On May 6, 2016

Spending less isn’t as simple as it sounds

By Jon Margolis

Editor’s note: Jon Margolis is VTDigger’s political columnist.

Republicans in the Legislature think state government spends too much.

They might be right.

For the last several years, state spending has grown faster than the state’s economy. From 2010 to 2013, Vermont’s gross domestic product grew 2.4 percent. Growth since then has been even slower. But total spending grew about 5 percent each year. Republicans consider this growth rate unsustainable.

Those figures somewhat overstate the problem. They are for total spending, some of which was paid for by the federal government. The state’s general fund growth has been slower: 3.4 percent from fiscal year 2013 to 2014; only 0.5 percent the following year.

But the general fund is not the only one collecting money from Vermont taxpayers, and there is no doubt that state government spending has gone up faster than the state’s economy, and therefore faster than the revenue produced by each year’s tax and fee structure.

So each year the state tinkers with that structure. Gov. Peter Shumlin has stood firm on his promise not to increase “broad-based” taxes. The sales tax and income tax rates have not been touched. But some deductions have been curbed, effectively increasing the income taxes on some payers, and many fees have gone up.

In the last few years, the state has also used one-time funds, usually federal grants or tax windfalls unlikely to be repeated — such as an upward blip in estate tax revenue because a very rich person died that year — to balance its budget.

It would seem clear, then, that if the state is not going to raise taxes — and nobody wants to do that — the only alternative is to cut spending.

Except that no one wants to do that, either. Or, more accurately, no one wants to cut spending that benefits him and his or her and hers.

Also, some legislators think the state spends too little. Not that anybody comes right out and says that. But some Democrats and nearly all the Progressives call for spending more on specific programs, financing the spending by raising taxes on the very wealthy.

They may be right, too.

It isn’t just that the wealthy — households in the top 1 percent in Vermont whose average income is $978,400 — paid 7.7 percent of their income in total state and local taxes last year, less than the 10.5 percent paid by middle-income households averaging $45,600, or even the 8.9 percent paid by the lowest-income taxpayers, whose average household income is $11,700.

So says the 2015 report from the Institute on Taxation and Economic Policy.

It’s also that — by its own standards — the state is chintzing on some of its responsibilities.

Take the little-known Parent Child Centers program, which offers early intervention to at-risk families — for instance, “teen counseling programs for pregnant teenagers to help them finish their high school diploma,” as explained by Reeva Murphy, the deputy commissioner of the Department for Children and Families.

Twenty years ago, the state appropriated enough to provide each the 15 centers with about $65,000 in operating funds, Murphy said. In the projected fiscal year 2017 budget, the state will appropriate that same $65,000 in operating funds.

It’s not quite that bad, Murphy said. The centers get some other state grants and do some fundraising on their own. But as poverty, drug abuse and general social dysfunction have increased, so has the burden on the centers, whose resources are “definitely stretched,” Murphy said.

There’s an easy way to solve this problem. Close the centers. The state could simply not provide this service, saving about $1 million. Let those families deal with their problems on their own.

Nobody is proposing that. Instead, Republicans have other plans for cutting the budget. Rep. Don Turner, R-Milton, the House minority leader, provided a list of the 39 bills Republicans had proposed designed to cut spending.

A few of those bills illustrate the luxury granted to those out of power to be irresponsible. “Lowering the cap for income sensitivity adjustments” in the statewide school property tax (H.37) is a backdoor plan to increase the taxes of a lot of upper-middle-income homeowners, almost all of whom vote. Not likely. And some of the GOP bills would reduce taxes, not spending.

But others, such as creating a joint committee on state employee compensation (H.424) or a federal fund planning report (H.394) might make sense, might even make government more efficient.

But none of those bills includes an estimate of how much money might be saved. That’s because they wouldn’t save much money. No doubt, state government could be run more efficiently; so could the companies for which most people work. But the idea that greater efficiency can lead to meaningful savings — enough to lower taxes — is as much a myth as the claim in Washington in the 1980s that getting rid of “waste, fraud and inefficiency” would reduce the federal deficit.

The only way state government can spend less is to do less: Don’t fill the potholes; close the state parks for a year (or forever; are state parks absolutely necessary?); let the wetlands get filled in; give less money to impoverished single mothers.

That last one has been done. Actually, it’s still being done.

There is also something close to a consensus that the state does not spend enough dealing with the mentally ill. “The system is at the brink,” said Julie Tessler, the executive director of Vermont Care Partners, which represents many of the private, nonprofit “designated agencies” that provide most of the mental health services in the state. Adjusted for inflation, Tessler said, funding for these agencies has fallen more than 20 percent in the last five years.

The 13,500 or so employees of the designated agencies earn far less than do state workers. At the designated agencies, many professionals with advanced degrees earn little more than $30,000 a year, Tessler said.

So they leave for higher salaries and more generous benefits. Rep. Mitzi Johnson, D-South Hero, the chair of the House Appropriations Committee, said that because of the budget cuts and revenue increases adopted this year, the state can “eliminate reliance on one-time funding for ongoing expenses” in the future.

She acknowledged that lawmakers would “still have to wrestle with the budget” next year, especially because the cost of Medicaid could grow. Only 3.7 percent of Vermonters and less than 1 percent of children in the state now lack health insurance, she said, but providing it is not cheap.

Could the state manage to spend less simply by not covering those people?
No, Johnson said. “To me, it would be immoral…To the federal government it would be against the law.”

Sometimes, it seems, the state can’t even spend less money by doing less.

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