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Gov. Douglas voices concerns about state, school budgets

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By JOHN FLOWERS

MIDDLEBURY — Vermont Gov. James Douglas on Monday encouraged lawmakers to come closer to his priorities on developing new affordable housing, a tight fiscal year 2009 budget and new strategies to stem Vermonters’ property tax burden.

Douglas outlined these and other legislative goals during his annual appearance at Addison County’s legislative breakfast series, held at the Middlebury American Legion headquarters on Wilson Road.

Calling it the toughest budget year in the six he has served as governor, Douglas warned that state legislators will be challenged in the coming weeks to make some tough decisions on spending priorities.

The most recent financial forecasts indicate a 1-percent drop in general fund revenues for fiscal year 2009, according to Douglas.

“It is a time for making choices,” Douglas said, quoting, as he did in his first budget address, President John F. Kennedy who said, “To govern is to chose.”

Douglas noted he had outlined his budget priorities in a draft 2008-2009 spending plan he unveiled in January. That budget has drawn fire from some House and Senate leaders for proposed cuts to the Vermont Housing and Conservation Board, Medicaid reimbursement rates for hospitals and for a proposal to lease the state lottery to generate an estimated $50 million the governor would use to pay for school construction aid and to draw down property taxes.

“This is a year to make those difficult choices, and I know we can work them out and decide what’s most urgent for people in the coming year in a time of softening economy and decreasing revenues,” Douglas said.

While Vermont’s economy is slowing, the Green Mountain State appears to be in much better financial condition than other states, according to Douglas. He noted the state of Rhode Island is proposing to lay off 1,100 state employees, while Maine is considering reducing its workforce by a “lesser number”; Kentucky is cutting some budget items by 12 percent; California is facing a $15 billion deficit; and New Jersey Gov. John Corzine recently proposed eliminating three agencies of state government in order to save money.

“These are some very dramatic proposals around the nation to deal with shrinking revenues and the economic stress that we are experiencing,” Douglas said. “But we are doing better in Vermont, at least in relative terms.”

He said Vermont has been spared much of the pain of the sub-prime mortgage crisis.

“We have the lowest foreclosure rate in America,” Douglas said. “That has been positive.”

The governor added Vermont can also be pleased by the fact that its economy is becoming more diverse, its 2007-2008 ski season has been “epic,” dairy farmers are riding a wave by good milk prices and Vermont has gained 11,700 jobs since 2003.

“It’s going to be a challenging year … but I’m sure we’ll get through it,” Douglas said.

HOUSING

While Douglas is optimistic he and state lawmakers will come to terms on the state budget, he is less confident of seeing eye-to-eye with them on the subject of housing.

The governor had hoped the Legislature would approved his “New Neighborhoods” initiative, which he said streamlines the permitting process for new affordable homes and creates incentives for communities to approve new construction that complements the existing low-income housing network.

House and Senate Democratic leaders have not taken shine to his proposal, however, saying — among other things — that it would weaken environmental oversight of new construction. Some lawmakers have also questioned the true affordability of the homes envisioned under the New Neighborhoods initiative, arguing that homes in excess of $200,000 are not affordable to most Vermonters.

Douglas disagreed, arguing, in part, that many Vermont families are ready to graduate into mid-level, $200,000 homes, thereby freeing up less costly starter-homes for new families.

“There are a lot of Vermonters who could upgrade to larger homes if they had those opportunities available, but they just don’t now,” Douglas said.

He called a counter-proposal by House leaders a “no neighborhoods” initiative that has drawn opposition from several state homebuilding organizations.

“It makes some changes in Act 250 that will make it more difficult to build homes in rural parts of the state,” Douglas said of the House plan. “I think it’s a step in the wrong direction.”

Douglas believes a lack of housing will provide another disincentive for employers to locate or expand to Vermont.

“Their employees just can’t find places to live that are affordable,” Douglas said, citing one firm that had considered putting up mobile homes on its property to accommodate its workforce. He added another employer told him that homes are more desperately needed by his workers right now than health care.

“This is going to be an important issue as we go forward during the coming weeks,” Douglas said of housing.

PROPERTY TAXES

Douglas acknowledged that Vermonters approved all but 12 school budgets on Town Meeting Day 2008 but argued the Legislature should look at ways to stem the growth of the statewide property tax.

“It keeps going up,” Douglas said of the property tax rate. “It’s just not sustainable.”

That should hit home with Vermonters later this year when they begin to pay their property taxes, according to Douglas. He conceded that Act 68 — the state’s education finance law — includes a provision that ties school property tax bills to citizens’ incomes. But he stressed “somebody is going to pay,” and offered this take on the town meeting fallout: School budgets on average increased 4.3 percent, but that will result in an increase of 5.3 percent in spending from the state’s education fund and rise (on average) of 7.2 percent in the homestead education property tax rate in Vermont’s school districts. Meanwhile, Vermont’s school-age population decreased by 1.2 percent last year, he said.

“I think it’s something we have to take a lot more seriously than we are,” Douglas said, adding he believes Vermont’s property tax rate will dissuade prospective businesses from settling here.

The governor noted legislative criticism of his proposal to lease the state lottery to generate funds to lower the property tax rate. He challenged lawmakers to come up with an alternative proposal.

“I’m open to other ideas,” Douglas said.

He added he was disappointed the Vermont House last month rejected the so-called “two-vote” provision on school budgets. Passed by the General Assembly last year, the new law would’ve required two votes on proposed school budgets featuring spending increases greater than inflation plus 1 percent.

A majority of House members determined the new rule was too complicated and takes a measure of trust away from local school boards that prepare the budgets for vote. Instead, the House OK’d a bill that would gradually lower the penalty threshold for higher spending towns. As it stands, school districts that spend in excess of 125 percent of the statewide per-pupil average must pay a financial penalty. The House bill would gradually lower that to 120 percent.

Douglas hopes the Senate will push to retain the two-vote provision on school budgets.

“I certainly don’t think we want to take a step backward from a very modest proposal that was approved on a bipartisan basis by the Legislature last year,” Douglas said.

THE IRAQ WAR

Some participants at Monday’s breakfast quizzed Douglas on his stance on the Iraq War and questioned his support for the GOP presidential nominee, Sen. John McCain of Arizona. McCain has been quoted as saying the U.S. could be in Iraq for as long as 100 years.

Given the unpopularity of the war and in light of the most recent estimates that have put the cost of the conflict at $12 billion per month, all politicians — including Douglas — are being asked to weigh in.

“I think Sen. McCain was noting the fact we were in Korea for 60 years after the war there,” Douglas said. “That may be the consequence of our involvement in various places around the globe. He also said very recently that we need to find a way to bring our troops home with honor, to finish the job as quickly as we can, and I certainly agree with that. I think everybody does.”

Douglas was asked to react to Iraq War-related legislation sponsored this session of Rep. Michael Fisher, D-Lincoln. That bill challenges the federal government’s ongoing authority to call up National Guard troops to serve in Iraq, while urging Gov. Douglas to bring home Vermont Guard soldiers now serving in that part of the Middle East.

Douglas and others have argued that the U.S. Congress’s ongoing funding of the war has given the president ongoing power to deploy the National Guard.

The governor bristled when questioned whether he had done enough to represent the state’s opposition to a war that some argued was drawing down federal resources that could be spent for domestic programs.

“I take the situation in Iraq very seriously,” Douglas said. “I’ve comforted all the families of the dozens of Vermonters who’ve lost their lives there. I have been there when they have been deployed at ungodly hours of the morning and been there at night when they have come back. I’ve broken bread with their families when they’ve been serving far from home.”

Douglas said while he’s familiar with the toll the war is taking on the state, “I’m not running for Congress. I’m focused on what I can effect as governor of Vermont.”

TRANSPORTATION

Douglas acknowledged that while the state’s transportation network needs far outstrip the funds available, he believes the state is on the right track in managing repairs to its roads and bridges.

He touted a new Vermont Agency of Transportation strategy of fixing existing road, bridge and culvert infrastructure before embarking on major new projects. The strategy also emphasizes no-frills plans that meet basic transportation needs, Douglas said.

The governor voiced concern, however, that one-third of the state’s federal transportation aid this year has come through earmarks, or dollars assigned to specific projects.

“Frankly, I don’t think that’s the way to go,” Douglas said. “I think the state should have more flexibility. When the Legislature is presented with federal highway dollars, a third of which are already earmarked for specific projects, it limits their flexibility and limits the agency’s flexibility to decide what’s most important.”

HEMP LEGISLATION

Douglas said he remains unsure whether he would sign a House-backed bill that could pave the way for hemp to be grown as an industrial crop in Vermont.

The governor noted a current federal ban on growth of hemp in the U.S. because of its relationship with marijuana. In the meantime, he said he will encourage farmers to grow renewable energy crops, such as switch grass and oil seed, on the estimated 100,000 acres of unused agricultural land in the state.

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