Early Out

Editorial in Times Argus

Article published Jul 19, 2015 on timesargus.com

The Shumlin administration is moving ahead with plans to offer incentives for early retirement to 300 state employees as a way of meeting budget-cutting goals set by the Legislature.

Administration officials say 952 employees are eligible for the incentive program, and they will be receiving letters soon with details. If more than 300 employees sign up for the retirement incentive, the state will use a lottery to select those allowed to participate.

The incentive program is a case of spending money to save money. The maximum payment a retiring employee could receive is $15,000. Payments to qualified employees are based on years of service and will be paid in installments in 2016 and 2017.

The Legislature was faced with a $113 budget shortfall this year — a gap between expected revenue and expected budget outlays. The retirement incentives are part of $10 million state officials hope to gain through savings in labor costs.

The agencies and departments with the most eligible employees are the Agency of Transportation, the Department for Children and Families, the Department of Health and the Department of Corrections.

Retirement incentives are a relatively painless way to pare back a workforce. Steve Howard, executive director of the Vermont State Employees Association, said the incentive was far preferable to layoffs axing employees against their will. 

Indeed, retirement incentives are a tool commonly used in business. Howard said the state was likely to have little trouble finding 300 workers to take the state up on its offer. 

The early retirements do not solve the state’s ongoing budget problem, however. During the legislative session lawmakers wrestled with the problem that spending was growing at about 5 percent, but revenue was growing by only 3 percent. They call this a structural problem, and it is not resolved by makeshift yearly remedies. 

The retirement of 300 workers will help, but it comes at a time when the demand for services in many crucial areas is increasing. The Department for Children and Families and the Agency of Agriculture are two agencies that are facing new challenges and require additional personnel. The secretary of education has acknowledged that her agency lacks the personnel needed to help local school districts carry out the reforms demanded by the Legislature. The state is seeking to take an aggressive role in stemming the tide of drug addiction and providing alternatives to prison. These initiatives require people. 

It is a dilemma that generally runs aground on politics. The instinct of Republicans is to close the budget gap by cutting programs, an approach based on the supposition that there is fat in any budget. Democrats also begin with cuts, but they are usually more willing to consider increases in revenue. Still, Democrats remain gun shy about tax increases. Gov. Peter Shumlin has made it a practice always to oppose increases in broad-based taxes, and fellow Democrats understand that in hard times they raise taxes at their peril. On the left, however, some Democrats are convinced that the tax system already favors the rich and more revenue can be found by raising taxes on wealthy taxpayers.

Even raising tax rates remains a temporary fix. If higher income taxes close the budget gap one year, the slower growth of revenue will mean budget demands will have outstripped available revenue a few years later. Meanwhile, the state continues to experience new demands for service in those crucial areas of health care, education and environmental protection. Those 300 retirees will help the bottom line this year, but the state cannot pare its workforce down to nothing, and it should not eviscerate vital programs.

As the state looks for ways to slow spending growth, legislators will inevitably look at the growth in health care expenditures, which have been a major drain on the budget. The future of Vermont Health Connect could well depend, not only on its successful operation, but on its cost. It has cost far more than anyone expected.

Meanwhile, revenue growth is possible where income is growing. Part of Vermont’s problem is that middle-class wages have stagnated in recent decades, while income growth has occurred in the upper tier of earners. Thus, raising rates on wealthy taxpayers makes sense, not to punish them, but as a practical way to tap into a growing revenue source. Scare stories about millionaires moving to Florida are always heard, but millionaires move here, too, despite our tax code. Economic inequality is mitigated only when the people demand it. If programs essential for many Vermonters are to succeed, they need the money to support them.