From the Statehouse

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By Paul Dame

Taxpayers, rest easy as the Legislature has adjourned for the 2015 session. The Education Bill, which originally had strict spending caps, came out of the Conference Committee with spending targets still around 2 percent, but used penalties (not outright prohibitions) for districts that spend over the target. After being the only Essex Rep to vote against the original bill, I voted for the final version because it gave communities choice as to what they wanted to do for their schools, while putting the burden more fairly on high-spending schools that raised the statewide average. It uses part of that burden to reward low-spending schools that want to bring up educational quality. It strikes a better balance between local control and real cost containment than the previous version.

While the Legislature used the Education Bill to hold school districts to “cost containment” of around 2 percent, our state spending grew at 4 percent. You may hear that “overall” spending grew at 1.1 percent, which is also true. How can our budget grow at 4 percent and 1 percent at the same time? If you go to dinner with a friend and both order the same thing the bill might be $100, so you can each pay $50. But the next time, if your friend doesn’t order dessert, they might only chip in $45, and if you decide to order their dessert, your share is now $56. So the overall bill went up 1 percent, but YOUR share went up 12 percent. Similarly, Vermont uses federal funds to match programs to certain income eligibility standards. But when we’re more generous than the Feds, instead of splitting the cost, we assume 100 percent of the liability.

The other issue is that our economy is not growing as fast as our spending. While we continue to spend over 4 percent, our state revenues are projected to grow at 2.7 percent. Our growth on existing taxes wasn’t enough to cover our spending, so $30 million in NEW taxes had to be raised. The problem is that the new taxes we added, largely by capping income tax deductions, are still going to grow at only 2.7 percent next year. So we can balance the FY16 budget, but everyone already knows that we are going to start off being around $50-$70 million short when we come back in January for FY17. And if growth is less than 2.7 percent due to an economic slowdown, the problem worsens.

When I talked to folks last year, everyone told me that being in the minority I could have no impact. But looking back over the end of the session, I think we the minority’s impact was significant. One of the things I campaigned strongly on, a repeal of the “cloud tax” on software companies, was included in the economic development bill. This will help to build Vermont’s reputation as being tech friendly and foster job growth in a clean and high-paying job sector. Also having a critical mass in the minority allowed us to give the governor strength to use his threat of veto power to reduce the final tax bill a few million dollars. We also turned a $50 million health care bill (which included a tax on everything from soda to dietary supplements to possibly employer fees or payroll taxes) to eventually become a $3 million bill to boost payments to primary care physicians funded by an increase in cigarette taxes. While our structural budget deficit is still uncorrected, a stronger minority of fiscally conservative representatives (Republican, Democrats and Independents) helped to move the needle in the direction of long-term financial sustainability, which I think is what Vermonters asked for in November.

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Paul Dame represents Essex Junction in the Vermont House of Representatives.