January 14, 2011 – Week 2

The Joint Fiscal Office presented several committees with an overview of the state’s finances, which look bleak again this year. The expected FY2012 state budget deficit (the difference between state revenues and state spending) is $150 million. A revised revenue forecast, which legislators and the Administration use to build the state budget, is expected later this morning. Meanwhile, House and Senate Appropriations Committees are working on the annual budget adjustment bill, which is used to reconcile changes in state spending and revenues. Thanks to some increased revenues, the gap between spending needs and revenue is expected to be small this year. The House Appropriations Committee hopes to wrap up their work on the bill in advance of the Governor’s Budget Address on January 25.

The Blue Ribbon Tax Structure Commission issued their recommendations for changing the tax system in Vermont. The Commission coalesced around a broad set of principles including fairness, economic competitiveness, simplicity, transparency, tax and revenue neutrality, sustainability, accountability, and interoperability. Click here to view the full report.

Some of the major recommendations include:

-Shifting the tax base from federal taxable income to adjusted gross income and eliminating deductions while allowing a residential credit.
- Implementing a lower, flatter rate and bracket structure.
- Broadening the sales tax base by levying a sales tax on all consumer purchased services with limited exceptions for business to business transactions and certain health and education services.
- Cutting the sales tax rate from 6 percent to 4.5 percent.
- Eliminating all consumer based sales tax expenditures retaining only the exemptions for food and prescription drugs.
- Removing soda from its tax exemption as a food product.
- Enhancing scrutiny of tax expenditures by developing legislative intent for each one.

Our organizations’ initial reaction to the Commission’s report can be found by clicking here. We encourage you to read the report and email your comments to tom@vermont.org.

The House and Senate Health Care Committees spent time reviewing Vermont’s health systems and past reform efforts this week in advance of a consultant’s report, which is expected next week. Dr. Hsiao, a professor of economics in Harvard’s School of Public Health, will release his report on how to reform Vermont’s health care system next week. The report will be released for public comment on January 19. The Chamber and GBIC are in the process of developing a set of guiding principles based on the feedback we’ve received from members, by which to judge the report and any legislative action.

The House and Senate Health Care Committees held a joint hearing to discuss changes to Vermont’s Global Commitment Waiver which governs how Medicaid is paid for in the state. Under the new waiver, Vermont would be eligible for about $4.26 billion over the next three years but have more flexibility on how to manage the program allowing any leftover funds to be invested in other health initiatives. Chittenden County has several representatives on the two committees: Senators Miller and Fox and Representatives Larson, Till, Pearson, and Spengler.

The House Commerce Committee heard from the Agency of Commerce and Community Development about their preliminary priorities for the legislative session. Secretary Lawrence Miller introduced his team and talked about the importance of entrepreneurship and growing existing enterprises as the State’s greatest opportunities. He described Vermont as a great place to do business, but that we can improve the business climate. Miller touted regional development corporations and planning commissions as important partners and commended them for the development of performance contracts and outcomes as a result of the Challenges for Change government efficiency initiative.

As an indication of the importance of agriculture in the Administration’s economic development strategy, Agriculture Secretary Chuck Ross appeared before the House Commerce Committee with Secretary Miller. Both officials spoke of the connection between a successful agricultural base and our tourism economy. Later on in the week, a press conference heralding the preparation of a Farm to Plate strategic plan provided yet another sign of the focus on agriculture for the Shumlin Administration. This plan envisions the creation of 1,500 jobs over the next ten years by increasing the production and consumption of local food.

The Chamber and GBIC Government Affairs Team testified before the House Commerce and Economic Development Committee and provided the Committee with an overview of our organizations’ work and our members’ priorities. We look forward to working with the Committee to enhance the success of our member businesses.

Agency of Natural Resources Secretary Deb Markowitz introduced her new team which includes some former commissioners and state appointed employees to various House and Senate Committees. She has asked her staff to focus on “how the agency gets its work done with a goal of being more customer oriented which includes both applicants and the public.” She also described global warming as being a “capstone issue” for the Governor. David Mears, Commissioner of the Department of Environmental Conservation, called for an interdisciplinary approach in solving problems, overcoming silos and all levels of government working together. He wants the Agency to be accessible and transparent and provide prompt, predictable and clear decisions.

The House Education Committee developed their priorities for the session. They include (in order of importance) addressing student achievement gaps; the governance structure of the educational system both at the state and district levels; the cost of education; pre-kindergarten to age 16 education; pre-kindergarten/early education; and workforce development.

The House Natural Resources Committee will be working on another evolution of a renewable energy bill, post closure issues associated with Vermont Yankee, expanding solid waste/recycling, and refining legislation governing clean energy districts for municipalities.

Senator Vince Illuzzi (R- Essex/Orleans Co.) announced a bill he’ll be introducing to change the regulations that govern FairPoint Communications and regulate them in the same way independent phone companies are. Mike Smith, President of FairPoint, commented that Senator Illuzzi’s bill would “level the playing field… as much of our competition is unregulated.”

The Government Accountability Committee has been reviewing a status report on the government restructuring initiatives known as “Challenges for Change” and conducted a public hearing to obtain specific ideas for moving forward. This Committee’s work and most recent progress report can be found by clicking here.