• The Shumlin budget
    January 25,2013

    The budget outlined by Gov. Peter Shumlin on Thursday is well focused and ambitious, addressing looming problems in areas such as transportation and health care, while breaking new ground in education, child care and energy.

    The focus of Shumlin’s program is job creation, but the way to job creation, in his view, is to improve the capabilities and readiness of Vermont workers. Thus, he has proposed a major shift of money to child care subsidies, raising the state’s share of child-care costs from 10 percent to 50 percent. By making child care and pre-kindergarten affordable to low-income workers, they will be able to gain the skills and pursue the jobs that will lift them toward prosperity.

    In tandem with his initiatives on child care and education, Shumlin is calling for a change in the state’s welfare program, subjecting it to welfare-to-work requirements like those other states adopted during the Clinton administration. At present Vermont’s Reach Up program has no time limit, and Shumlin is concerned that, combined with prohibitive child-care costs, these rules have engendered an unproductive dependency.

    Workers now face a kind of child-care cliff. When workers’ incomes reaches a certain level, they lose child-care subsidies, making it too costly to remain employed. The new subsidies for child care would eliminate this cliff, making work a better option for those who might otherwise grow dependent on welfare. By imposing a five-year limit on Reach Up benefits, and combining that new limit with more generous child-care subsidies, the state would be saving money on welfare and moving more people into the work force.

    Shumlin has proposed funding his child-care subsidies by shifting part of the money spent on the earned income tax credit for low-income workers to child care. In other words, he would be reducing an income benefit now going to low-income workers in order to pay for a different benefit. This shift has run into criticism from those who believe the state should find somewhere other than the pockets of low-income workers to take money for child-care benefits.

    Shumlin used his budget address to mount a stout defense of his funding choice, saying that the earned income tax credit has actually increased 49 percent over eight years because it is indexed to the federal credit. Reducing that credit would merely bring it in line with other states, he says.

    It is a reasonable argument, but it might not persuade a low-income working woman with a child in first grade and another in fourth grade that it is a good idea to cut her income to boost state child-care spending. It is likely that the tax committees in the Legislature will want to search for another source of money that would feel the pinch less acutely than the low-income worker would.

    Shumlin’s budget addresses a worrisome problem in health care, allocating money to hold harmless Vermonters now enrolled in state health programs who would face higher costs under the new health care exchange. He also seeks to patch the “leaky bucket” of the state’s gas tax by proposing a higher tax on gasoline to make up for revenue lost due to diminished consumption. He suggests a 6 percent tax on fuel at the wholesale level.

    Shumlin is proposing a new tax on break-open tickets, the lottery-style tickets sold at fraternal organizations that now go untaxed. He says this tax would yield $17 million for important energy programs. Massachusetts and Connecticut have a similar tax, and it is a worthwhile idea, but so is a proposed tax on sugar-sweetened beverages. Shumlin opposes that tax because he says it is regressive. But so is the reduction in the earned-income tax credit.

    Shumlin has proposed a balanced budget, which means that his new spending initiatives have been offset by cuts elsewhere in the budget. It will be up to the Legislature to review the means he has employed for carrying out his agenda, which has much promise for improving the prospects of Vermonters in a reviving economy.

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