The  Economy & Vermont State Budget

With Vermont and the nation experiencing the worst recession sinec World War 2, state budgets reflect the same painful realities as home budgets; the income doesn't always match the expenses.

There is a growing sense that in such precarious economic times, the current tax structure has absorbed as much as it  can.

Looming deficits threaten economic recovery. The challenge is how to do more with less, while still maintaining committments to the vulnerable Vermonters , whose very lives  depend on help from their fellow  Vermonters.

As we look to build the budget for the next fiscal year, we ask our fellow  Vermonters to provide their suggestions as to what the state budget should look like. Below are some financial updates regarding the current situtaion and looking  ahead.Feel free to contact me with suggestions.

The next fiscal years will see additional reductions .

• With the federal fiscal stimulus funds spent and budget

reductions already made, the revised revenue forecast and

budget adjustment pressures, Vermont‘s state budget is

nearly in balance for this fiscal year, 2010. (-3.4 M) or -.3%

• The current deficit projection for Vermont is:

– FY 2011 ($ 88 million) = 7% shortfall

– FY 2012 ($160 million) = 12% shortfall

– FY 2013 ($136 million) = 10% shortfall

(Note these estimates do NOT include needed contribtiions to the state employee and teachers retirement accounts. This is estimated to be about $40M.

Bottom line is that without federal stimulus money the state budget would be about $240 M- about 25% of the entire budget)

• Base reductions in one year will reduce future year‘s deficits

• Budget pressures significantly above the 3.5% growth

assumption will increase these deficit projections.

• This models assumes $38.6 m of ARRA funds for education

are replaced with GF. Restoration of the base $18.4m GF

reduction to the Education Fund is not.

Even these projections understate the problems faced by Vermont.

• Teachers retirement obligations grew from $41 million in FY 2010

to $63 million for FY 2011. State employee retirement costs, grew

from $32 to $41 million. Without system changes, costs will

continue to exceed revenues. Together this represents a $31

million budget pressure. This is before retiree health care.

• Medicaid and health care caseload growth indicates a state dollar

increased need of $20 to $30 million over projections for FY 2011.

• By 2012 there will be interest obligations for federal borrowing to

meet obligations of the Unemployment Insurance Fund.

• There are $35 million of currently approved school construction

projects awaiting capital funds.

• There is no solution built into the budget for the Vermont State

Hospital despite the identified need for a new facility.

Administration actions include:

• Education finance change proposals;

• A set of ―”tiger teams “ to find savings opportunities;

• Budget instructions asking for 8% cuts from FY 2010 levels in FY

2011 budget submissions.

• In the next few years the current budget can not be maintained at its

present level and difficult decisions will have to be made.

In FY 2012 a budget has to be built that is

essentially 12% less General Fund than in

FY 2010– How would you do it ?

• Percent of Total

• K-12 education 26% ____

• Medicaid 24% ____

• Corrections 10% ____

• Public Safety (state police/judic/other)7% ____

• Children and Families 7% ____

• Higher Education 6% ____

• Debt Service 5% ____

• Everything else 15% ____

(General gov‘t, Labor, ANR,

Economic Development and other)

Total 100% 88%