Public Assets Institute: A Balanced Way to Balance the Budget
ITEP Work in ActionIn the end, the Vermont Legislature found a balanced solution to balancing the state budget for fiscal year 2010, which begins July 1. After a gubernatorial veto—the first budget veto in the state’s history—and a dramatic override in a special session on June 2, lawmakers put in place a budget that uses a combination of cuts and taxes to cover part of the drop in revenues. The federal government also provided a big and timely boost, designed to help states weather the recession.
In Vermont, there were more cuts than taxes. While spending reductions totaled about $76 million, the net effect of tax changes and increased enforcement will bring in about $28 million more than had been anticipated for fiscal 2010 (Table 1). In the wake of cuts to the fiscal 2009 budget, an even split between taxes and additional cuts in the coming year would have been better. But by maximizing the use of federal stimulus money and also raising additional revenues, the Legislature protected services that could have been lost had Montpelier followed its usual practice of managing to the money—that is, balancing the budget by cutting services to make expenditures equal existing revenue—rather than raising adequate revenues to support needed services.