Governor Shumlin’s Budget Address

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Here is Gov. Peter Shumlin’s first annual budget address, as prepared for delivery. 

Click the "Listen" button above to hear the speech

Mr. President, Mr. Speaker, Mr. President Pro Tem, Members of the General Assembly, distinguished guests, fellow Vermonters:

Two
weeks ago, we gathered here to commemorate a new day in our state’s
long and rich history. In my inaugural address, I laid out my vision for
Vermont – a bold and ambitious agenda for job growth whose success
depends on our ability to work together to get big things done.

That
was a day for Vermonters to challenge our own imagination for what we
must make possible: a new and innovative economy, quality health care
for all Vermonters in a cost restrained system, broadband and cell
service to every corner of the state, and educational excellence for a
new century of job creators.  

I
stand here today to present a budget that is as sobering as it is
necessary, matching state spending with our state revenues, in keeping
with the long tradition of frugality and common sense that is the
lifeblood of Vermonters. My budget puts Vermont on a solid and
sustainable path to fiscal responsibility. Facing our fourth consecutive
year of budget shortfalls, I am committed to making the painful choices
today that will help ensure that we are not back here next year making
drastic cuts. We must match the promises government makes with the
capacity of Vermont taxpayers to support those promises.

To
meet that responsibility, I am proposing to close a $176 million
shortfall in the next fiscal year by imposing roughly $83 million in
General Fund reductions, raising $36 million in additional federal
funding through provider and managed care assessments, utilizing $27
million in unanticipated receipts and $30 million in Global Commitment
carry forward and federal matching grants.

I
would like to take a moment to acknowledge what our state has done to
address projected budget shortfalls in the past three years.  Hundreds
of state employee jobs have been eliminated, many agency and department
budgets were reduced several times, state employees took a 3% pay cut
for two years, and teacher retirement was recalibrated to save $15
million in this fiscal year.  Compared to other states, Vermont’s
Governor and legislature responded quickly and wisely to crisis, and you
should be commended for that response.

Some
might be wondering why we have a $176 million problem rather than the
$150 million shortfall that we have all heard about. Here’s why: if we
were to continue to book all of the hoped-for "Challenges for Change"
savings, the shortfall would be $150 million. While "Challenges for
Change" was a well-intentioned initiative, we simply cannot budget $26
million in savings that may not likely be realized, and I won’t.

This
budget also includes over $120 million in unavoidable increases
resulting from statutory commitments to the Education, Unemployment, and
Pension Funds, as well as rising human service caseloads resulting from
the Great Recession. Even with these increases, when adjusted for
temporary federal aid, the budget that I propose today represents a
General Fund spending reduction of over $25 million from last year. This
is the first time in a decade in which state spending is lower than the
previous year.  

The top contributors to the $83 million in reductions are the following:

  • A
    $23 million ongoing reduction from the General Fund transfer to the
    Education Fund. This reduction, which I announced last month, will
    require continued spending restraint by our hardworking school boards
    and local communities to hold back property tax increases. The $19
    million in one-time federal funding that I am releasing this year will
    give our local communities additional time to make further spending
    reductions, but they must be made.
  • $12 million in government labor, private contract, health insurance, and retirement savings.
  • $7.2 million in savings throughout the corrections system.
  • $5
    million from folding the Catamount Health program into the Vermont
    Health Access program, otherwise known as VHAP, to create one single
    health care pool for Vermont.
  • $4.6 million in reduced funding for our regional mental health agencies.

My
administration takes no pleasure in delivering this budget, and we will
work in partnership with the mental health, health care, and human
service community to ensure that vulnerable Vermonters are protected.

Critics
will observe that some of the budget reductions that I put before you
today are the same reductions that I worked with you to protect when
proposed by the previous governor. They will rightfully ask, "What has
changed?"  

My
response is simple: what we face in this budget year is the reality
that the hundreds of millions of stimulus funds that were allocated by
the federal government to cushion the blow of the worst recession in
American history are now gone.

We
all knew that this day would come. It is now our responsibility to make
difficult choices, and to find a balance between compassion for our
most vulnerable citizens and the imperative to put our state on solid
fiscal footing. I believe this budget achieves that balance.

In
addition to reducing spending, my budget maximizes federal dollars
available to our state. For over 20 years, Vermont has asked our
hospitals and health care providers to cooperate in a partnership that
has used ingenuity to utilize federal dollars to support health care
services for Vermonters. My administration understands that in these
difficult times, every dollar that we draw down from the federal
government is a dollar saved for Vermont taxpayers.  

Therefore,
I am expanding upon what is an imperfect but effective revenue stream.
We do so first by applying the same assessment to health insurance
companies and dentists that we have been applying to our hospitals and
nursing homes. This will net 9.2 million new dollars for the General
Fund.

Second, we increase the current assessment on hospitals and nursing homes, which will net $18.7 million.

Some
recent good news about our revenues from fiscal year 2011 has helped
our effort.  My budget utilizes $27 million in General Fund
unanticipated revenues to bridge our shortfall.   

Some
might ask why I am not utilizing the state’s rainy day fund. There are
two simple answers: first, we must minimize the use of one-time money to
meet ongoing financial commitments. Second, we must preserve the rainy
day funds until we can project with confidence that we will be able to
replenish that fund in the out years. My budget team cannot provide me
with that assurance for fiscal years 2013 or 2014, and therefore we must
not tap into those funds this year.

In
light of the hundreds of millions of dollars in budget shortfalls that
we have had to endure over the past few years, it should be abundantly
clear that the current reserve of five percent of our state budget is
not adequate to withstand tough times. I call upon the legislature to
join me in raising our reserves to eight percent as soon as we return to
better times.

Critics
might also ask: why are we not raising taxes?  After all, Illinois
recently raised its top income tax rate from three percent to five
percent. But remember: Vermont is not Illinois, and our situation is
vastly different. Our top income tax rate is not five percent; it is
nearly nine percent. Our tax rates must remain competitive with other
New England states to grow jobs.

Others
might say, "Well, forget Illinois and remember Governor Snelling." When
facing a less severe shortfall, he temporarily raised income, sales,
and rooms and meals taxes. But I would remind my friends that Governor
Snelling was working in economic times less dire than our own and he
started with income tax rates that were lower than our rates of today.
The sales tax was four percent; today it is six percent. Our rooms and
meals tax was seven percent; today it’s nine percent. The Snelling
solution made sense then, but it would be counterproductive now.

****

As
difficult as this budget is, our spending priorities also reflect my
belief that the choices we make here will lead to extraordinary
opportunities for all Vermonters. To achieve long-term budget
discipline, we must be innovative and go where the money is.  

Health care is the largest area of growth in our state budget and we must bring it under control.  As taxpayers, we are the largest source of health care payments for our state,
and we are paying twice as much in taxes today to keep Vermonters
healthy than we were just a decade ago. That is yet another reason why
it is so important that we pass a single payer health care plan that Dr.
William Hsiao estimates will save Vermonters over $500 million in the
first year alone.

We
will work together to pass a bill that takes the first step in putting
Vermont on a solid road to single payer health care, and we must do it
before we adjourn this spring.

****

In
addition to bringing health care costs under control, I am committed to
replacing the State Hospital and treating our most vulnerable citizens
with the dignity and respect they deserve.

To
do that, I recommend first that we suspend current plans to build a
15-bed facility that cannot be expanded. Short-term planning will only
lead to long-term problems.

Second,
I have directed my administration to work diligently with our hospitals
and the Brattleboro Retreat to finalize plans for partnerships and
deliver to me within six months both the treatment and financial
implications of those partnerships. This summer, my administration will
determine whether any of the partnerships are clinically and financially
prudent, and that date will represent a deadline for determining the
number of beds that could be provided from such partnerships.

Third,
my budget proposal next January will include a plan to build a state of
the art new State Hospital to meet Vermonters’ needs for the next 50
years. We have waited long enough.

****

The
second fastest area of growth in the state budget is corrections.  A
decade ago we spent $71 million on our corrections system.  Today, we
spend almost $131 million, an increase of nearly 100 percent.  On any
given day, of the 2,100 prisoners that taxpayers are currently
supporting, 180 are in prison because they have no other place to go.
Sixty-nine percent of our female inmates and 45 percent of our male
inmates are non-violent offenders.

What
do we know about these non-violent offenders? Many of them have
difficulty reading and writing, and most have drug and alcohol related
addictions. When their time is up, a lack of adequate housing, adult
basic education, drug and alcohol counseling, mental health services and
job options leave them on our Main Streets with the same lack of skills
and substance abuse challenges that led them into prison in the first
place.  As a result, half of our non-violent offenders end up back in
prison within three years, costing us an average of $45,000 a year per
inmate.  

Therefore,
we are proposing to move the women inmates from St. Albans to
Chittenden Regional, and the men to St. Albans to maximize unused bed
space and save money.  Since roughly one third of our incarcerated women
are from Chittenden County this will help them transition back into
their home communities. We will create a parent-child visiting space for
these parents and their children. This will not only help mothers bond
with their children, it will also help them learn better parenting
skills for when their time is up and they are reunited with their
families.  

By
implementing these reforms, we will save $2 million. At the same time, I
ask the Legislature to join me in investing $1 million in prevention
and alternative justice in community based programs across Vermont to
help keep non-violent offenders out of jail.

My Administration will also re-allocate an additional $300,000 to unlock the waiting lists for methadone treatment. 

These choices represent the first steps in my administration’s war on recidivism. 

****

There
is a direct link between our non-violent offenders and early childhood
education. Most primary school teachers can identify which of their
students will run into problems later in life. The evidence is
irrefutable: the years up to age five are a critical time for brain
development. It should come as no surprise that one dollar spent on
early education saves seven to sixteen dollars later in life. To give
all of our children a bright future and bring long-term fiscal
discipline to corrections, special education and human services
spending, we must take bold preventative action.  

Today
I am calling for expansion of the state’s pre-kindergarten program for
ages three, four, and five, by lifting the cap on the number of students
counted in Pre-K funding. Vermonters will be able to exercise local
control and vote to spend money without the heavy hand of Montpelier
preventing them from doing so.

When
this cap is lifted, over time, if half of Vermont’s eligible children
are enrolled in a Pre-K program – an optimistic goal – the cost to the
state’s Education Fund would be about $14 million.

Let us make Vermont the national leader in early childhood education.  

****

We
must also invest in workforce development. My budget proposes $4.8
million for fiscal 2012 to assist Vermont workers and employers with
high quality job training.

As
Vermonters grow older, we must keep more young people in our state in
order to have a workforce to train. Ensuring that young Vermonters
pursue post-secondary education is critical to our economic future.
Vermont students and families have one of the highest education debt
loads in the nation. I propose a sustainable higher education income tax
credit that will enable Vermont students who stay here and work here to
reduce their college debt.

****

Two
weeks ago, I launched Connect VT, an ambitious plan to deliver
broadband and cell service to every corner of Vermont. Vermont cannot
succeed in creating jobs or competing in our global economy if we fail.

To
get this essential project done, in addition to using federal funds and
private investments, I propose spending $13 million from our two-year
capital budget and fully utilizing the $40 million revenue bond capacity
of the Vermont Telecommunications Authority. These investments will
expedite the build out of fiber optics lines and wireless networks
across our state, including the most rural areas that for economic
reasons are least likely to attract private providers.

We
will also need to address three regulatory areas that have the
potential to hamper, if not derail, our progress. These are utility pole
regulations for fiber and telecommunication attachments, consolidated
land use and environmental permits for the placement of poles, and
long-term telecommunication lease agreements to erect infrastructure on
state land and buildings. It could cost as much as five times the cost
per mile to string fiber on poles if the regulation for our utility
companies and providers are not clarified from the start. Rapid build
out could be delayed and millions of dollars could be wasted if we fail
to act.

Shortly
I will submit legislation to expedite these actions so that we can
deliver broadband and cell service to every last mile by 2013.

****

A
clean Lake Champlain is also critical to our quality of life and our
attractiveness to tourists, anglers, boaters and birders who share our
love of our lake. Although we protect our great lake with Quebec and New
York, much of the water runs through our state, and its cleanliness is
as crucial to our economic vitality as it is to our culture and our
health. Lake Champlain provides drinking water for more than 200,000
people, while the state’s reputation for environmental quality and lake
stewardship reflects upon all of us.

We
must make faster progress in cleaning up the lake. I will work together
with our Congressional delegation and President Obama to seek waivers
that will enable us to place federal dollars in a central pool that
would give our communities and farmers the flexibility to maximize our
efforts and get results.

The time for talk is over; we must clean up Lake Champlain.

****

Increasing
investments in energy efficiency is a top priority of my
administration. Vermont spends over $1.5 billion a year on electricity
and heating, and many of Vermonters’ hard-earned dollars go to oil-rich
countries that will do just fine without us. To protect both our
pocketbooks and our environment, we need to transition away from a
dependence on fossil fuels and move toward more efficient, affordable,
and cleaner renewable energy. Vermont can be a leader in the fight
against climate change and at the same time save money and create good
paying jobs that cannot be exported to China.

By
investing in energy efficiency and renewable energy development in
state buildings and lands, we will save taxpayer dollars. I have asked
the Lieutenant Governor to work closely with the Commissioner of
Building and General Services on this initiative and have allocated $3.5
million to help us achieve this goal. The budget also increases state
support for our weatherization programs, investing $7 million for
weatherizing low-income Vermonters’ homes.

However,
we have much more to do in order to make Vermont the energy efficiency
state. Our challenge is to give all Vermonters, not just those in the
lower income brackets, incentives to make their homes and businesses more efficient. I ask you to stand with me in this legislative session to make this happen.

****

I
am recommending a new approach to the Capital Budget this year by using
an unprecedented two-year authorization of over $150 million. This
two-year approach will enable us to accelerate important capital
projects, borrow at historically low interest rates, take advantage
of comparatively low construction costs, and put Vermonters to work.

****

My
budget also includes full funding for the Vermont Housing and
Conservation Trust Fund.  This will be the first time in many years that
the Governor has included full funding for this extraordinarily
successful partnership that creates affordable housing and conserves
precious agricultural lands that help ensure a bright future for our
farmers.  

****

Finally,
my budget addresses the deteriorating condition of our roads, highways
and bridges. We need to bring our transportation network into the 21st
century, and to support this effort I am proposing to spend $106
million on improvements to more than 65 bridges and culverts, and
preventive maintenance work on dozens of other structures. 
Additionally, the Morrisville Truck Route will finally begin
construction this year and work will continue on the Bennington Bypass.

Expanding
passenger and freight rail in Vermont is also a top priority. My budget
invests in rail upgrades to the western corridor, with the goal of
returning passenger service from Bennington to Rutland to Burlington to
Montreal as soon as possible.  These investments, coupled with
improvements to our rail line on the eastern side of the state, bode
well for Vermont’s rail future.

As
some states reject federal money for high-speed rail, I am also
committed to working in partnership with my colleagues in New England
and the Premier of Quebec with a vision of a high-speed rail line from
New York to Montreal, with a spur to Boston.

High speed rail is the transportation of our global future, and it is high time that Vermont gets on board.

****

Having
been immersed in the difficult choices of the budget that I present
today, I understand that my proposals may lack perfection and invite
disagreement. The best Governor from Putney, George D. Aiken, in his
first address to the joint assembly in 1937, said, "With some things I
have said today, many of you will disagree. This is inevitable. But when
we disagree on a subject and express our viewpoints openly, then we are
in reality making progress."

Aiken
continued, "Let us forget our political differences, forget that we may
not attend the same church, or that we belong to different occupational
classes, but remember that we are all Vermonters working to promote the
welfare and prosperity of the people of our state."

In
that spirit, let us make the hard decisions that this work requires of
us, always mindful that balancing our budget gap is one step in our
climb to a brighter economic future for the people that we serve.

Let us never lose sight that at this time of economic hardship, our best days are still ahead of us.

If
we allow the need to put our fiscal house in order to divert us from
our once in a lifetime opportunity to connect Vermont by 2013, begin to
build a single payer health care system, reduce recidivism by giving
hope and dignity to our non-violent offenders and use the dollars saved
to help make Vermont the Education State, we fail those who put their
faith in us to get tough things done.

By
putting the state that we all love on a fiscally responsible path, we
do more than just serve as responsible stewards for our children and
grandchildren; we create opportunities to put Vermonters back to work, one job at a time.

Governor Aiken often said, "Nothing makes me happier than to see a Vermont family with a good job."

With boldness and courage, we will make it happen today.

Let’s get back to work. 

Thank you.

 

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