3.31.2017 – Miscellaneous Taxes and the FY2018 Budget
On Thursday and Friday of this week we worked on what are the most important bills of the 2017 Session – H.518, the Budget or “Big” Bill and H.516, the Miscellaneous Tax Bill. H.516 provides revenue, though not much this year; H.518, makes the appropriations choices for the FY2018 budget.
We worked on the Miscellaneous Tax Bill first. It is a relatively small bill this year, raising $4.975 million through savings and increased state revenue collections. Provisions included in the bill enable the Tax Department to increase its ability to collect taxes that are already in law. Additional data and information will be used by the Tax Department to use new and existing collections strategies to close the “tax gap”, the difference between what we should be collecting and what we do collect currently. It should be noted that no taxes or fees have been increased this year.
One interesting detail is that the “safe harbor” percentage for the Use Tax will actually be lowered. The Use Tax is a provision that requires those of us who buy items from the internet, catalogs, and other states where sales tax is not charged to pay 6% to the State of Vermont for those purchases. It is estimated by the Tax Department that only 10% of Vermonters pay the required amount. The proposal would lower the percentage from .2% of Adjusted Gross Income (AGI) to .1% of AGI. It may seem counterintuitive but it is believed that the decrease will encourage better compliance. Increased outreach and education of use tax responsibility will be undertaken by the Tax Department. Those of us who live on the east side of Vermont and sometimes shop in New Hampshire should be aware of these potential changes and increased enforcement.
I am happy to report that the Miscellaneous Tax bill passed unanimously on a vote of 138 – 0.
The FY2018 Budget was built on five basic principles – Sustainability, Transparency, Inclusivity, Priorities, and Vermont Values.
Sustainability in future years has been important for several years and is more important than ever given the situation on the federal level. Principles used for the FY2016 budget construction were again employed for the FY2018 budget. This budget proposal does not rely on one-time money for on-going expenses. It takes a multi-year approach when making decisions and takes steps to create two-year budgeting cycles where it’s appropriate. It strengthens and builds state reserves and “rainy day” funds by not spending 100% of forecasted revenue.
It should be noted that all of our reserves are filled to above statutory levels. We also continue to employ Results-Based Accountability measures to determine if programs are giving us desired outcomes, which ensures that our investments are being well-spent.
The Big Bill was built in a transparent and inclusive manner. The Appropriations Committee held five public hearings around the state and three public hearings in Montpelier. Legislators were encouraged to testify in the Appropriations Committee and each policy committee had a liaison to the Appropriations Committee so that there was a better understanding of information and decisions that needed to be made.
Vermont values were reflected as decisions were made regarding priorities for investments. Allowances for additional workers in the Department of Children and Families and an additional judge to handle child protection cases were made, as well as increased funding for more children in state custody. This is a necessity due to an increase in the number of parents involved in debilitating drug use. Provisions for additional support for existing opiate addictions services as well as a new hub in St. Albans are made. Money to help establish homeless shelters in Rutland and Montpelier is included and language regarding emergency housing has been amended to provide more flexibility.
Another goal has been to avoid having people experiencing mental health crises spending days in hospital emergency rooms before they can find a bed in a proper facility. Additional crisis bed staffing has been included to improve that situation.
Other investments include an additional $2 million for our state colleges, funding for the Pay Act in support of our state employees, and a continuance of our enhanced weatherization funding of $1.9 million at FY2017 levels.
Efforts to improve efficiencies through the restructuring of areas within state government are made that generate savings. $280,000 is added to the $600,000 in Capital Bill money to help with the unification of Lyndon and Johnson State Colleges. An effort to begin two-year budgeting for state government, which increases efficiency, has started with the Agency of Agriculture, Food, and Markets.
For several years, under the oversight of now Speaker Mitzi Johnson, then Chair of the Appropriations Committee, we have been working to close the so-called “alligator’s mouth”. A few years ago, had you looked at a chart with projections for revenue versus spending, you would have seen that spending was higher and that the trend lines diverged in out-years – what we referred to as the “alligator’s mouth”. Our job has been to systematically close the gap and bring spending in line with revenue.
Since the Great Recession of 2008-2009, demands on the state budget have out-paced revenue – this year the shortfall was $70 million. The budget presented to us this year by the governor was not balanced so the Appropriations Committee had to start from the ground up. The committee built a balanced budget that makes investments and reductions, and restructures state government so that we realize savings and efficiencies. All this was done without raising taxes or fees.
In the past, I have felt strongly that the members of the Appropriations Committee were a group of miracle workers – this year that is truer than ever. Under the thoughtful guidance of Appropriations Chairperson, Rep. Kitty Toll of Danville, this carefully constructed budget was voted out of committee unanimously and passed the House on a vote of 143-1.