Incandescent Unpopularities 
By John McClaughry

It has fallen to Gov. Jim Douglas to present to the 2009 legislature a budget proposal replete with incandescent unpopularities.

It's not that Gov. Douglas is some kind of hard-hearted Scrooge, who revels in human suffering. Nor is he a notable subscriber to President Reagan's 1981 inaugural declaration that "government is not the solution to our problems; government is the problem." Far from it. 

But there is no doubt that Vermont's state government faces a serious budget problem. Already the administration has made severe cuts in the FY2009 budget, ending this June. In the approaching FY2010, the General Fund, compared to a year ago, faces a revenue shortfall of $152 million. That will produce a budget gap of over $200 million.

The governor clearly understands that our demands and expectations for government have outrun the money available to pay for them. He also recognizes that a Congressional bailout of unknown size and form will not resolve the problem.

Perhaps the most politically unpopular belt-tightening proposal - in the sense that highly organized interest groups will rise up against it - is reducing state government employment by some 600 positions. That's easy to say, and it's easy to calculate the savings ($17 million).

What is not so easy to determine is whether the work that those 600 employees are doing will no longer be done at all, or whether it will be distributed among the surviving state employees on top of their present workload. If the latter, there will be consequences: unplowed highways, even lengthier permit delays, untested water supplies, waiting lines, closed offices.

Equally unpopular with the state's environmental movement will be his proposed one-year suspension of conservation purchases ($4 million) by the Housing and Conservation Board. The Board has been making conservation purchases - beginning with a loon preserve in Newark - since 1989. After twenty years most people will probably be content to give this activity a rest for a year - or more.

For the first time in many years a Governor has pried open the Pandora's Box of spending through the state's captive nonprofit human service organizations. The home health, developmental disability, planned parenthood, and mental health service monopolies have for years contrived to expand their own budgets, militantly stifled competition, and provided very "robust compensation packages" (the governor's phrase) to their executives. They have also built up a powerful political force.

The governor wants a "comprehensive package to rein in property taxes." How this will be achieved while transferring some $40 million of teachers' retirement costs to the Education Fund, and freezing the annual General Fund contribution to that Fund, is not at all clear. His message did not include a proposal for forcing spending controls on local school districts, an idea that, whatever its merits, would lower the coffin of "local control of education" into an already beckoning grave.

The governor declaims against raising "broad based taxes that can be avoided": income, gasoline, and property taxes. But upon close examination his budget exhibits numerous tax increases. Unless there is some as yet undisclosed magic money pot, property taxes will have to increase to fill the proposed hole in the Education Fund. The Governor opposes raising the gas tax, which is long overdue, but wants to institute a new "infrastructure investment fee" on vehicle registrations paid only by Vermont motorists. The employment security tax will have to increase to replenish the depleted employment security trust fund.

And then there is the surprising call, amid all the reductions, to increase preschool spending. This, he says, will assure that "more children arrive at kindergarten ready to learn". Only three years before, the governor had observed that "adding two more grades to the already stressed K-12 education system" would be "an unacceptable outcome". In addition, he wants to increase spending for higher education, where many believe that the costs are running well beyond the benefits, many if not most of which are exported when new graduates seek employment.

Is there a game changer in this menu of fiscal remedies? One modest possibility is the governor's call for creating a Health Savings Account-eligible Catamount Health policy. The liberals dominant in the legislature adamantly reject high deductible coverage coupled to tax-free HSAs as "not even insurance".

By that they apparently mean that such consumer-driven health plans threaten their hoped-for march toward the government-run, taxpayer-financed single payer health care system of their dreams. And they probably do. The Governor's HSA proposal heads the opposite direction.

All in all, Gov. Douglas has done the best he could to deal with an enormous problem under very trying circumstances, almost totally not of his making. Now the political combat will begin, and as usual, focused special interest groups are likely to fare better in it than ordinary citizens and taxpayers.
 

John McClaughry is President of the Ethan Allen Institute.