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A look at what’s behind Vermont budget shortfalls

December 1, 2015

MONTPELIER, Vt. (AP) — For at least the ninth year in a row, Vermont is looking at a budget gap for the coming fiscal year — a situation in which projected revenues do not meet projected demand for spending. Here’s a primer on why this keeps happening.

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What’s behind the recurring budget troubles?

Vermont’s economy has been growing by 3 to 4 percent a year, while state general fund spending has been growing at just over 5 percent, said Administration Secretary Justin Johnson. That has left lawmakers scrambling at the end of each session to close the gap with a series of cuts matched with tweaks to sales and other taxes — all designed to minimize the pain, but none achieving anything like a long-term solution. At bottom may be that the appetite for spending exceeds the appetite for raising taxes.

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What does the picture look like for this year and next?

At a budget briefing on Tuesday, lawmakers were told Vermont faces a budget gap of about $40 million for the current fiscal year, which ends June 30, and $58.5 million for fiscal 2017, which starts July 1.

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What’s the biggest cause of these shortfalls?

Medicaid. Vermont has seen a big expansion of the public health care program since the advent of the federal Affordable Care Act. About a third of the state’s population now has health insurance through the program and its offshoots. Gov. Peter Shumlin last January proposed a 0.7 percent payroll tax to shore up the Medicaid program, an idea that didn’t fly with lawmakers. Now some $53 million — about 90 percent — of next year’s budget shortfall is being attributed to Medicaid.

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Is the economy helping?

Vermont’s economy continues a long, slow recovery from the Great Recession of six years ago. “The current economic recovery is beginning to make up in duration what is has lacked in both vigor and speed,” Tom Kavet, an economist who advises lawmakers, said in a presentation prepared for Tuesday’s briefing. Sectors ranging from professional and business services to health care and leisure and hospitality have seen job growth, while construction and manufacturing have seen declines since 2007, Kavet said.

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Is there any silver lining?

The projected 2017 budget gap has shrunk during the past month by about $10 million. The state won’t have to pay as large a share of the cost of an expensive new cystic fibrosis drug as earlier estimated; and projected inflation affecting school spending now looks like it won’t materialize, budget analysts said Tuesday.

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