budget changes

I’ve never liked the part of the Vermont state budget bill called ‘the waterfall’. Regular readers will recognize this name for the part of the state budget bill that directs where extra money should go when revenue estimates fall under the actual inflow of money. To my frustration, the extra money often goes to fund some additional project for state government or fund some special one time effort for which the initial revenue estimates did not cover. I’ve always thought if we had extra money, it should be used to reduce expenditures for the following year, or kept as cash on hand to reduce tax. I’ve never been able to convince my colleagues to do either of these things.

However, maybe they were listening after all. I’m very pleased to report that this year there is a plan to eliminate the waterfall forever and save unexpected revenue, reducing expenditures and creating stronger financial footings for the state.

Here’s what will happen. In a year when there is more revenue than expected at the end of the fiscal year:
* First, the statutory reserves will be filled. That’s going to take an amount equal to 5% of the previous year’s budget. It’s called the ‘float’, about which I’ve written before. This money is needed keep state accounts level as revenue inflow varies.
*Second- Revenues will be added to the Education Fund to replace the money shorted in last year’s general fund transfer, approximately $280 million. Obviously replacing this large amount will take a while. This revenue will lower property taxes.
*Third- To offset federal budget cuts and soften impact on Vermont’s most needy populations, a fund will be set up and filled with an amount close to the estimate of federal cuts. It would be used to supplement programs like LIHEAP, Medicaid, Global Commitment etc.
*Fourth-A rainy day fund will be created to be used when there is a REAL emergency. Lots of Vermonters were calling for a rainy day fund during the worst of the recession, and this answers those concerns.

I like this plan because it sets money aside for use in hard times, has the potential to lower property tax and maintains the ‘float’ needed to keep state accounts viable, all without raising taxes. This plan can work for a number of years because we are still in difficult financial times and it will be several years before we return to normal times. The uses are wise and will create a more solid financial footing for the state.

Sometimes, I have a really good day here at the statehouse.

Rep. Carolyn Branagan