BRISTOL — Gov. James Douglas on Monday urged lawmakers to focus on three priorities during the second half of the 2010 session: Balancing the state budget, creating more job opportunities and finding new ways to fund public education.
The Middlebury Republican made his remarks at the Bristol Legion hall during his last legislative breakfast as governor. Douglas touched upon a wide variety of subjects, including Vermont Yankee, during a free-ranging discussion that saw local lawmakers sit back and let the governor soak up the political spotlight.
It’s a spotlight that Douglas used to underscore the state’s fiscal year 2011 budget shortfall, which had been estimated at around $150 million. The Legislature has been working to bridge that gap through various cuts and efficiencies in state government.
But Douglas served notice that the shortfall is likely to grow before the gavel falls this spring on the 2010 session. Indeed, Douglas Administration Secretary Neale Lunderville reported hours after the governor’s Bristol appearance that general fund revenues for February were nearly $10 million — or 18 percent — short of the forecast provided by two consulting economists a month earlier.
Compounding the problem have been substantial shortfalls in the state’s unemployment and pension programs.
“Our revenues are not performing well, and it’s principally in one area — personal income tax,” Douglas said. “Our sales, meals and rooms taxes have been holding their own.”
Douglas attributed the personal income tax dip to Vermonters working less in this sluggish economy, or simply moving to other states with a lesser tax burden.
The governor said he believes the Legislature should not only resist raising taxes to solve the revenue shortfall, it should roll back some estate and capital gains tax hikes it passed last year.
“A lot of people have a choice of where they live or die,” Douglas said of the effect that higher taxes have on attracting and retaining affluent citizens and entrepreneurs. He pointed to U.S. Census figures indicating that, during the past two years, there has been a net outward migration from Vermont.
“More people have moved to other states than have moved in,” he said.
Lawmakers, according to Douglas, must also resist the temptation of using federal stimulus money to patch holes or build up state programs. He specifically pointed to the prospect of additional American Recovery and Reinvestment Act (ARRA) dollars to fuel Medicaid health care programs.
“It’s one-time money and we ought to use it for one-time purposes, and not build it into the budget base, which will push the problem down the road to next year,” Douglas said. The governor believes the additional ARRA money should be used in planning for a replacement of the state hospital in Waterbury.
Douglas said Vermont must improve its economic standing by creating more jobs, or at least better conditions in which businesses can prosper and add more workers. With that in mind — and in spite of a big revenue shortfall — Douglas has proposed a “jobs bill” that includes spending increases (using ARRA funds) for higher education and workforce training. The governor said 38 companies have already lined up to take advantage of the extra training resources. He said he is still waiting for the Legislature to pass his jobs bill.
“I think even in these difficult fiscal and economic times, we need to position Vermont for success,” Douglas said.
The state’s future economic success hinges, in part, on devising a new funding scheme for what will have to be a more streamlined public education system, according to Douglas.
The governor praised the vast majority of school boards statewide for proposing 2010-2011 budgets that are level-funded, or slightly less than this year. But Douglas said bigger changes will be needed soon in order to contain education property taxes that he said are hurting homeowners and businesses — even with the income sensitivity provisions of Act 68. He noted that Vermont households earning up to $110,000 can currently qualify for subsidies under Act 68. Those subsidies figure to draw another $26 million from the education fund next year, he said.
“I agree that we ought to have some kind of support for people with modest incomes, but a subsidy for up to $110,000 of income I think is too much,” Douglas said. “What it does is shift the cost to everyone else.
“I think we’ve got to rein those costs in.”
Douglas has suggested some ways of containing school costs. His ideas have included asking teachers to assume at least 20 percent of their health care premiums, and reducing the replacement schedule for retiring teachers to a point where Vermont’s student-teacher ratio would rise from the current 11-1 to 13-1.
“It’s not an easy conversation to have, but we have to be realistic,” Douglas said of streamlining public education.
Other topics discussed by Douglas on Monday included:
• Vermont Yankee. Douglas said the Legislature should not be casting votes on the fate of Vermont Yankee. The state Senate last month voted overwhelmingly against the notion of extending the Vernon-based nuclear power plant’s operating license for 20 years when the facility’s current license expires in 2012. Lawmakers have questioned the credibility of the plant’s ownership (Louisiana-based Entergy), as well as its ability to amass adequate funding to properly decommission the facility. Meanwhile, Entergy continues to try and get a handle on a leak of radioactive tritium on the Vermont Yankee property.
“The question here is ‘Who ought to make that (licensing) decision?’” Douglas aid. “With all due respect, I don’t think it should be the Legislature.”
Douglas said the re-licensing of energy facilities like Vermont Yankee falls within the purview of the Vermont Public Service Board, the Vermont Public Service Department and federal nuclear regulatory authorities.
“I think we should let that system work its way through,” said Douglas, who did voice frustration with Entergy officials for recent operations at Vermont Yankee.
• Human services funding. Some participants at Monday’s breakfast voiced concern that Douglas’s tax/budget priorities seemed weighted in favor of retaining well-to-do citizens and businesses, while cuts loom for many programs for needy citizens.
Douglas argued that Vermont will be hard-pressed to afford the array of social services it currently provides. He said Vermont has more nonprofit organizations per capita than any other state, and suggested some be combined to reduce redundancies in services and administrative salaries.
The governor said an estimated 28 percent of Vermonters are expected to receive some form of Medicaid services next year, compared to around 9 percent in neighboring New Hampshire.
“I think it’s fair to ask if we need the robustness of programs we have,” Douglas said, adding he believes human services clients should assume a greater share of their premiums.
• Health care. Douglas said he is not inclined to support a universal, single-payer health care system. He said Vermont could, as economic conditions improve, upgrade its Catamount Health program. In the meantime, he said the state should work on controlling costs and encouraging Vermonters to lead healthier lifestyles.
John Flowers is at firstname.lastname@example.org.