Vermont Tiger

Doing the Math

by Art Woolf

WCAX reports that our elected officials in Montpelier are back at work and 

priority number one was the budget.  The state is facing a $150 million shortfall, and Democratic leaders say they're closing in on a final plan to fill the gap.

Great.  It should be priority one.  Speaker Shap Smith then says

"We think we're within $10 million dollars of solving the problem.

Excellent.  Reporter Kristin Carlson tells us

The Problem With Models

by Art Woolf

Tom Kavet, the consulting economist who works for the Vermont legislature's joint fiscal office, has analyzed the impact of proposed reductions in the state's Human Services budget, some of which I assume (I haven't gone through the nitty gritty of the entire budget) are part of the Governor's proposal to balance the FY11 budget--which is unbalanced to the tune of $150 million.   Kavet uses a fancy econometric model that is widely used in the state, and the Rutland Herald's editorial writer has used it to question the wisdom of human service budget cuts.  Kavet writes that the model's output shows that

In Vermont, the proposed AHS cuts reviewed herein are likely to result in the loss of more than 1,000 jobs per year, and could approach losses of 1,400 jobs per year. 

That's not surprising, given that when the state government spends money, jobs should be created.  Since state spending brings in matching grants from the Feds, there should be even more of a job benefit, and if that spigot is turned off, it's not surprising that there would be a loss of jobs.

Unraveling Ed Spending: Part 5

Myths, Phantoms, & Solutions

How do spending on education and student performance correlate?  Why are some schools receiving taxpayer money to educate students who don't exist?  And, finally, what can concerned citizens and taxpayers do to reform what is so obviously a broken system? 

Hugh Kemper may not have all the answers.  But he certainly has more than anyone else. Click here for Part Five of Unraveling Ed Spending.

(ed. note: We are exceedingly grateful to Hugh for the analysis and to Steve Evanczuk for the technical wizardry.  They have done us all a service.)

Unraveling Ed Spending: Part 4

The Tax Scenario

So, you ask, what happens to my property taxes over the next couple of years.  The answer isn't pretty but as Hugh Kemper explains in this segment, the governor has proposed reforms that could make a difference. 

But the governor can't do it alone.

Surprised?

When voters in Georgia go to the polls, they will find an unusual scenario: a proposed school budget that would go down — by 1.22 percent — yet still trigger a substantial school-tax increase of an estimated 6.2 percent.

Georgia is not alone among Vermont communities in this situation. The proposed school budget in neighboring Fairfax would go down 0.01 percent — while raising school taxes 8.7 percent. In Chittenden County, school budgets proposed in Charlotte, Hinesburg, Shelburne and Williston are roughly level or decreasing, but taxes would go up 5 percent or more. Communities in Addison County, Grand Isle and other parts of the state also are feeling the pinch.
    Freeps

This may be news but it shouldn't come as a surprise.  It certainly didn't catch followers of Hugh Kemper's work unaware.  Nor readers of Art Woolf who was predicting this outcome almost from the day Act 60 became law. 

Watch this site, beginning tomorrow, to learn how we got here and what can be done. 

It will be surprising.  

Guaranteed.

Economics 101

by Art Woolf

The state's Unemployment Insurance Trust Fund moved into the red this past week and is forecast to be $300 million in the hole within a few years.  (See page 3 of this presentation from the Vermont Department of Labor.  More information about the UI Trust Fund's problems here.)  Governor Douglas has proposed a cut in benefits and an increase in the taxable wage base, meaning that the state's employers would have to pay higher unemployment insurance taxes for each worker they hire.

Needless to say, the state's labor unions are upset about the first part, and the business community about the latter.

Senator Vince Illuzzi recently offered a new idea:  Rather than taxing employers, tax all workers in the state.  According to the Herald's story, Senator Illuzzi's proposal

would add a one-tenth-of-1-percent or two-tenths-of-1-percent surcharge on weekly paychecks for about 330,000 wage earners. For an employee making $40,000 annually, the new tax would amount to $40 or $80, depending on which rate the Senate chooses....

Illuzzi said his plan restores the fund in the same time period. Better, he said, it does so without hitting out-of-work Vermonters already struggling to make ends meet at current benefit levels. And it slows the curve, he said, on the administration's proposed tax increases for employers, many of whom say they will be unable to absorb the new burdens without resorting to layoffs.

"It's a trade-off," Illuzzi said. "Do you put some businesses under? Or do you ask a much larger number of people to put a much smaller amount in?"

Assuming the Douglas plan to increase the taxable wage base raises the same amount of money as Sen. Illuzzi's plan, what's the difference between the two plans?

Three Questions About "Education"

By Daniel Foty

I'll start out by noting that "public education" isn't something to which I pay close attention; I just have too many other things (in too many other places) to stay on top of to pay this one much mind.

But I couldn't help but note how the discussion associated with this post had evolved.

The problem I have is that I see three elephants standing in the corner of the room that seem to be critical to any taxpayer discussion of this topic - and those elephants seem to get scant attention amidst the philosophical arguments.

Therefore, I will try to frame those three elephants as three questions for discussion - below the fold.

The No-Go NGO: Burlington Telecom

by Chris Campion

The City of Burlington is continuing to argue that city funds should be used to prop up their failed enterprise, Burlington Telecom.  While Judge Toor of Chittenden Superior Court ordered (on Friday, 2.13) that Burlington make no payment on the next scheduled installment of BT's $33.5 million note to Citi Leasing unless the Public Service Board agree, the city's attorneys have asked that Condition 60 (the certificate of public good) be waived so the city can access cash-pool money to pay the outstanding BT debt.  This request by the city was made at a hearing before the PSB on Thursday.

In other words, the document that created BT in the first place must be partially nullified in order for BT to consume the city's dollars - all in the hopes of keeping the organization afloat for some indeterminate period.  The city's lawyers are arguing, whether they know it or not, that BT cannot function as a public good - which seems to undermine the whole case for supporting this failed enterprise, since it's that certificate that made it a public project in the first place.  The good news is that the judge's order requires the city to document any spending on BT from the city's coffers, and that any spending by the city on BT's behalf can be repaid by BT revenues.  This last piece of the order, in itself, might obviate the sale of BT, since it is entirely unlikely that BT's revenues are going to increase on the order of magnitude required to cover payments on principal and interest.  By some calculations done on the Tiger, the subscriber base would have to triple to meet operating expenses now wildly inflated by BT's borrowing.

One might argue that none of these machinations would have been necessary had a business case been brought forward that demonstrated both a need and a demand for the services BT was to offer.  I think the reason this wasn't done is because the need and demand simply did not exist, and demand was already being serviced by other providers.  BT is a political animal that slipped its leash, and Burlington only has its elected officials to thank for the lumbering, cash-consuming behemoth now found wandering City Hall, sniffing for tax dollars.

New Prophet In Town

    Although still early in his legislative tenure, Rep. Oliver Olsen has wasted no time getting his feet wet in the Statehouse.
    The Jamaica Republican released his analysis of the FY 2012 Vermont State Education Fund projections on Thursday called "Crisis on the Horizon."
    Olsen said education spending has increased annually since Act 60 was established, leading to hikes in property taxes.
    "But with many local school boards proposing smaller budgets this year and next," said Olsen, "voters will be left asking an obvious question -- if we reduce school spending, why will our property taxes continue to increase?"
    Reformer

Oliver Olsen was appointed to fill the void left in the legislature by the death of our friend Rick Hube.  Olsen is also a friend of this site and a very keen student of Vermont politics.  He is also a shrewd and capable policy analyst with an ability to pull order from the kind of chaos that is Vermont's system of taxing property, which we do as though it were income ... sort of.

In this report, Olsen has isolated four large consequences of past decisions that are simultaneously bearing down on the state.  Pick your metaphor here – "perfect storm," "tsunami," etc. etc., the outlook is not good.

We've been saying this for a while now.  Rick Hube, rest his soul, was saying it before he died.  Now, Olsen is saying it and saying it well.

Eventually, perhaps, the legislature where Olsen now toils will listen and do something about it.

Perhaps ...

Lessons From Oregon?

by Art Woolf

Last week, Oregon's voters overwhelmingly approved a ballot initiative to raise the state's corporate and personal income tax rates.  The initiatives passed by 54-46 majority, despite the opposition of well-known right wing entrepreneurs who lead corporations such as Nike and Columbia Sportswear.  (Just kidding about the right wing part.   But entrepreneurs Phil Knight of Nike and Tim Boyle of Columbia did vocally oppose the initiatives.)

Oregon's personal income tax rate before the tax hike was 9.0%, and it kicked in at such a low level that just about every taxpayer paid at that rate.  By contrast, Vermont's 9.4% rate only applies to income levels above $400,000 for married couples.  The Oregon ballot initiative raises the income tax rate from 9% to 11% but only for taxpayers earning over $250,000.  

Does this have any significance for Vermont?  I think so.