By John McClaughry
The exhausting national election is now over, other than counting misplaced ballots and resolving lawsuits. Now is a good time for Vermonters to let partisan animosities subside and take a serious look at what the governor and the next legislature are likely to face. Here’s a concise list.
Fiscal Worries: In September a Republican governor and Democratic legislature commendably produced a balanced budget for FY21, with no tax increases. This achievement was made possible by the windfall of $1.25 billion from the CARES pandemic relief act, and an unexpected $21 million in personal income tax revenues from boom year 2019. Remarkably, the lawmakers did this without depleting the Budget Stabilization and Rainy Day Reserve Funds (totaling $112 million).
John McClaughry is vice president of the Ethan Allen Institute.
But with the election year pressure on Congress to spend now in the past, and the national debt growing by a trillion dollars a year, there’s no assurance that the 2021 Congress and president will issue more debt to pay for a CARES Act reprise. Nor can anyone confidently predict the fiscal implications of various pandemic scenarios.
The Scott Administration projects a $180 million General Fund deficit for FY 2022.The $23 million needed to keep three state colleges in business can’t be delivered year after year. Some solution has to be found that makes the system self-supporting or drastically transformed, over stubborn resistance from faculties, staff and legislators committed to preserving the (unstable) status quo.
Revenue Shortfalls: Other than rooms and meals, tax collections have been surprisingly strong over the past six months. However, there is no likely new source of new tax revenue to close this anticipated budget gap. Politicians like former House Speaker Shap Smith have lusted after a sales tax on services, but Democrats, in the majority, have historically resisted raising sales tax rates. Their current “progressive” idea — a surtax on incomes of more than $500,000 — won’t come close to covering a $180 million shortfall, and would likely send current and prospective top bracket taxpayers fleeing to less punishing places.
Broadly taxing fossil fuels, the most yearned for green enthusiasm of the past decade, has never made it to a vote in the House, despite a virtue-signaling supermajority ready to vote for almost anything that promises, however preposterously, to defeat “climate change.”
The pending carbon tax proposal, the Transportation and Climate Initiative (TCI), would put a tax of 5 to 17 cents per gallon on motor fuel, rising annually, but the backers are insistent about spending the revenues on additional subsidies for solar panels, electric cars and room heaters, and home insulation. Those revenues would not be available to cover existing fiscal shortfalls.
Retirement Fund Deterioration: A year ago the state employees’ and teachers retirement funds, and their associated post-employment benefits, had an astounding unfunded liability of $4.5 billion. When the new figures come out on Nov. 10, that liability is likely to increase to more than $5 billion. Making things worse, the unachieved 7.5% annual yield from the funds will soon be reduced to 7.0%, but in this pandemic year, the funds will be lucky to earn half that.
Even tightening up benefits and adopting a realistic yield rate will not be enough to sustain confidence in our retirement fund management. Without credible progress on reform, the interest costs on state borrowing will start creeping up, and our bond ratings will start creeping down.
This problem has been recognized for three decades. In 1996 Treasurer Jim Douglas reported that with an infusion of $60 million the teachers fund could be converted to a defined contribution plan, a amount now ludicrously inadequate. I wrote back then, “The $60 million shortfall — perhaps much more — is part of the price of a legislature and governor chronically unable to pay for a liberal welfare state with the revenue that beleaguered Vermont taxpayers can produce. That is the tough nut that will have to be cracked somehow.” Twenty-four years have gone by and that tough nut remains uncracked.
Electric Grid Challenges: The “decarbonizing” rush to replace fossil fuels with electricity, whether with heat pumps in homes and businesses, or electric vehicles on the highways, promises to put a serious burden on the state’s already shaky power grid. Vermont’s Meredith Angwin, in her new book “Shorting the Grid,” patiently explains why reliance on diffuse and intermittent renewable power generation and just-in-time fuel deliveries to downcountry natural gas plants is a recipe for rolling brownouts by 2025.
Finally, the chances for a long-overdue government performance review remain, alas, zero. Every administration sets out to carve out waste and improve services (Scott’s version is PIVOT). All have achieved some small successes. But the big question — just what can we realistically expect our state government to do, and how much can our taxpayers be made to pay for it? — won’t be asked.
John McClaughry is vice president of the Ethan Allen Institute.
Spot on John. As usual.
You’ve been letting us know about these issues for decades now, your 2008 “Off the Rails” has some of the very same issues discussed in it, 12 years ago.
I don’t think past legislators paid much attention, doubt the current incoming batch will.
As a post-script- I wrote several replies here, to why we needed to support Phil Scott earlier this week. After hearing of his performance at the voting booth Tuesday, I see I was flat out wrong. As my son told me- ” Rip the damn band-aid off, and get it over with”
He remains convinced that allowing the ship of state to sink is the best, remaining chance to get change.
It’s one way but not the only way – gains made are a great start but in the end I agree. It was Hussien that gave us Trump. What many ppl are not seeing is Dems and Progs have an unholy alliance in VT. Terrified the skunks at the party will run competing candidates – Dems have jumped into bed by the communist wing of the party which have now begotten more communists.
However there is an old-school wing of this bastardized bunch that does not accept this arrangement *at all* and stupidly allowed party to accept a dyed-in-wool commie prog for governor? When all Dems vote Benedict Scott his numbers are 15% Dems? Already have all they want so what are the missing – nothing.
It’s the Progressives of the Democrat Party that effed this up for them all – as usual. And by allowing a Progressive to run in CC under the ticket removed a reliable Dem from office. No honor among thieves much.
Correction: Scotts numbers are 75% Dem – like 15% Rs – do the math lol.
So let’s talk about eligibility to run.
Molly Gray, still has some soul, you can hear it with her answers and non-answers about the eligibility, she knows she is wrong on this. From our constitution.
15. Residence of representatives and senators
No person shall be elected a Representative or a Senator until the person has resided in the State two years, the last year of which shall be in the legislative district for which the person is elected.
23. Residence of Governor and Lieutenant-Governor
No person shall be eligible to the office of Governor or Lieutenant-Governor until the person shall have resided in this state four years next preceding the day of election.
This is clearly a qualification upon the citizenship. The person shall have resided……to live. We were our own country when this was formed, of course you had to be a citizen. French citizens or Montreal Citizens could not be our Governor for example.
So if you take reside to mean citizen, it doesn’t work. People can not be registered to vote, nor pay taxes, nor be citizen and reside in a town. They could be illegal aliens and reside in a town.
They are parsing words. Molly Gray knows she’s wrong on this, you can tell by her words and how she reacts. Yes she might win the first round of court, but she wont’ win. She knows this in her heart, she may be uber ambitious which put her in this place but her soul hasn’t been so corrupted she can’t recognize the truth, it comes out in her speech, words and actions.
Somebody with experience, a bit of money could win this. Some group with a back bone could press this issue. Of course everyone in Vermont has run cover and put this out in a way to “sell it” to the public, in other countries this is known as propaganda, a much more accurate term.
Are here a handful of people in this state willing to uphold the law? A group from VT GOP? Anyone?
Milne was talking about it, will anyone stand up? How about our Governor?
This really is a pretty simple concept and if you flesh things out, she is clearly not eligible. Will we stand up for what is right, or will once again we have the wool pulled over our eyes.
Hi Neil.
I don’t see one thing on this list about Job Creation- and even worse than that, he says “No likely new source of new tax revenue”.
“”WHY”” I ask is that??
I see nothing but opportunity if you work to roll back some regulation that allows the people to dust themselves off and begin the work of rebuilding based upon what they now see around them for need.
Home Schooling has opened up an entire new way for parents to educate their own kids, the opportunity to grow what parents need now for this is huge, it’s endless, it could be an entire new economy.
People are much more concerned about their health and are wanting to get healthy again, get off all the meds.. there is huge potential in this field.
You’ve got this problem with the Dairy farmers and what they are going to do to modernize, there is more opportunity.
I read you have a problem coming up with all these old oil barrels..
I see opportunity everywhere!
You can’t solve a whole lot until you get that economy and the people up and running and rolling the money back in again.
JOBS, ECONOMY, Getting people to WORK.. Creating Work.. this stuff is Number One Neil..
Don’t the people running the state get this?
Hi Laura, many love living off the teet of our out of state visitors. Taxing is income! Please comrade, step in line! 🙂 Business is evil. working for the state is good. You haven’t been practicing your indoctrination home work, bad citizen.
Ohhh yes, silly me.
I forgot you all live on love over there. 😉
Of note are the numerous “shalls” – kinda brazen for her and comrades to attempt this – even for fellow communists lol.
SCOV and other lawyerly folks didn’t happen to see this or even mention?
Thoughtful and well written as always.
Thank you Mr. McClaughry.