May 22, 2020
Recent significant revenue downgrades, primarily, if not exclusively, driven by the COVID-19 crisis, forced Governor Scott this week to introduce a modified, “skinny,” budget proposal to cover the first three months of fiscal year 2021, which begins July 1, 2020. This is an all-text budget, meaning there are no line items. Gov. Scott’s FY ’21 budget proposal introduced in January to cover the entire fiscal was deemed unworkable due to the COVID-19 crisis.
State economists advised the administration that State spending is predicated on revenue forecasts, and, right now, they don’t have a clear picture of how the recession will impact Vermont in the next few months. The administration and lawmakers listened and agreed to a short-term budget with minimal policy changes until the state’s revenue picture is clearer.
Budget Calls For 8% Reduction In State Spending
The budget proposal being floated instructs State agencies and departments to spend 23% of the FY20 spending for the first quarter of FY21. A reduction in annual spending from 25% to 23% translates to state agencies and departments having to reduce their spending in the first quarter of FY21 by 8% from the previous year. The cut comes as agencies and departments are experiencing caseload increases due to the COVID-19 pandemic and a revenue loss of 12% due to the recession the crisis has caused. Vermont’s beleaguered State College system is also not immune from the 8% cut.
The implications of the proposed budget cuts are not yet fully clear, but I would note that the State has already implemented a hiring freeze on all positions that are not working directly on the COVID-19, and it’s because these positions are ineligible for reimbursement under federal CARES ACT. While some State agencies and departments may be able to absorb some or all of the additional cut by delaying projects, many others will struggle with the mandate, especially while experiencing increased caseloads and understanding the additional budget pressure that is coming July 1, when their VSEA employees receive a negotiated lump-sum payment.
VSEA will be providing regular budget updates to members as we learn more specifics in this rapidly evolving an unprecedented budgeting process.
Federal CARES ACT
Vermont’s House and Senate Appropriations committees will be working the next few weeks to identify areas of state spending where the state can legally replace state revenues with federal CARES ACT funds, but the opportunities are limited by the fed’s strict regulations on how and to whom the COVID-19 relief funds can be allocated. Currently, the funds can only be used for COVID-19-related expenses and cannot be used to backfill state revenue losses caused by the recession.
Budget Scenario Worsens Without Federal Assistance
Vermont, like all other states, desperately needs additional federal support, coupled with a loosening of the restrictions to receive federal funds. If Vermont does not receive additional state support, the results will be catastrophic for state government and for our communities. There are a historic number of Vermonters unemployed today, and the State should not be adding numbers to our unemployment rolls by laying off state employees. And with so many Vermonters in need right now, many of our communities could be devastated further by program/service cuts.
It’s time for Vermont’s legislature to explore securing additional revenue from those in our state who can most afford it. It’s also time to tap Vermont’s relatively significant reserves while we wait for federal action.
Vermont State Employees’ Association