3.27.2015 – The Budget and Revenue Bills and Water Quality

This week our primary focus was on the Budget, or “Big”, Bill and the Revenue Bill to fund it. One of the main goals of this year’s budget work was to bend the spending curve to better reflect our actual revenue. Due to a number of factors, including growing service demands, slower economic growth, and less money from the federal government, construction of our budget has become more of a challenge.

Balancing the FY2016 budget required a combination of cuts and increased revenue. The total General Fund shortfall was $113.2 million, which was bridged with $53 million in cuts and funding changes, $35 million in new revenue, and $25 million in “one-time” money.

One of our underlying goals going forward is to reduce our reliance on one-time money. The FY2015 budget relied on $53 million in one-time money so we are more than halving that amount in FY2016 – an important positive step. This is a prudent course of action because one-time money is just that; it is unreliable and not sustainable.

The $35 million in revenue was raised by increasing fees for a total of $1.8 million and making changes to the Vermont income tax code, which raises $33.2 million. One income tax change caps all itemized deductions at 2.5 % of the standard deduction, which amounts to $31,000 for a couple filing jointly or $15,500 for individuals. The other change would eliminate the deduction for the previous year’s state and local taxes. These changes are expected to make Vermont’s tax code more fair and progressive. According to information provided by the Ways and Means Committee, people making $1 million or more will see an increase in their tax bill of just over $17,500 while those making $75,000 or less would see an increase of $67-$143.

The third element of the FY2016 budget used to bridge the gap was $53 million in cuts and funding changes. Structural changes include a proposal to close the Windsor Prison in two years. A similar idea to close the Veteran’s Home in Bennington was put on hold but reforms will be looked at in terms of encouraging less reliance on the General Fund. The proposal to close two Public Safety Answering Points (PSAP) was postponed in order to look at alternatives. There will be a cut to VT Health Connect and greater efficiencies in state buildings and general administration operations will be initiated.

Good news for property tax payers is that the FY2016 budget fully funds the transfer to the Education Fund. The Community High School of Vermont, which works to educate people serving time in our prisons, was cut 6% rather than the proposed 50%.

The Working Lands Enterprise Initiative was cut to $700,000 from well over $1 million. The members of the House Agriculture and Forest Products Committee (HAFPC) were disappointed with the cut but understand the circumstances. We, as a committee, put forward a revenue proposal that was supported on an 8-2-1 multi-partisan vote, to increase the Rooms Tax by one-half a percent to create a Special Agriculture and Rural Heritage Fund that would support Working Lands and other agricultural endeavors. Our proposal, however, was not taken up by Ways and Means.

Next week, the Water Quality Bill, H.35, will be on the Floor of the House. This has been a truly collaborative process with several committees including Fish, Wildlife, and Water Resources; HAFPC; Judiciary; Transportation, Ways and Means; and Appropriations working closely together to craft something that will meet with approval from the US Environmental Protection Agency (EPA) as we plot a course to cleaning up our lakes and waterways.

Money for the agricultural positions needed to identify and certify small farms will be raised through annual fees on small, medium, and large farms and additional registration fees on non-agricultural fertilizer, commercial feed, and pesticides (economic poisons). This is something the farmers found preferable to fees on bulk fertilizer, which would have had more of a negative impact on the medium and large farms that already have Nutrient Management Plans for which they spend, in some cases, a great deal of money. To start with, the annual small farm fees will be charged only to the small dairy farms that are identifiable (199 or fewer cows). Eventually, as more small farms are identified, they will be certified and required to pay the annual fee.

Additional positions will also be needed at the Agency of Natural Resources, as well, in particular at the Department of Environmental Conservation (DEC). Revenue to cover them will be raised through increased water quality-related permit fees. Another change will remove certain permit fee exemptions for municipalities, the Agency of Transportation, and the Department of Buildings and General Services. They will be required to pay DEC fees for stormwater, lake encroachment, stream alteration, and wetlands permits. The money raised will be used to fund 13 positions at DEC to manage the additional workload.

When we started work on the Water Quality Bill, the motto was “All In” – everyone had to be ready to help. Many have had a hand in the degradation of our lakes and waterways and it will take all of us working together to reverse the damage that 50 years of poor stewardship has done. While I would love to think that I could live long enough to see Lake Champlain clean again, I don’t expect that to be the case – it will take a long time. It gives me great satisfaction, however, to know that maybe my son, his wife, and three year-old granddaughter, Madison, who lives in Fairfax might have that opportunity and pleasure.