Muddling Through the Looming Deficit 
By John McClaughry

The struggle is well under way in Montpelier to shave the FY2011 General Fund budget down by $150 million. It is instructive to explore just how the Governor thinks this ought to be done, in a "balanced, compassionate, and sustainable" way, of course.

First, a fair-minded critique of the Governor's proposed budget must recognize that budgeting is always a difficult business. Governor Douglas deserves credit for courageously proposing some choices that will surely be unpopular.

Having said that, let's look at the first big item: $38 million in expected "Challenge for Change" savings. These savings will hopefully be achieved by telling certain state agencies to reduce spending or else. This is reminiscent of Gov. Dean's deficit solution in 1993, when he decreed that every agency must lop off one percent of it spending. Problem solved!

That technique, however, forces agency heads to find savings from programs and practices that have the fewest political defenders, or will least interfere with the management of the agency. These savings are not necessarily those that a rational analysis, built upon a prioritization of state government functions, would likely yield. In short, it's likely to be more of a fig leaf than a reform of lasting value.

Consider the welfare program. The Governor's budget says we ought to "remove recipients from the [ReachUp] program when they chronically refuse to complete their family development plans or to meet work requirements."

The Agency of Human Services, heavily influenced by the notion that poor people are victims, has long exhibited a reluctance to enforce serious sanctions for refusal to work. Vermont is long overdue for achieving the welfare reform successes of Wisconsin, Oregon, and Wyoming, where in effect the government told applicants "No more free ride. Prepare yourself, show up at the job we found for you, work conscientiously, and start climbing the ladder toward economic security. (We'll help you)."

With money tight, maybe AHS will now start doing this. Whether it will save much money is another question, partly because there are lots of escape hatches from actually having to work, and entry-level jobs are regrettably scarce just now. The state won't move toward a Wisconsin model by telling AHS to reduce its budget by X%. To his credit, Gov. Dean wanted to go down this path in 1992, as did the Democratic-controlled House - but liberal Sen. Doug Racine stopped it dead in the Senate.

The Education Fund budget proposal ($1.32 billion) says "pressure needs to be exerted that not only inhibits such [education spending] increases, but actually results in staffing decreases to affordable levels." Will the state, now in total control of public education finance, tell local school districts that the Education Fund won't pay districts what their voters approved, until the district achieves mandated pupil-teacher ratios? Possibly, but not likely.

If the governor wants to reduce education spending, he could propose to relocate special education responsibility from school districts to the state Department of Education. Let the state give tuition vouchers to parents to be used to the child's best advantage (the McKay Scholarship program in Florida), and defend against lawsuits demanding exorbitant expenditures.

Then give vouchers to the remaining parents to choose the public or independent educational program that they believe best suits their kids - many of which charge tuition well below that of the increasingly costly public schools.

No one in Montpelier dares to propose any meaningful parental choice out of fear of the public education lobby. Instead, the state's "solution" is likely to be more command-and-control decrees from Montpelier to local school districts, and the creation of regional education districts. That consolidation would assuredly not save any money. It would, however, make life easier for bureaucrats and please the teachers union by extinguishing school choice for thousands of kids who now have it.

A third example: the Housing and Conservation Board, for which the Governor proposes level funding but an overall $3.9 million spending increase. The HCB runs one of the state's five housing assistance programs, and buys up land rights in the name of conservation. The obvious reform is to consolidate the housing programs (together paying 130 employees $9 million), stop buying land rights, and terminate the HCB. That won't happen this year.

Basic point: the legislature can shave spending here and there, raise minor taxes and fees here and there, and maybe - maybe - close this year's huge budget deficit. That's called muddling through.

What Vermont really needs is a bold strategy to shrink the size and cost of government to what our overcharged taxpayers can afford, and stimulate our economy to wealth producing growth.  There won't be much of that this year.

John McClaughry is Vice President of the Ethan Allen Institute (www.ethanallen.org).