By Austin Davis, Lake Champlain Chamber
It wasn’t that long ago that our Legislature was writing language to enable a handful of legislators to spend millions of federal dollars if they became available outside the legislative session; this week, they voted on what to do if they are taken away…
Catch up quick: As we’ve covered previously, storm clouds are brewing in Congress that could have disastrous budget implications for Vermont.
- Death by a 1,000 cuts: already, Vermont is experiencing the loss of federal funding coming into the state through grants and programs perhaps exceeding $400 million, all due to administrative action to cut off funding.
- However, not all of them directly affect the state budget, and the state has yet to lose money due to congressional action.
Eyes on the Nation’s Capital: The gap between the US House and Senate has decreased this week, and Congress could vote on a reconciliation package as early as next week, though the ultimate deadline is Memorial Day.
- If these trillions of federal cuts happen, Vermont could lose a substantial amount of the $3.2 billion of federal dollars it uses in its state budget.
The Money Committee Chairs bracing for a fiscal emergency was clear in VPR’s Peter Herchfield’s story that ran this week.
- The story featured a quote from the Chair of Senate Finance that “If things sugar out so that large numbers of people would be hurt, I would consider a Snelling-esque [income] surcharge at some level to keep from cutting holes in the safety net and putting more people into the homeless category.”
Prior debate: Despite being on the brink of massive revenue loss, legislators voted to spend $77.2 million to buy down property tax rates, keeping what would have been an increase from 5.8% to instead 1.1% – the dissenting vote on the Committee voted no because they thought these funds should be held for impending federal cuts.
Contingency planning: The cuts Congress is considering could hit outside of the legislative session, and the budget drafters decided they needed to create a contingency for this.
- Buried in page 127 of the budget is some extraordinary language directing that if federal funding decreases by 1% or more compared to the most recent appropriations act, the Secretary of Administration must develop a spending reduction and transfer plan for approval by the Joint Fiscal Committee, which is made up of just 10 legislators.
There are some guidelines: Any total reductions or transfers must not exceed the amount lost in federal funding. This can be achieved by using the General Fund Balance Reserve to temporarily cover funding gaps, reverting unspent or unobligated funds, eliminating spending authority, or approving limited spending reductions or reallocations.