Legislative Update
January 17, 2009
Rep. Anne Donahue
My Human Services Committee had a fairly stressed-out first week listening to the impact of the many budget recisions in human services. This is before hearing what the governor will be proposing in the budget for next year, in this Thursday’s budget address.
From a policy perspective, we are trying to get an idea of how the least damage can be done, but everything is highly interrelated: housing, health care, mental health or developmental services, child care, Reach Up (support for families in poverty with children)...losses in supports for Vermonters in need of help in one area become exponential when combined with others.
How bad is bad?
A broad overview: Vermont’s total budget this year is $4.3 billion. The largest chunks include the $1.3 billion that comes in from federal sources, $1.2 billion in the general fund, $1 billion in state education funds, and $515 million in transportation.
The $1.2 billion general fund includes 28.3% that goes to the education fund to supplement its other revenue sources, and the 21.6% that goes to the programs funded through Medicaid dollars to supplement its overall revenue. (The Ed Fund also gets the statewide property tax, part of the sales tax and other smaller sources; Medicaid revenues include tobacco sources and a federal match.)
Other large chunks include corrections (10%), public protection (7.4 %), higher education (7 %), child and family support (7%), and the payments on state debt (5.5 %.)
The shortfall in the general fund is breathtaking: there has been a $120 million gap that has developed between the estimated total general fund budget and the estimated state revenues since last April. That is a 10 percent difference.
Of that, $95 million is lower revenue, and $25 million is increased budget needs.
The increases range from emergency homeless shelter funds to payment for loss of funds that I warned last spring were “fake” revenues (now called “hoped-for-at-the-time”), such as the $7 million extra needed in the budget for the Vermont State Hospital. That resulted from not including $7 million in the hope that VSH would be recertified for federal funds by this January – something we knew was highly unlikely.
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Since April, the general fund budget has been cut three times: just before it was passed in May ($24 million); in August ($24 million); and in December ($19.7 million.) That leaves a current $53 million gap.
The governor is proposing that we fill that hole by cutting $3 million more through eliminating Medicaid pharmacy support for low income seniors and those with disabilities, and reducing support for families in poverty, plus counting on $48 million in federal rescue funds.
However, the current projected general fund gap next year, assuming we start from the 10 percent decrease as a base and without counting Medicaid and Catamount, is another $181 million next year. Medicaid adds a $75 million shortfall, and Catamount adds $5 million, for a total shortfall of $261.3 million
Despite projected revenues starting to climb back the projected gap (with Medicaid at another $80 million shortfall and Catamount at an additional $10 million) repeats again every new year at only slowly reduced levels: $260.6 million in FY ‘11; $247.9 million in FY ‘12; and $117 million in FY ‘13.
Even federal funding bailouts to the state during the current economic crisis will not help in the long term. We are outspending our revenue. And we will have top repay the bailouts in future inflation.
Our Joint Fiscal Office points out, “To the extent that any category is held harmless from changes, i.e., untouchable, the universe within which you can achieve savings is that much smaller.” In other words, if we aren’t going to cut public safety, or reduce prison sentences, those “shares” of reduction from that 17 percent have to be absorbed by the rest.
It becomes clearer why the governor is proposing that the 28.3 percent of the general fund that goes to the Education Fund needs to be “on the table,” along with the cuts to health care and support for low income Vermonters. It isn’t about shifting more of the cost onto the property tax; it’s about cutting education spending along with general fund spending.
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As much as the math gets boring, it’s the only way to get even a basic understanding of the difficulty in balancing the budget.
Increase revenues (taxes)? That will push more families and businesses to the brink and arguably discourage both strong businesses and wealthier families from staying here. It is the nine percent of our citizens with the highest incomes who provide 60% of our state income tax revenues. Many folks, including the not-very-wealthy, have already been hurt in retirement or other savings that were devastated by the market plunge.
Despite that, given the challenges we face as a whole, nothing – not even taxes – can be taken off the table.
Big cuts in “welfare” wouldn’t solve much, at a total of seven percent of the general fund.
Neither would cutting higher income children off of Medicaid: kids cost us the least to keep insured and higher income families actually pay more in premiums than the average cost.
The high cost care – 20 percent of the cost for only two percent of Medicaid beneficiaries, are the low-income elderly and disabled who are in long term care (nursing homes, or home alternatives to nursing homes.)
Since those are federally matched dollars, anything the state cuts only saves 40 cents on the dollar. We were able to maximize state money over the past decade by maximizing what was eligible for a federal match, and that means cutting back hits much harder now.
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What does “low income” mean? It is based on the “federal poverty level,” an important baseline to know when programs are described. Each figure is based on monthly gross income.
For a single person, the federal poverty level figure is an income of $906 a month($10,872 per year) or less which, roughly speaking, is equivalent to $5.50 an hour or less in a full time job.
A household of two has an limit of $1220, or $14,640 per year.
For a household of three, the maximum monthly income is $1533, or $18,396 per year. Four – a parent with three children, for example – can have a household income up to $1,846 gross per month ($22,152 per year) and be considered to be within the federal poverty level.
So, for example, if reference is made to a program eligibility of “200 percent of poverty” it would mean double those amounts.
Vermont currently helps low income seniors and those with disabilities on Medicare with filling the hole in the “Part D” federal prescription benefit. It addresses most uncovered costs for persons up to 150 percent of poverty, with a $17 per month premium, and covers maintenance prescriptions (those needed for ongoing health conditions) for those up to 225 percent of poverty, with a $50 per month premium. The only pharmacy assistance program without any premium is for persons making below 50 percent of poverty – an adult making less than $453 a month.
Those are the programs that would be eliminated under the governor’s proposal to help balance this and future years budget gaps.
Cutting those pharmacy programs would save an estimated net of $800,000 from the general fund. Not much bang for the buck.
The transportation fund is hurting, but not quite as badly as the general fund. We voted last week to release the third quarter local highway funds, but to hold back 15 percent while waiting to find out what happens from the new federal administration.
The one temporary cheery note was the $20 million surplus in the education fund. The legislature has approved a one cent reduction in the property tax rate for this year.
Please keep in touch; your questions and comments are much appreciated, and help me to do a better job. You can reach me at counterp@tds.net or by message at home (485-6431) or at the state house (228-2228.)