Dems: The 'Rainy Days' are here
Toolbox
By Peter Hirschfeld Vermont Press Bureau - Published: April 24, 2009
MONTPELIER – Democratic leaders in both the House and Senate say "rainy day" funds may be needed to shore up the fiscal year 2009 transportation budget.
The Transportation Fund, already in the red, is expected to see another downgrade today when economists release revenue forecasts for the remainder of the fiscal year. Though legislative leaders say they won't craft a solution to the revenue dilemma until they learn the full scope of the deficit, both the House speaker and Senate president say rainy day funds could be used to balance the ledger.
"When it comes to rainy day funds, it's time to stop pretending that it isn't raining," Sen. Peter Shumlin, a Windham County Democrat, said. "We're in a downpour, and it may be necessary to utilize some of those funds."
In the Legislature's budget-adjustment bill – which made mid-year changes to state spending – the House had sought to bring transportation spending more in line with revenue by cutting state aid to town highway departments by more than $3 million. Intense criticism compelled lawmakers to abandon that effort. While legislators have now included the full aid payments in the adjustment bill approved Tuesday, they have not included a funding mechanism for doing so.
House Speaker Shap Smith, a Morrisville Democrat, said rainy day reserves may be part of the equation.
"My hope is we won't have to dip into reserves," Smith said. "… But I think everything has to be on the table right now."
The cut to aid payments would have eliminated, for now at least, a $3.6 million deficit in the 2009 transportation budget. That hole is expected to deepen on Friday; observers estimate the revenue downgrade will be at least $2 million, and potentially considerably higher.
Lawmakers and administration officials have limited choices when it comes to balancing the transportation budget, which has seen below-forecast performances in both the purchase-and-use and gasoline and diesel tax funds.
One option is to cut spending. However, the only possible targets – items funded purely with state dollars – include town highway aid, Amtrak or internal operations at the Agency of Transportation. None of those, according to Rep. Rich Westman, a Cambridge Republican and chairman of the House Transportation Committee, is a palatable choice.
Vermont can ill afford to gut agency staff as it gears up for a summer of stimulus spending, Westman said. And the agency's budget for new vehicles and other central garage items, Westman said, has already been shaved to the bone.
"The only big bites out there are town highway programs and the train, and it's really clear people don't want to cut the train," Westman said. "I think we're getting so close to the end of the year now that there's no way to cut it out."
Barring new cuts, the Legislature and administration will have to find funding elsewhere. Secretary of Administration Neale Lunderville said using rainy day funds is tantamount to deficit spending and is not a fiscally responsible way to balance 2009 spending.
"That is the last resort, but the governor feels strongly we have time to address the challenges in the Transportation Fund, even though we don't have a lot of time left in the fiscal year," Lunderville said.
Secretary of Transportation David Dill said the agency can "sweep" fund balances remaining in other agency accounts to offset some of the overspending, though that could affect the fiscal year 2010 picture.
Westman said short-term borrowing from next year's budget is another mechanism to examine. Relying on 2010 appropriations to fill holes left in 2009, however, would also have consequences in later years.
"You can short-term borrow, and pay it back in 2010, and that gets you away from rainy day funds. Part of that discussion, though, will be how much of the hole ripples out from '09 into '10," Westman said. "Until we know the shape of the hole, and can sit down with the Senate and governor's office, we won't have a clear idea of where we want to go."
Lunderville said the state could transfer money from the General Fund to the Transportation Fund, effectively eliminating all or a portion of the deficit with no borrowing or reserve spending. The General Fund, however, will likely suffer its own setbacks at Friday's revenue forecast. The General Fund has received about $30 million worth of transportation revenue in 2009.
"There may be an opportunity for the general fund to provide modest support," Lunderville said.
Lawmakers will likely lump the latest mid-year spending adjustments into the 2010 budget bill, which won approval Thursday in the Senate and is headed for conference committee next week.
The troubles won't end in 2009. Dill said he anticipates revenue downgrades to extend well into fiscal year 2010, which could force wholesale revisions in a transportation bill that lawmakers will have to finish before the session adjourns.
"The House and Senate are building budgets without regard for what's in the April forecast," Dill said. "Obviously there will be more discussion about possible cuts."
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