MONTPELIER, Vt. — In his annual budget address, Gov. Peter Shumlin on Thursday revealed a plan to fix Vermont’s $68 million deficit by raising $30 million in new revenue — mostly from independent physicians and dentists — and reducing spending increases by $38 million.
“The budget that I’ve presented to you today closes the General Fund budget gap of $68 million by trimming the projected growth rate — we say ‘cuts,’ but it’s actually trimming what we assumed in the growth rate — by $38 million and raising $30 million,” Shumlin said.
The $30 million in new revenue will come in two chunks, according to the governor’s plan.
The smaller chunk involves increasing mutual fund fees to match the average fees paid across all New England states. The move would raise $13 million in new revenue, a portion of which would go toward creating college savings accounts of $250 for all Vermont kids and $500 for kids from low-income families.
The larger chunk gets at the heart of the deficit: a $55 million Medicaid shortfall created by expanding health care to 20,000 low-income Vermonters as part of the Affordable Care Act.
“While we’ve been eager to expand Medicaid to families that were making poor choices without it, we’ve refused to summon the courage to pay for it,” Shumlin said.
That lack of courage was a reference to the Legislature’s refusal to fund Medicaid with a 0.7 percent payroll tax, as Shumlin requested in last year’s budget address. Without that revenue and matching federal funds, Shumlin said, Medicaid expansion has run up a deficit of $55 million — roughly three-fourths of the $68 million hole.
On Thursday, Shumlin again urged lawmakers to summon courage. This time, the governor wants the Legislature to make independent physicians and dentists pay the same provider assessment that hospitals and nursing homes pay, but at half the rate. Doing so would raise $17 million in new revenue and draw down federal funds of $21 million — a total of $38 million for Medicaid.
All-payer health care model
With health care premiums projected to double in the next 10 years, Shumlin said that the state must transition from a “fee for service” medical payment system to an “all-payer” model. Under the all-payer model, the Green Mountain Care Board would likely set reimbursement rates paid out by Medicare, Medicaid and commercial insurers to remedy chronic underpayment by Medicare and Medicaid.
Echoing President Barack Obama’s promises about the 2010 health care law, Shumlin promised that patients who like their doctor will get to keep their doctor in an all-payer system. He also said health care providers will receive adequate reimbursements and the elderly will retain current Medicare benefits.
“The all-payer model is about restoring the relationship between Vermonters and their family doctors or health care providers,” Shumlin said.
Funding priorities outlined in the budget include a request for $5 million to fund positions for the Department for Children and Families, the judiciary, state’s attorneys and the defender general. He also requested $2 million to increase safety for state employees.
In a bid to end family homelessness by 2020, the governor asked lawmakers to designate 15 percent of taxpayer-funded housing for homeless and special-needs individuals.
On crime prevention, Shumlin called for closing the Northeast Regional Correctional Facility in St. Johnsbury to redirect funding to the Step Up program. The closing would shift funds in a similar way that past incarceration reduction efforts freed up $50 million for universal Pre-K for three- and four-year olds, the expanded school meals program and dual enrollment in early college, Shumlin said.
“I’m proud to present to you a budget that closes a $68 million budget gap, does not rely on one-time money for ongoing state expenses for the first time since the Great Recession, (and) increases General Fund spending by a modest 3.1 percent, which is matched by an identical projected increase in our revenue,” Shumlin boasted.
Reactions to the governor’s budget
Reactions to Shumlin’s sixth and final budget speech came quickly Thursday afternoon.
“Vermont Democrats have consistently passed state budgets that have grown at least twice as fast as most Vermonters’ paychecks. In fact, in the last six fiscal years Vermont Democrats have increased taxes and spending by over $300,000,000 dollars — that’s about $50 million each year, on average,” said a news release from Vermont Republicans.
On Twitter, Vermont Democrats tweeted, “We stand with @GovPeterShumlin in investing $2M to improve the safety of state workers at the frontlines of VT’s big challenges.”
The National Federation of Independent Business, which represents small business interests, issued a written statement from Vermont spokesman Kris Jolin about new spending increases in the governor’s budget.
“We find ourselves once again disappointed that instead of making the choice to reduce spending and operate within his means, Governor Shumlin has chosen to increase the budget. While he mentioned the added spending will be close to 3%, given the Governor’s track record of inconsistency in the past, we are certainly questioning if that number will wind up increasing in the future.”
Shumlin said he plans to provide more details on his all-payer health care plan in the coming week.