arm of state government) to base budgets for printing, postage, travel and cell phone use on fiscal year 2014 actual spending amounts.
- Shrinking the number of designated agencies over a three year period.
- Creating a competitive bidding process for child abuse and prevention, youth substance abuse prevention and parenting services for at-risk children.
- Privatizing the state psychiatric hospital, the Vermont Veterans Home, the functions of the Agency of Commerce and Community Development and the Department of Buildings and General Services.
Editor’s note: This story was updated at 6:43 a.m. March 25.
Correction: Rep. Fred Baser’s hometown was incorrect in an earlier version of this article.