Think tank urges budgeting based on Vermonters' needs

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The Public Assets Institute is once again calling on state officials to fundamentally change the way they tax low-income Vermonters and budget for public services.

The liberal think tank released a report Tuesday called "A Framework for Progress," outlining a three-part approach to economic development: improving how the government is managed, investing in infrastructure, and paying livable wages.

The report is a signal of what lawmakers can expect the organization to seek from the budget in the upcoming legislative session, and includes several specific recommendations to encourage officials to budget based on demand for services, not availability of tax revenue.

This past session, following advocacy in partnership with Vermont Interfaith Action in late 2015, the think tank successfully pushed the Shumlin administration to create a current services budget — a one-page estimate of how much it would cost to maintain services from one year to the next.

This year, the Public Assets Institute is seeking five-year projections of what the government expects to spend on different programs. As part of the annual budgeting process, the state works with economists to project how much revenue will come in five years into the future, but it doesn't project expenses.

"At the moment, the true cost of all the state's obligations is unknown," the report says. "Detailed program-by-program projections are needed, and those projections should be estimated further into the future to account for anticipated changes in the need for services, expected revenues, and demographics, as is recommended by state credit rating agencies."

Justin Johnson, the secretary of the Agency of Administration, said in an interview his budgeting team is working to make the current services budget for fiscal year 2018 more expansive than in this past year. But he said his team doesn't have the resources to look at expenses five years into the future.

"In a sense, I understand what they're looking for," Johnson said. He added that the same people in his office who are working to make the budget and the current services budget would be needed to do five-year projections, and that it would be harder to project expenditures in some programs versus others.

The Public Assets Institute also calls for an increase in so-called rainy day funds from 5 percent of Vermont's budget to 15 percent, and for legislation that would make it easier to use those funds. The organization cites a 2013 report that says Vermont had to make deeper cuts than necessary during the Great Recession because officials were reluctant to use rainy day funds.

The organization says Vermont should eliminate school property taxes on primary residences, citing data showing that two-thirds of Vermont homeowners are paying those taxes based on their incomes using the state's income-sensitivity option. "The school funding system is still regressive," the report says. "Vermont could make the system fairer and simpler by eliminating school property taxes for all primary residences."

The group instead recommends that school taxes on primary residences be paid based on an individual's income, not the value of their property. The group does not recommend changing the way second homes are taxed.

Stephanie Yu, a spokesperson for the Public Assets Institute, said the report represents a "basket of recommendations" that lawmakers can review when they convene in January 2017. "They're not completely comprehensive, but we see them as changes that policymakers can make now that can make a big difference," Yu said.

The report says the Public Assets Institute's priorities are in line with Article 7 of the Vermont Constitution: "Government is, or ought to be, instituted for the common benefit, protection, and security of the people, nation, or community, and not for the particular emolument or advantage of any single person, family, or set of persons, who are a part only of that community."

Additional policy recommendations

The report recommends that Vermont raise the minimum wage to an unspecified amount; increase the Earned Income Tax Credit, which gives cash to low-income people; and expand the Vermont Department of Labor's Short Time Compensation Program to allow people to collect unemployment when their hours are cut, not just when they lose their jobs completely.

The report says Vermont should increase subsidies for families who need child care; create a state-administered retirement plan that members of the public can buy into; increase funding to ReachUp, which gives cash to low-income people; and get back on track to goals outlined under Act 48 in 2011 to control health care costs and publicly fund health care.

The report embraces Vermont's goal to have fiber-optic internet cable delivered to every home by 2024, but says the state should take an ownership interest in the infrastructure once it is built. The report says Vermont should not delay investing in necessary upgrades to transportation and water infrastructure, and investments in affordable housing.

The report says Vermont should fund two years of higher education through the education fund; should improve workforce training for people with disabilities or criminal records, or who suffer long-term joblessness; and should avoid tax "gimmicks" that provide cash to companies in exchange for creating jobs in Vermont.

"Elected officials also need to make smart investments that benefit all the state's residents," he said. "And policymakers can rebuild Vermonters' faith in their government by restoring its capacity to do its job."


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