January 27, 2017
January 27, 2017
On January 24, Governor Scott introduced his first budget for Vermont Fiscal Year 2018 which begins July of 2017. Governor Scott followed through on his campaign promise of introducing a balanced budget with no new revenues, largely by slashing education spending in two forms; a freeze on new school budgets in FY18 and mandating Vermont’s teachers’ pay a minimum of 20% of their health insurance premiums. In addition to the estimated $45 million in education cuts listed above, the Governor’s budget relies on a significant one-time education fund surplus to balance his budget and finance new initiatives in early and higher-education. It’s critical to note that this budget was introduced only a few days ago, therefore information such as departmental budgets and corresponding budget language are still unavailable, thus VSEA will be ever vigilant for potential surprises hidden in the details. Although state employees missed the brunt of the governor’s budget cutting axe, there are several issues of interest and concern that will be outlined below:
Impacts on State Government:
Allowing direct enrollment non-Medicaid insurance clients- The governor’s budget proposes that individuals who receive insurance through Vermont Health Connect, but are not eligible for Medicaid, directly enroll for their insurance through Blue Cross or MVP. Direct enrollment is estimated to save $2.8 million in General Funds, however it is unclear how the savings are generated. These savings could be the result of reduced payment errors for which the state is ultimately responsible, reductions in the Maximus call-center contract, the elimination of classified state employees, or some combination of all these elements.
Administrative Savings in AHS- The Governor’s budget proposal includes $2.1 million in administrative savings in AHS, which are predominantly derived through the elimination of fourteen classified managers in the AHS and DOC central offices. The proposed budget saves an additional $1.7 million by reducing so-call DISH, or Disproportionate share payments, to hospitals with relatively-high concentrations of Medicaid-eligible patients.
Shuttering Windsor Work Camp- The Governor’s budget proposal includes $4 million in projected savings from closing Vermont’s oldest correctional facility, the work camp in Windsor. The projected savings do not include reductions in force, as the positions would be reassigned to the work camp in St. Johnsbury and potentially the prison in Springfield. The governor also proposes expanding the state’s electronic monitoring and home detention programs to help accommodate the low-risk offenders currently housed in Windsor, saving an additional $1 million.
Pay Act- The Governor’s budget proposal includes full-funding for the Pay Act, save for $2.4 million in administrative savings achieved by reductions in exempt attorneys and classified managers. The Pay Act includes $1.93 million in additional funding for RFRs, in addition to financing state employee steps and the labor board- imposed cost-of-living adjustment of 2.25% for FY2018. Full Pay act funding in a budget proposal is a welcome change over the past two budgets; however these funds will likely be under-threat due to the controversial foundations, primarily education cuts, on which the Governor’s proposal is predicated.
Governor Scott’s budget proposal includes several laudable new initiatives, primarily focusing on early education and higher education. The budget proposal including $7.5 million in increased funding for Vermont Child Care Assistance Program which will increase rates paid to child care providers for state-subsidized families, while expanding the program to subsidize a further 500 families. A remaining $2.1 million will be distributed in grants to improve access to full-day Pre-K, sharing services between child care providers and municipal initiatives. The governor proposes a long-overdue $4 million increase in base funding for the Vermont State Colleges that must be secured to ensure the solvency of the VSC system and VSEA members’ jobs. Additionally, UVM and VSAC will be appropriated an additional $1.0 million each.
Questionable Budget Foundation:
The Governor’s budget is only balanced through significant and controversial cuts to Vermont’s K-12 education system. The governor’s budget is only balanced through significant one-time funds, increased federal CHIP match-rates and offloading the Vermont teacher’s OPEB (health insurance) costs to the education fund. Offloading retired teachers’ health care costs saves $35 million from the general fund; however the education fund can only absorb these additional costs and the governor’s early/higher education proposals through austere cuts on the Vermont’s K-12 system. First, the governor proposes level funding school budgets state-wide; savings $30 million by mandating school boards to maintain FY17 spending levels. Level funding school budgets will require hundreds of layoffs state wide, infuriating the NEA, but also school boards and the communities they represent.
Second, the Governor is asking the legislature to interfere in collective bargaining negotiations between teachers and school boards by mandating all teachers to pay for 20% of their health insurance, up from the current average of 15%, saving an estimated $15 million. This is occurring while all Vermont teachers are already being forced on to lower quality health insurance plans with higher out-of-pocket-costs. This proposal is not only politically unpalatable, but sets a dangerous precedent for legislative interference into collective bargaining negotiations. Furthermore, its unlikely teachers would accept an effective pay cut without resorting to strike actions or settlements that increase wages to compensate for the lost value of their health insurance.
Finally, the governor has also proposed shifting all pre-k and higher appropriation funding to the education fund. Fortunately, these new budgetary pressures are accompanied by their general fund revenues, thereby increasing the general fund transfer to the education fund. These transfers are sizable, but amount to little more than budgetary musical chairs for the upcoming fiscal year. The real concern is the sizable budget gap remaining if the Governor’s education initiatives are rejected or deemed unconstitutional for violating the Brigham V. State of Vermont precedent. Even if the legislature strips the budget of the Governor’s new spending initiatives on early and higher education, a $35 million deficit will remain. The budget maintains a $6.8 million rainy day fund, a $3.7 million fund for 53rd week of Medicaid in future years, a $32 million Federal contingency caseload reserve and the 5% statutory reserve, however legislators are unlikely to spend the reserves while balancing the FY18 budget.
This sizable budget gap could not only threaten Pay Act appropriations, but whole state programs as well. The only reassurance is VSEA’s familiarity in coping with these fanciful budget proposals, as we have in previous years. VSEA must remain vigilant, and work with elected officials to craft a budget that doesn’t compromise the Pay Act or state programs, and hopefully preserving critical investments into the Vermont State Colleges.
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