2012 Legislative Update: Week 3 (1/17 – 1/20)

by Jeff Wilson

Revenue Estimates – Every six months the Administration’s Economist (Jeff Carr) and the Legislature’s Economist (Tom Kavet) present their consensus revenue forecast for the state. In the forecast issued this past Wednesday (1/18), the economists Carr and Kavet indicated that economic activity turned out to be a bit slower than they anticipated last July, and that their state revenue projections for FY 12 (the current fiscal year) and FY 13 require a modest downward adjustment. In FY 12, General Fund revenue estimates were scaled back by $300,000, while the FY 13 numbers were reduced by $9.3 million dollars. The lower income estimate for the upcoming fiscal year will make a tough job for House and Senate budget writers a little tougher. Kavet and Carr, placed the blame for the weaker than anticipated revenue picture largely on a national economy that can’t quite shift into high gear. They cited a tepid housing market, the ongoing European financial threat and disjointed fiscal policy emanating from Washington.

Employment Data – A prominent portion of Kavet’s “economic review” was devoted to employment information and trends. On a national level, the December unemployment rate dropped to 8.5%. However, Kavet points out that the less often cited U6 unemployment measure, which also includes discouraged and underemployed workers, stands at a very disturbing 15.2%. In Vermont, December unemployment stood at 5.3%, fifth best in the nation. When looking at employment data in the context of the “great recession”, Kavet finds that current job numbers in Vermont are 2.7% above the number that existed during the depths of the recession, and are off by 2.0% from our pre-recession employment peak. In comparison to other states, Vermont ranks twelfth best on both counts, and has the best record in the northeast when it comes to digging out from the darkest days of the recession.

Budget Adjustment – On Friday (1/20), the House gave its final approval of this year’s Budget Adjustment Act by a vote of 101 to 37 (Wilson voting with the majority). Budget Adjustment serves as the legislative vehicle to make mid-course corrections to the State revenue and expenditure picture. This year, FY 12 changes were quite a bit more robust than the norm due to tropical storm Irene. The final bill included increased spending of $11.6 million over the original FY 12 total budget amount (all funds & sectors). However, most of this new spending is the result of Federal “pass through” funding. In fact, the General Fund portion of the bill, driven by broad based state taxes, was adjusted downward by $220,000. The debate over this bill was largely centered around the additional 29 permanent positions that will be activated from the “vacancy pool”. All but 3 of these positions will be allocated to the Department of Vermont Health Access (Medicaid) and the Office of Children and Families. Most of the Medicaid positions will be posted to working with Vermont’s most costly Medicaid patients. Based upon past experience, DVHA projects that this investment will end up saving state $4 million annually. The new Children and Family employees (9) will consist of social workers devoted to working with children in State custody. Given increased caseloads, the social worker-to-child average caseload ratio has increased to 15 to 1, quite a bit higher than the 12 to 1 guideline set by the Federal Government and required by State law. And finally, my Ways and Means colleague Oliver Olsen (Jamaica) hit one out of the park by gaining unanimous approval of an amendment to the bill that, over time, would restore last year’s reduction in the General Fund’s contribution to education spending. In short, the “Olsen amendment” calls for 50% of any end-of-the-year surplus funds to be earmarked for transfer to the Education Fund.

– Jeff Wilson, Manchester, Vermont, State Representative

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