Budget crunch calls for difficult choices

By Governor Peter Shumlin

Putting together a budget is never an easy task–everyone knows that from personal experience–and it is harder when finances are lean. But we all do what we need to do to make ends meet. Perhaps we cut back on dinners out, cancel a family vacation or keep the family car another year. Sometimes the decisions are more difficult–like explaining to a child that the gift they had their heart set on is just not affordable, or making difficult choices between necessary expenses like groceries and medicine. Every day, Vermont families make decisions like these to make sure they live within their means. Vermonters go through a similar exercise every year on Town Meeting Day when they try to match local needs with tax capacity when they consider their local school budget and town spending. In Montpelier, we have a responsibility to do the same thing when we pass our yearly state budget.

Coming out of the worst recession since the Great Depression, economists had predicted that Vermont’s economy would grow at around five percent. Those assumptions were the ones upon which budgets were created and state spending was based. Those assumptions turned out to be wrong. While Vermont’s economy is growing, it is growing at a rate closer to three percent, not the five percent economists had predicted. That is a better growth rate than many of our neighboring states and the region as a whole, but it is slower than we had expected.

That has created a budget gap that the state needs to fill. And just like a wage-earner who finds that he or she didn’t get the expected raise, the state now has some difficult choices to make. None is easy, but choices must be made if we are to maintain and protect sound fiscal footing for the state going forward.

Some have suggested that we solve our budget challenges by simply asking Vermonters to pay more in taxes. I have resisted those calls for two reasons. First, just like the economy as a whole, Vermonters are not seeing their incomes rise as fast as they would hope. Asking Vermonters to pay to balance the state budget at a time when they are working harder to balance their own doesn’t make sense to me.

The second reason is that the math doesn’t add up. Unless we address the underlying structural issue–the fact that spending is growing at five percent and economic growth is at three percent–raising revenue this year to fill the gap wouldn’t fix the problem next year. We need our spending to match our revenue growth, period–or we will find ourselves in this same budget gap discussion year after year.

That means working hard this year to match Montpelier’s spending with Vermonters’ ability to pay. With economic growth expected to be around three percent for the foreseeable future, we need to work toward getting spending growth to that level. That is not easy, but it must be done.

To accomplish this, I have proposed to make state government more efficient by consolidating some functions within state government and eliminating others altogether. If adopted by the Legislature, these government efficiencies will reduce our expenses by about $40 million. Some of these proposals have drawn criticism from those who would be affected by reduced state spending. I understand their frustration, because these decisions affect people’s lives and jobs. But when state government can do things more efficiently, it must–even when doing so is difficult.

In addition, I have proposed achieving approximately $10 million in labor cost savings from within state government and $15.5 million in revenue raised through closing a tax loophole that allows people who itemize their deductions to deduct last year’s state and local taxes from this year’s tax bill. Like any Vermont family, state government needs to look at what we have and balance that against what we can afford. Just like a family, we need to sit down and work together to work out the best path forward. A balanced approach that involves all of us working together is, I believe, the only way to be successful.

I have made it very clear that I am open to other solutions, because I know that my administration does not have all the answers; we need to work with the Legislature and listen to Vermonters to come to the right decision on this difficult budget. But I have asked that any alternative proposals meet the challenge of cutting state spending while working hard not to add further to Vermonters’ already significant tax obligations. I believe Vermonters expect nothing less of their representatives in Montpelier.

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