Right to the Point3/5/09

March 5, 2009

By Mike Benevento

Stimulating Vermont’s economy

On Feb. 17, despite strong Republican opposition, President Barack Obama signed what he called a “bipartisan” $787 billion stimulus bill into law. The plan calls for a mind boggling amount of spending. In fact, as Hillsdale College Economics and Public Policy professor Gary Wolfram notes, the size of the stimulus program is slightly less than all the U.S. currency in circulation. Quickly rushed through Congress with little public inspection, only now are details starting to emerge on how the package will help spur Vermont’s economy.

Gov. Jim Douglas is a big supporter of the economic stimulus bill. He sat near the president as Obama addressed the nation’s governors in late February. Obama told the governors that the package includes $15 billion to help states cover their Medicaid costs. Of that total, Vermont expects to receive $265 million.

Still, not everything is going as planned. The federal government is withholding Vermont’s Medicaid money until the state rolls back last summer’s premium increase. However, this looks to be only a small bump in the road as House and Senate leaders expect the Legislature to authorize the premium rollback fairly soon.

Rep. Peter Welch and Sens. Bernie Sanders and Patrick Leahy recently announced the arrival of Vermont’s first stimulus funds. Grants totaling $14.4 million will be used to aid low-income communities and for public and affordable housing programs.

Future stimulus dollars should help Vermont improve health care and reduce the ever-growing education cost. Jack McMullen, a Fortune 500 strategy consultant, believes Vermont could also benefit from funds for rural development programs (including loans and money for housing), road and bridge improvements, and energy (especially green) projects.

Undoubtedly, Vermont needs all the money the federal government can provide. Vermont’s unemployment rate reached 6.4 percent in December and continues to climb. As Vermonters lose jobs, the state loses the income taxes they had been paying. This squeezes the state’s budget even further.

According to Tom Pelham, Vermont has a $200 million budget gap for the next fiscal year. To make government sustainable, he says decisive action must be taken immediately to resolve this serious budget problem.

In an effort to reduce the size and cost of Vermont’s government, Douglas proposed eliminating more than 600 state jobs starting this summer. Meanwhile, the Vermont State Employees Association is working to prevent state workers from being laid off. The VSEA recently announced its plan to save Vermont nearly $20 million while maintaining the same quality of service Vermonters expect.

Director Jes Kraus wrote that the VSEA proposal includes a pay freeze for fiscal year 2010, no cost-of-living-adjustments for fiscals 2010 and 2011, elimination of the Wellness Program, and moratoriums on meal and tuition reimbursement for fiscal 2010.

Despite significant sacrifice, there is talk that the VSEA reductions will provide only a third of the needed savings. Thus, hundreds of job cuts may still be necessary to make up the shortfall.

Amid a nationwide recession, the state should look into consolidating administrative functions within agencies to save money. Vermont also needs to focus on reducing spending and cutting taxes. It appears that the Democrat-controlled Legislature, however, is going in the opposite direction. In late February, House Speaker Shap Smith and Senate President Pro Tem Peter Shumlin announced a fiscal 2010 budget that includes $33 million in tax increases.

“This proposal is extremely disappointing,” said House Minority leader Patti Komline. “At a time when our Vermont families and small businesses are struggling to pay their bills, any proposals to increase sales and use taxes, income taxes and rooms and meals taxes, send exactly the wrong message.”

Perhaps the wrong message was also sent on Feb. 20, when House Democrats killed an amendment to H.232 — a budget adjustment bill — to reduce legislative salaries by 5 percent through June 30. While legislators aren’t highly compensated, both of Williston’s representatives — Terry Macaig and Jim McCullough — voted against the pay cut. Even though Democrats quashed the amendment, Vermont Republicans are voluntarily taking the 5 percent pay cut.

Locally, town and school officials considered current economic realities when crafting their budgets. Despite last year’s 5.2 percent drop in local sales tax revenue, Williston’s fiscal 2010 municipal budget is $34,000 less than last year’s. Meanwhile, the Williston School District’s budget calls for a slight 0.3 percent increase and the Champlain Valley Union High School budget asks for only a 1.52 percent increase.

Past town and school budgets appeared to have grown with scant limitations. So, one small positive from this economic mess is that this year’s budgets are very reasonable. Maybe the current economic crisis contains a silver lining after all.

Michael Benevento is a former Air Force fighter jet weapon systems officer. He has a bachelor’s degree in Military History and a master’s in International Relations. Mike resides in Williston with his wife Kristine and their two sons, Matthew and Calvin.