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Opinion: Straw man deficits

first_imgby Tom Pelham. Media coverage of the state budget has fallen prey to covering a contrived budget rather than the real budget. The contrived budget is one where legislative and administration budget staffs add up, as a planning exercise, an array of budgetary ‘pressures’ believed relevant and compare the sum to expected revenues. Last December, for example, the Governor’s Budget Office and the Legislature’s Joint Fiscal Office tallied general fund budgetary ‘pressures’ of $1.334 billion and expected revenues of $1.184 billion for fiscal 2012 and found an ‘estimated budget gap’ of $150 million. You can find this analysis here:  http://www.leg.state.vt.us/jfo/appropriations/FY12%20Consensus%20Budget%…(link is external)    Yet, the real budget passed by the Legislature for fiscal 2011 was much lower at $1,088.4 billion. Thus, to move from the actual fiscal year 2011 budget of $1,088.4 billion to a 2012 ‘pressures’ budget of $1.334 billion would require a pie-in-the-sky year over year increase of 22.6% or $246 million. Such growth is only conceivable in the wild eyes of the most ardent ‘tax and spender’.  No reasonable Vermonter expects the state general fund budget to grow by 22.6%. Yet the media has chosen to report legislative progress on the budget relative to this hypothetical budget gap.  By the start of the last legislative session, additional ‘pressures’ swelled the ‘budget gap’ to $176 million.   The resulting headlines and articles such as the Burlington Free Press’s  May 8th ‘Filling the Budget Gap’ and  Vt. Digger’s more recent ‘How Lawmakers Performed the $176 million Budget Miracle’ mislead the public. By basing coverage on the contrived budget and its inflated ‘$176 million budget gap’, reporters frame the budget dialogue in the context of ‘slashed agency budgets’ and employ alarmist quotes to bolster the storyline such as ‘more people will end up on the street or in jail’.  Political leaders as well revel in the boast of closing ‘a $176 million gap without raising broad-based taxes’.  The contrived budget used by the media serves well the hyperbolic interests of advocates and their sympathetic political leaders, but less those of taxpayers’ and others truly interest in the realities of the state budget. The real budget, the one that counts , the one far removed from a contrived 22% or more growth rate but  actually passed into  law, tells a more realistic and valuable story.  Here it is from the Joint Fiscal Office.Source and for more detail: http://www.leg.state.vt.us/jfo/appropriations/fy_2012/FY08_-_FY12_Total_…(link is external) Rather than slashed budgets, the actual budget data (see table below) shows the Total State Budget rising at the healthy annual rates of 5.84% from 2008 (the start of the current recession) through 2011 and 3.39% from 2008 through 2012, given the budget just passed by the Legislature. The budget for 2012 is reduced by $175.6 million from the 2011 level due to the loss of federal stimulus (ARRA) funds. However, where these funds had been assigned to supporting on-going state spending, alternative revenues were found such that the Total State Funds component of the budget was reduced by only $14.9 million. Even with this reduction, which amounts to a mere .74%, the State Funds component of the budget has grown by 1.8% annually since the start of the recession.   Relative to services for the ‘most vulnerable’, the Agency of Human Services budget was not ‘slashed’ for 2012, but actually increased by $46.35 million inclusive of a $94.5 increase in general funds which more than fully off-set  lost ARRA funds. Check here at Section B.345 for details. http://www.leg.state.vt.us/jfo/appropriations/fy_2012/FY09_-_FY12_Gov__T…(link is external) Overall, the Human Services budget during this recession has grown from $1.742 billion to $1.977 billion, equaling an increase of $235 million and an annual growth rate of 4.3% since fiscal 2008. Anne Galloway, editor of vtdigger.org, (STORY) observes in her recent article, ‘For one thing, the budget gap stubbornly keeps popping up, no matter how hard state officials try to quash it. Next year’s projected gap is $70 million.’ The reason the budget gap keeps popping up is clear; the contrived budget process has masked the real budget problems and the legislature has yet to squarely address these real problems despite their boasts of ‘closing the $176 million budget gap’. Recessions are defined by contractions or so-called negative growth of the private economy. These contractions, well beyond the control of the legislature, shrink state revenues. The legislature can only react. One path is to constrain state spending as practiced by Governor’s Snelling and Dean, and wait for economic recovery to restore revenues to a level that matches spending.  Snelling and Dean softened the blow of this transition with temporary tax increases. The other is to continue to grow spending and force revenues to keep pace with spending through permanent higher taxes. So far, Vermont’s legislature has chosen to grow state spending, as demonstrated by the JFO data above, but has avoided major tax increases through fiscal 2011 due to the availability of federal ARRA funding, their equivalent of Snelling’s temporary taxes. For fiscal 2012, legislators continued to avoid major tax increases, but replaced ARRA funds by raiding $23 million from the Education Fund, $4 million from the Transportation Fund, utilizing over $48.7 million in one-time ‘carry forward’ funds from fiscal 2011 (most a result of left over federal ARRA funds), and assuming taxes on cigarette sales will rise by $3 million and the federal government will forgive a $4.1 million interest payment on unemployment insurance funds borrowed last year. Also included are $24.2 million in increased taxes including those on health care providers and health insurance claims, though simultaneously legislators lament the spiraling cost of health care.  However, for fiscal 2013, there may be no more rabbits in the hat. The legislature will no longer be able to delay the choice between permanently raising broad based taxes or bending the state spending curve to be in line with revenues from the current tax structure. Our budget problems are not so severe that citizens and businesses need to dig deeper to pay higher taxes. The state has yet to seriously constrain spending and has already raised taxes in 2009, over Governor Douglas’s veto, and again during the current legislative session as noted above. One tax increase enacted in 2009 just became effective this past January, the elimination of the 40% capital gains exclusion for those over 70 years of age. Alternatively, opportunities for reforms in state government exist such that the any budget gap can be reasonably closed without additional taxes.    However, for this discussion to transparently move forward, the media as communicators to the public at large need to return to more traditional and common sense approaches of reporting budgets. This means a cut is a reduction relative to last year’s actual level and an increase an addition to last year’s level.  The pending budget should be viewed relative to the prior budget that actually exists and has been approved by the legislature and not the fuzzy math budget associated with hypothetical pressures unfiltered by the legislative process. It’s simply not informed nor grounded reporting to use a hypothetical analysis of budget pressures developed by four or five state bureaucrats (of which I’ve been one) that amount to a 22% year over year increase as the baseline for budget coverage. Tom Pelham served as Finance Commissioner for Governor Dean and Tax Commissioner for Governor Douglas.last_img

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