Shumlin presents budget Slashes $83 million without raising taxes

BRATTLEBORO -- Facing a budget shortfall now estimated at $176 million, Gov. Peter Shumlin said Tuesday he will reduce general funding by more than $80 million while keeping taxes stable.
In his first budget proposal before a joint legislative session, Shumlin presented a "sobering as it is necessary" $1.2 billion budget, harking back to Vermont's longstanding tradition of frugality and common sense.
"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," Shumlin said. "We must match the promises government makes with the capacity of Vermont taxpayers to support those promises."
Shumlin, a Putney Democrat sworn into office earlier this month, suggested imposing roughly $83 million in general funds reductions while utilizing $27 million in unanticipated receipts. The governor also proposed raising $36 million in additional federal funding through provider and managed care assessments.
Within the proposed $83 million cutbacks, Shumlin said $4.6 million comes from reduced funding for regional mental health agencies, $5 million from folding Catamount Health into the Vermont Health Access program to create a single pool for users and $23 million from transferring certain revenue to the education fund.
A $7.2 million savings in the Corrections systems is also planned. Corrections represents almost $131 million of the budget, nearly double the figure it was 10 years ago.
The administration's plan is to move female inmates currently in St. Albans to the Chittenden regional facility. Since one-third of incarcerated women reside in the state's most populous county, having the inmates back in Chittenden's prison will assist their transition process back into their hometowns, Shumlin said.
With the women out from the St. Albans facility, Shumlin proposed relocating men into the prison to maximize the unused space.
"By implementing these reforms, we will save $2 million," said the governor. "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 nonviolent offenders out of jail."
Corrections represents the second-fastest area of growth in the budget behind only health care.
To combat the rising costs, Shumlin pushed to apply the same assessment standards to insurance companies that are required on hospitals, netting an estimated $9.2 million in new general fund dollars. Furthermore, the administration plans to increase the assessment on hospitals and nursing homes to bring in roughly $18.7 million.
Just as he vowed during his gubernatorial campaign, Shumlin also renewed discussions of implementing a single-payer health care system. Harvard economic professor William Hsiao, a health care consultant known internationally for his work helping countries establish new plans, released a report in Montpelier last week estimating such a system in the Green Mountain State would save Vermont $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," Shumlin added.
But in addition to reducing spending, the budget maximizes federal dollars available to the 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," Shumlin said.
The governor also recommended the following during his budget address:
Increasing workforce development with $4.8 million in fiscal year 2012 to assist employees with high-quality job training.
Spending $13 million from a two-year capital budget and utilizing $40 million in revenue bond capacity of the Vermont Telecommunications Authority to construct wireless networks across the state.
Allocating $3.5 million to invest in energy efficiency and renewable development within state buildings to save taxpayer dollars in the long term. Shumlin asked Lt. Gov. Phil Scott, a Republican, and Building & General Services Commissioner Michael Obuchowski, a Democrat, to work closely on this initiative.
Proposing $106 million on infrastructure improvements to bring Vermont's transportation network into the 21st century. The budget includes rail upgrades on the western side of the state, with the ultimate goal of returning passenger services from Bennington to Rutland and Burlington.
"These investments, coupled with improvements to our rail line on the eastern side of the state, bode well for Vermont's rail future," Shumlin said.
"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," he added. "High-speed rail is the transportation of our global future, and it is high time that Vermont gets on board."
Despite calls to tap into the state's rainy day fund, as suggested by his Democratic gubernatorial counterpart Doug Racine, Shumlin said Vermont must minimize the use of one-time money to meet ongoing financial commitments. The state should preserve the rainy day funds until lawmakers can project with confidence they can replenish it, he added.
Shumlin also reiterated his inaugural address promise to not increase taxes. He said the rate must remain competitive with neighboring states to grow jobs.
State Auditor Thomas Salmon said the administration's honeymoon is now over, and elected officials must prepare for some difficult financial discussions. "Vermonters of all parties want the administration to succeed in preserving Vermont's financial stability," said Salmon, a Republican.
Andrea Cohen of the Vermont Businesses for Social Responsibility organization called the budget forward-thinking and ensures many important priorities are implemented.
"Increased investment in workforce development, energy efficiency, telecommunications infrastructure, a clean Lake Champlain and early childhood education are all smart strategy -- building on our strengths and honestly addressing our weaknesses," she said. "We especially look forward to the cost savings that can be realized from implementing a serious overhaul of our current health care system."
In a statement from the Vermont Chamber of Commerce, president Betsy Bishop said the budget addressed several critical areas but, most importantly, presented a balanced approach with no new revenues. "This sends a strong message to the job creators and the workers in Vermont that the governor understands that there is no more taxing capacity and that the state must address system changes," Bishop said.
Reaction from Windham County lawmakers will appear in the weekend edition of the Reformer in the "Under the Dome" legislative column.
Up until Tuesday's speech, the governor's administration has been mum on the budgetary details. Statehouse officials projected the budget deficit at somewhere between $112-150 million before Shumlin's address.
The governor said that figure jumped to $176 million because the Challenges for Change initiative last session could not address an additional $26 million in savings.
Nevertheless, this is the first time in a decade state spending is lower than the previous year. Even with $120 million in increases in state government, the budget represents a spending reduction of $25 million when adjusted for temporary federal aid.