The Carolina Cage Match: Peter Shumlin Versus Rational Public Policy

Having recently moved my waffle franchise south to a place the locals here call “North Carolina”, I thought it would be interesting to perform

Don't worry, ShumlinCare covers dental reconstruction.  With a $10,000 deductible.

Don’t worry, ShumlinCare covers dental reconstruction. With a $10,000 deductible.

that most agonizing of middle-school tasks: Compare and Contrast.  But to make it more interesting – and possibly more telling, we’re going to give the C&C treatment to the economies of Vermont and North Carolina. I’m picturing this as kind of a Goofus and Gallant deconstruction of public policy.  If  you happen to assume that Peter Shumlin is the Goofus in this scenario, well, that’s up to you.

A Quick Tax Policy Comparison:

North Carolina:  In 2014, North Carolina recently dropped its income tax rate, and completely flat-lined it. Where they had three brackets before (ranging from 6.0 to 7.75 percent), there is now one single rate of 5.75% on all income levels (actually down .05% from 5.8% in 2014; is there no end to this tax rate reduction madness?).

Vermont:  In 2014, and now in 2015, the governor’s office and the state legislature seem to spend the bulk of their time trying to find new things to tax, and to scratch their heads as to why income tax revenues are not matching the governor’s rosy budget outlooks.  In August of 2014, two months after the state’s budget was passed, the legislature was called back into session to cut the budget they had just said was needed for Vermont’s economic well being.

Pat McCrory, governor of North Carolina, just submitted his 2015-2017 budget.  The overview says a lot about what’s different between the two states:

No tax increases?  Gasp!

No tax increases? Gasp!

This is somewhat different than Shumlin’s plans for 2015 (at least as of December 2014):

The Shumlin administration has already announced that property taxes are set to rise by 2 cents to $1.00 per $100 of assessed value for homeowners and $1.54 for non-residential properties in 2015. And, Speaker of the House, Shap Smith has indicated that he would like to shift more of the $1.5 billion education budget onto the income tax as part of education finance reform.

Also on the front burner for the 2015 legislative session is a $250 million carbon tax, which would translate into a 45¢ to $1.35 tax on every gallon of gasoline, and something similar for home heating fuel.

In every instance, the only solution is more cowbell, er, taxes.  North Carolina is cutting specific taxes on income, gasoline, etc – the taxes that most directly impact the taxpayers’ bottom lines.

What’s Vermont doing?  The opposite.  And has been, for a long time, with Shumlin doubling down on the same policies that are both bankrupting Vermonters and the state.  A quick snapshot shows the difference between Goofus and Gallant:

Vermont tax rates at a glance:

Look at those glorious job-creating rates shine!

Look at those glorious job-creating rates shine!

North Carolina tax rates at a glance:

There's a reason people move here.

There’s a reason people move here.

Change in unemployment rate from March 2014 to March 2015 (hint:  Vermont’s change is statistically insignificant):

 

A 1% decrease versus a 0% change.  Hmm.  More cowbell, then?

A 1% decrease versus a 0% change. Hmm. More cowbell, then?

Finally, let’s take a quick look at state spending, by category, and per capita (strap in):

Vermont at a glance:

 

Vermont Spending dollars and percent

North Carolina at a glance:

NC Spending dollars and percent

Finally, let’s look at the net result of these policies, in terms of job growth.  From January 2014 to January 2015, Vermont’s total employment gain was 1.3%.  North Carolina’s?  2.6%.

At least Vermont got the hard work done on determining the appropriate levels at which to tax soda, though.  So that's something.

At least Vermont got the hard work done on determining the appropriate levels at which to tax soda, though. So that’s something.

Because Shumlin has clearly demonstrated he has trouble with math (unless he’s happily underpaying a neighbor to buy his property without

That's ok, Lois - neither is Vermont's governor.

That’s ok, Lois – neither is Vermont’s governor.

advising said neighbor that he could have gotten relief on his outstanding property tax bill due to his income level, but I digress), I’ll clarify this for him:

North Carolina is doing better than Vermont.  By some numbers, North Carolina is doing twice as good as Vermont is, in terms of creating jobs.  Jobs are what provide tax revenues, not soda purchases.

But when you spend most of your life under a dome that is golden, you don’t really need to see or even try to understand what’s going on outside of the box you’ve happily put yourself into.  Because to do so would point out, at klaxon-alarm-levels of loudness, that you’re killing Vermont’s economy, and with it, the livelihood of all Vermonters.

 

 

Starvation and the Socialist

Former Socialist turned US Senator Bernie Sanders, occasionally seen

Watch out!  Low prices mean the apocalypse is coming.  Or perhaps customers.  One of the two.

Watch out! Low prices mean the apocalypse is coming. Or perhaps customers. One of the two.

somewhere in the vicinity of Vermont, recently took Wal-Mart to task for the wages it pays its workers.  That Bernie is spending time attacking a company that employs 2.2 million people is probably not a surprise to most Vermonters, since he seems to earn his living by throwing mud from his comfortable office perch in DC.

Speaking of comfort, Bernie feels comfortable criticizing Wal-Mart, because he’s run multi-national corporations and understands the complexities of cost in labor, materials, utilities, insurance, compliance with local, state, and federal regulations, debt financing, corporate bond issuance, as well as asset and liability management.

Because he knows all these things, Bernie knows that wages should be $10.10 an hour, minimum, not the $10.00 an hour that Wal-Mart has raised them to.

That’s right.  Bernie just knows.  So let’s let this self-proclaimed champion of

That's right, Wal-Mart Comrades!  Senator Sanders and I have given you a 1% increase in salary!  Here, you may also have half a rotten potato.

That’s right, Wal-Mart Comrades! Senator Sanders and I have given you a 1% increase in salary! Here, you may also have half a rotten potato.

the oppressed – who earns roughly $174,000 per year, more or less triple the median household income of Vermonters – tell his side of the story:

IOWA CITY, Iowa, Feb. 19 – U.S. Sen. Bernie Sanders (I-Vt.) issued the following statement today after Wal-Mart announced that all of its workers in the United States would earn at least $9 an hour by April and $10 an hour by 2016:

“The Walton family which owns Wal-Mart is the wealthiest family in America and it is absurd that thousands of their low-wage workers are forced to use programs like food stamps, Medicaid and subsidized housing. Wal-Mart should not be paying starvation wages.”

It’s also absurd that overhead costs, including compliance, cuts into Wal-Mart margins, forcing reductions in other areas that can be controlled – like wages – in order to remain profitable, which means “in business”, so employees have a place to go to earn their salaries.  The world is crazy like that.

Speaking of margins, Wal-Mart’s profit margin as of Jan. 31, 2015, is (prepare to be outraged): 3.77%.  This is a screamingly tight margin, meaning that if variable costs go up by much at any given time (things like electricity, fuel, or wages), it directly reduces the margin.

Considering that as of Jan 2014, operating expenses for Wal-Mart were $91 billion, the bulk of which are labor costs, the company’s net income was $16 billion, something like a 10% increase in operating expenses (roughly $10 billion) would drop net income by 67%.  So bumping a salary up by 50% (moving from $10 to $15 an hour, say) could knock margins down by a third – and making the company less profitable is less likely to mean future raises and salary growth, let alone increase job security.

Now it wouldn’t work exactly like that, because not every salary is $10/hour, but since the bulk of the jobs are at that associate level, there would still be a significant reduction in margin, and a reduction in expectation of future employment.

Here’s Bernie’s math, where he puts it all together in a nice bow for all of us rubes out here in the Green Mountains:

“While this is a step forward and a response to grassroots activism across the country, this is nowhere near enough. Wal-Mart should raise their minimum wage to at least $10.10 an hour now and move it to $15 over the next several years. Struggling working families should not have to subsidize the wealthiest family in the country. Wal-Mart also should end its vehemently anti-union activities.”

Oh, so $10.10 is the correct wage as determined by the Dear Leader, er,

Says the guy who's job, as chairman of the VA committee, is to take care of veterans.

Says the guy whose job, as chairman of the VA committee, is to take care of veterans.

Central Planner-In-Chief, er, the guy who sat on his hands as chairman of the VA committee while veterans died in VA hospitals?  That’s the guy who picked $10.10 out of the air?  That’s the expert we have for wage rates at retail chain stores?

A 1% raise isn’t going to net anyone anything.  The costs associated with updating hundreds of thousands of employee records to increase salaries, alone, would cost more than the 1% increase.  But let’s not let little things like reality get in the way of Captain Soundbite, in terms of his valiant charge against companies that actually employ people.

Raising the salary to $15/hour would dramatically increase operating costs, would significantly cut into an already-tight margin, and increase the likelihood that Wal-Mart would employ fewer people, while asking current employees to work even harder to cover for the people it cannot now afford to employ.  How does any of that sound like a good idea?

Oh, and one last thing:  Bernie has the 45th lowest average staff salaries in the US Senate.  Which may mean that Bernie is saving the taxpayers money, or he’s just not interested in that “fair wage” thing as much as 44 other Senators.  In fact, Bernie has a larger staff (in FY14) than Leahy did, and he’s paying them less – more people employed, at a lower average wage.

Sounds a little bit like Wal-Mart, no?

Power to the people!  Unless you work for Sanders, then it's power to the people looking to work for other Senators that pay more.

Power to the people! Unless you work for Sanders, then it’s power to the people looking to work for other Senators that pay more.

 

 

The Humbled and the Horrified

Peter Welch, Vermont’s lone representative in Congress, posted the signing of his Oath of Office on Facebook on January 6, 2015.  He took the time from his busy schedule of visiting Communists to share his thoughts with his fellow Washingtonians, er, Vermonters:

This afternoon, I took the oath of office to once again represent Vermont in the House of Representatives. I am humbled and honored by the opportunity to serve Vermonters in Congress and look forward to finding common ground on the many challenges facing our country. –Peter

It's not signed in crayon?

It’s not signed in crayon?

Here’s a word missing from his casual Facebook post that readily applies to his fine work done in the last year:

Ashamed.

Why ashamed?  Because Peter, along with Patrick Leahy, lent the legitimacy of their offices to the Castro regime last month, a dictatorship that has suppressed dissent through force and intimidation for decades.  Here’s some handiwork of the Castro regime that Peter does not appear to be humbled by:

You're free in Cuba - to get hit in the head with a pipe if you challenge the dictatorship.

You’re free in Cuba – to get hit in the head with a pipe if you challenge the dictatorship.

Which is a bit of a walk from Welch’s pictures taken while he was visiting Cuba with Senator Leahy:

Not pictured:  Cuban dissidents being beaten by Castro apparatchiks.

Not pictured: Cuban dissidents being beaten by Castro apparatchiks.

Welch routinely votes the party line, siding with Democrats 95% of the time (113th Congress).  This isn’t representation; it is adhesion to a party line in order to ensure a place at the Democrat table.  Vermonters’ interests aren’t served by a time-serving politician, and neither is the national interest served by a representative that shows support for a dictatorship that has routinely executed, imprisoned, tortured, and terrorized anyone who questions the Castro regime.

If Welch really wanted to impress Vermonters about his dedication to service, he’d grab a paddle and help Cuban dissidents travel north through shark-infested waters to reach freedom – if the Castros aren’t too busy sinking these boats that have children aboard.  Better yet, Welch could have sat down with Cuban dissidents who have made it safely to the United States, and asked their opinions about his support for the Castros.

But I suspect there would be fewer smiles at that table for Welch to stare dully at, and less polite conversation.  Instead of leadership, which is what one presumes national office calls for in an individual, we get a Democrat vote machine, a man robotically employed to press the correct vote button as long as that position has been approved by the party elite.

In a way, that’s not too far a reach from what Castro’s been doing since the 1960’s.  Welch has learned that lesson well.

Oh, and in case Welch doesn’t have his TV on this afternoon:

  Over 65 Cuban democracy activists were arrested today in the eastern province of Santiago de Cuba.
  All of those arrested were members of the opposition groups, Cuban Patriotic Union (UNPACU) and Citizens for Democracy (CxD).
  Their crime? Trying to attend Mass at the Sanctuary of Our Lady of Charity.
  They were intercepted by nearly 200 Castro regime agents, who began to beat and arrest them.

Just another day in the worker’s paradise:

Thanks for perpetuating the dictatorship, Peter!

Thanks for perpetuating the dictatorship, Peter!

 

 

 

 

Major Deterrence: A Payroll Tax Over a Bridge Too Far

Recently, the (somewhat) recently-anointed Chief of Health Care Reform, Lawrence Miller – an un-elected, politically-determined position that impacts every single Vermonter in the critical area of health carepublicly defended the governor’s plan to raise taxes on Vermonters to pay for

Fixing the cost shift, aka "a tax increase".

Fixing the cost shift, aka “a tax increase”.

health care.  This seems somewhat contrary to what Shumlin originally opposed back in 2011, when he argued against the payroll tax increase as outlined in William Hsiao’s plan for single-payer in Vermont.

As Shumlin advised Vermonters then, and was very true to his word on, he felt that he didn’t need to put forward a funding plan, because why should a governor worry about how to pay for massive new entitlements?  From the 2011 VPR article:

(Interviewer John Dillon) The Shumlin administration is working with legislative leaders on a single payer bill. The governor said the bill will probably not include a funding plan.

(Shumlin) “I don’t think it needs to. I think we first need to pass the cost containment mechanism that will work. We all know that it’s going to get paid  for. The question is are we going to design that’s going to cost less and be more affordable for Vermonters. And that’s the hard work.”

Ah, the old “cost containment” angle, and the governor actually says that “we all know it’s going

Speaking of hard work, here's the governor fixing his budget.

Speaking of hard work, here’s the governor fixing his budget.

to get paid for”.  I wonder – did he know it’s not going to get paid for?

Now flash forward to a few years down the road from 2011. After single-payer is passed, Shumlin ignores his own imposed deadline for providing a funding plan.  He pushes it off for as long as humanly possible, until after the gubernatorial election, which he only won by a few thousand votes against a weak Republican candidate.  Good science argues that there’s no correlation here.  Ahem.

Then Shumlin says single-payer funding is DOA, because there’s not enough money in Vermont to support it.  Even though anyone with a glance at the state’s budget and revenues knows that you can’t slap $2.2 billion in additional taxes on existing $5 billion budgets and think that hey, the money will just come from somewhere.

Where, you might ask?  From Another Payroll Tax Plan!  

And here to defend it is the state’s Health Care Reform Chief, a position which seems to be less about reforming anything than just raising taxes to minutely addresses the existing cost-shift, which has been the reason commercial insurance rates have risen so much.  The existing version of single-payer, Medicaid, does not cover costs, and why doctors often refuse it as a reimbursement, because no business can long operate at a loss.  As Shumlin, himself a shrewd businessman, surely understands.

But let’s see how Major Deterrence addresses the cost increase on the increasingly hapless Vermont businesses that, despite the state’s best efforts, still manage to keep their doors open here:

Some lawmakers worry the payroll tax will make Vermont seem less open for business.

Vermont’s Health Care Reform Chief Lawrence Miller said it’s hard to see how a tax of less than 1 percent would be a major deterrent.

“It is still coming from businesses who are coming from the sources of commercial insurance, it’s also being doubled with federal dollars and really being applied very strategically to make sure those premiums are reduced,” Miller said.

Well, if you’re already rated one of the highest-taxed states in the country and one of the least business-friendly states to do business in, maybe it becomes a little easier to see how deterrence

OK, I know you called for Major Deterrence, but it's basically the same effect.

OK, I know you called for Major Deterrence, but Disaster is what you’re getting.  And you’ll like it, punk.

actually works.  It could be that the companies that have moved out of state, or decided not to expand here, have already been deterred.

Claiming that, somehow, businesses will now be paying twice for coverage that they’re already paying more for because of the cost shift is somehow an incentive to support an increase in cost in the form of a payroll tax is a gargantuan level of an assumption to make.  People and businesses have memories.  If the state raises taxes on one aspect of their business, and tells them that they’re going to lower the costs for their insurance premiums on the other, let’s just say that there’s some well-founded skepticism on the parts of the people who sweat, bleed, and build in this state.  The only guarantee is that taxes will go up, and new taxes will be applied.

Not only does this payroll tax not fully cover the cost-shift (even if one assumes that jacking taxes on businesses won’t have a collateral effect, in that some of them will decide to reduce payroll, leave the state, etc, so that $90 million revenue projection is a huge guess, at best), we get the “Hey, the fed is matching the dollars!” argument.  Clearly this argument is made by people who have lived far too long in the state bubble, where dollars that come from the magical federal spigot are somehow not tax dollars taken from and piled onto the backs of the people who work for a living in Vermont.  Oh, and the Medicaid unfunded liabilities gap is in the trillions.

Miller also says greater reimbursement rates might attract more health care providers to work outside Chittenden County where the percentage of Medicaid patients is higher.

It might not have that effect, too – because those reimbursement rates will continue to be shaky and indeterminate, due to yet another patch slapped onto the sinking hull that is the SS Single-Payer.  The simple truth is that if you’re going to put all care recipients into one big pool, then

Sure, a payroll tax will fix this.

Sure, a payroll tax will fix this.

every recipient is going to have to pay….what’s the phrasing we hear so much about?  Oh yeah, that’s right – every recipient is going to have to pay his or her fair share.

That includes those people currently receiving care under the cost-shift.  And that problem cannot be solved at the state level, by uncovering previously-hidden tax revenue and telling Vermonter that it’s going to “fix” the cost-shift, and access to health care in Vermont.  It will do neither of those things, and it will make it harder for Vermonters to be employed in a state that already sports one of the highest tax burdens in the country.

Health Care Coverage So Nice, Shumlin Wants You To Pay For It Twice

(Just barely) Governor Peter Shumlin recently let Vermonters know that he’s aware of how health care costs are shifted from participants in commercial plans to those participants in the current version of single-payer:  Medicaid.  In other words, the private sector subsidizes a single-payer program because single-payer can’t cover its own costs.  Just casually walking past

Health care costs got you down?

Health care costs got you down?

this stark irony seems to not be impossible for a governor who promised single-payer for all because of the urgent need for all Vermonters to have insurance.  A need that seemed to evaporate just after the governor edged out, by a few thousand votes, his competitor in the last election, as the governor subsequently scrapped plans for single-payer implementation that he already knew the state could not possibly afford.

Shumlin’s plans were scrapped only after a few hundred million were flushed down the tubes on a malfunctioning website, of course.  Note that the hundreds of millions that were wasted on a website could have gone to actually funding Medicaid, instead of paying a contractor to build a site that allowed people to sign up for a plan they were already eligible for.  The governor’s new plan blows all of that away, however:  He now wants to fix Medicaid, all the way from a small office in Montpelier, and then the cost-shift is reduced, and voila!  Problem solved.

But once again, those nagging realities – things like cost, and the fact that the states, in general, have become puppets on the strings of federal dollars – come back around to remind us all (except Shumlin) that you can’t have something for nothing.

Shumlin’s new plan is to hike the payroll tax (a tax hike!  Shocking.) by .7%, to generate an expected $90MM in revenue.  The $90MM is matched by the federal government, which is the way it entices states to manage their own Medicare programs, while simultaneously being completely on the hook for them since the matching funds are the only thing keeping the states’ system alive.

Under the plan, we will ask businesses to pay a one seventh of one percent payroll tax (0.7%), which will raise $90 million a year. For the majority of Vermont businesses, this will equal less than $1,000 per year. And since state Medicaid investments are matched by the federal government, we’ll draw down an additional $100 million in federal money to help our efforts.

Shumlin's hat is on backorder.

Shumlin’s hat is on backorder.

Now, keep in mind that the federal Medicaid dollars come from somewhere, right?  I’m going to guess “taxes” here, on a lark – so taxpayers are already paying for the matching Medicare dollars that the state collects.  And so are future generations, since the federal government’s unfunded Medicaid liabilities are in the tens of trillions.

This is the “free money” argument that seems to hold so much water in Montpelier – that if it’s federal dollars, it’s “free”, and we should do whatever we can to maximize those dollars.

But Vermonters are paying the taxes to the federal government and Peter’s government, and getting hit by them on both ends.  By increasing a payroll tax, you’ve just added another cost to businesses in Vermont, decreasing profitability, which imperils jobs – all to collect matching funds to offset a cost shift that’s due to underfunded and catastrophically managed federal and state programs.

In other words, commercial rate payers (employees who buy commercial insurance through their employers) pick up all the failures of the federal and state government, and now they’re going to get kicked again.  They’re going to wind up paying more for Vermont products because the costs will be shifted to people buying the products from Vermont companies.  Prices for Vermont goods will go up, making them less competitive.  It is an anti-business solution to an already well-known government failure.

But wait -there’s always more good news:

Of that $190 million, we will dedicate a significant portion of it to shore up Medicaid payments and immediately drive down private insurance rates, resulting in a 5 percent reduction in private insurance costs to individuals and businesses. We’ll invest the rest of the funds in strengthening the overall health care system to ensure better outcomes at a lower cost, meaning businesses providing insurance will benefit financially from lower health care costs.

If the cost-shift is the problem, why aren’t all dollars going to Medicaid?  Aren’t there Vermonters in need of Medicare dollars?  What does the rest of that “investment” look like?  How would money not spent in Medicaid “strengthen” the health care system?  How would that improve outcomes and reduce costs?

It looks to me that this is more window-dressing on a chronic failing of the federal single-payer system, that the states are far too tangled up in now to say “no” to.  So we go, hat in hand to the federal government, showing that we’ve done our due diligence in controlling health care costs by raising the cost of employment so we can claim we’ve “fixed” a cost shift created by the same people now claiming we need to fix the health care system.

As a result, Peter’s closing arguments are less than…convincing:

I know businesses are skeptical of new revenue and worried that this will not return value. 

What businesses?  You mean like the state’s formerly largest business that had to cut a $1.5 billion check to take an asset off its hands?  You mean businesses that rank Vermont near dead-last in business climate surveys?  Those businesses?

I know they are worried that Montpelier will try to use this revenue source for other purposes down the road.

Well, only because the state moves dollars around between the general fund and the education fund like water flows through a tap.  The Governor’s budget shows a $300 million transfer from the General Fund to the Education Fund (p. 23 of the governor’s budget summary).  So you can see where maybe the state’s businesses have some sort of historic basis for skepticism here.

General Fund, Education Fund - whatever.

General Fund, Education Fund – whatever.

But here is why I think this makes sense. Right now, businesses pay the vast majority of private health care costs and are the ones being overcharged. If we act, businesses will be the ones that will get the greatest relief if we lower private insurance costs by shoring up Medicaid.

But this just means they’re paying it twice.  Shumlin asks Vermonters to pay more to one system to offset their costs in another.

Simply put, we’ll ask businesses to pay in a payroll tax money they would have spent in higher insurance premiums had we not acted to shore up Medicaid.

So how is this a net benefit?  At best, you raise costs on businesses to offset one insurer (Medicaid) from another (commercial).  To put it in layman’s terms, this does not move the needle – it’s simply a transfer of dollars that would have already been spent on insurance, in one form or another.  It’s just raising one tax (payroll) to offset an already-existing cost, in commercial insurance rates.

It seems like the governor’s plan is to raise taxes, one way or another, to pay for a version of single-payer.  This version of it, though, will just look a little bit more like what we have today, which is a blended coverage, and will lack the stigma of the label of single-payer.

So, no single-payer, but you're going to raise taxes anyway?

So, no single-payer, but you’re going to raise taxes anyway?

What it won’t lack, however, will be the tab, which is ultimately foisted upon the Vermonters Shumlin keeps telling us he represents.  Given the massive budget failures that have occurred and are ongoing, and that Shumlin’s plan will also raise the cost of doing business in Vermont which won’t make it easier for Vermonters to live their lives here, how, exactly, did he manage to squeak past the finish line last November?

Sweet Budget Projections Are Made Of Cheese; Who Is Shumlin To Disagree?

What a difference a year makes. Vermont’s Governor, Peter Shumlin, after narrowly edging out a gubernatorial election by less than

Even Annie knows cheese when she sees it.

Even Annie knows cheese when she sees it.

a percentage point, recently presented his 2016 budget to the Vermont legislature.  Shumlin described this budget as the “toughest” he’s had to deliver, which really means his budget planning has long been out of whack if it’s taken him this long – after years of revenue misses causing cuts to successive budgets to be made – to own up to the fact that the State of Vermont is spending well beyond its means.

“Like a family trying to adjust its budget to meet reality, it is our responsibility as state leaders to match spending with Vermonters’ ability to pay,” Shumlin said. “Government must be effective, efficient and affordable.”

This may come as a shock to a “humbled” governor, but his recent, ah, accomplishments demonstrate that government has been none of those things.  If he’s so concerned with Vermonters’ ability to pay, why does the state still rely on property taxes to fund education?  Property values have nothing at all to do with income and ability to pay.

The governor said he recognizes the state faces a structural economic problem. The state has faced eight years of budget gaps, and the economic situation isn’t expected to change anytime soon. State revenues are projected to increase by 3.5 percent annually for the next five years, while expenditures have increased by 5 percent or more in the past few years.

I’m still not sure if he does recognize the issue.  His FY16 recommended budget shows growth in General Fund revenues of 4.4%.  But in the same budget document, on page 5, he shows year-over-year forecasted increases to the GF as being 2.91% for 2015, and 3.26% for 2016.  If you take a longer term look at the forecast, the YOY percentages in revenue growth are in steep decline, yet his budget calls for anticipated revenues well beyond what his budget documents forecasts.  His appropriation for the General Fund does not seem to meet his own statement, talking about a need to “match spending with Vermonters’ ability to pay”.

Hey, don't let the reality of declining tax receipts interrupt the healthy YOY growth in anticipated revenues!

Hey, don’t let the reality of declining tax receipts interrupt the healthy YOY growth in anticipated revenues!

 

Why should the forecast match the budget, anyway?  Is it really that important?

Why should the forecast match the budget, anyway? Is it really that important?

This may seem like a relatively minor nit, the difference between 4.4% and 3.26% in the General Fund, but that’s a 25% difference in assumed revenue growth rate.  So why would his budget assume such a variance between the forecast and what his budget proposes?  Why base the budget on such shaky assumptions that are constantly being revised, downwards?

Call me crazy, but those revenue projections look flat to me - and don't look close to a 4.4% number, either.

Call me crazy, but those revenue projections look flat to me – and don’t look close to a 4.4% number, either.

 

Not pictured:  The Swiss Cheese holes this budget seems filled with.

Not pictured: The Swiss Cheese holes this budget seems filled with.

The General Fund is the largest component of the budget – oh, wait, sorry, it’s the second-largest component.  Because while Shumlin is trying to tell us that we have to match our budget with Vermonters’ ability to pay, the largest component of the budget is federal funds.  In other words, Daddy’s covering our spending for us, because if we lost a third of the budget revenue, state government in Vermont would largely shut down.

But the General Fund is mostly comprised of Personal Income Tax, Sales and Use taxes, and Meals and Rooms – in other words, mostly driven by rates, which makes the General Fund the most “controllable” in terms of anticipated revenues.  The state can’t control how much income Vermonters earn, but it can control the percentages it charges for the privilege of earning a living in the Green Mountains.

So if the relative size of this tax revenue component changes, even by a percentage point, the result can be catastrophic in terms of the overall budget.  Which is why the state legislature had to return to Montpelier and come up with a new FY15 budget one month after they passed it.

Why?  Because they and the governor had based their revenue projections in something other than reality.  Now that those assumptions are being laid bare, it’s clear that the “consensus” assumptions were used to mask a serious budget deficit, one that we’re experiencing right now, and considering the historical trend, we will continue to experience no matter how many times Shumlin holds up a “Vermont Strong” bumper sticker.

These budget misses sure look painful.

These budget misses sure look painful.

In fact, the state has had to revise its revenue assumptions downwards, 3 years running.  Not only does this mean that the state lacks a certain, ah, seriousness about the actual tax revenues coming in, it also demonstrates that political concerns seem to override Vermont’s financial realities.  Political concerns do not seem to meet the Governor’s own shiny new standard of “responsibility” he so proudly touts now, after he’s cleared the hurdle of re-election.

 

An Agenda for Progress….ivism

Peter Shumlin, not-so-recently humbled in an election that he barely won against a (very) late-comer Republican with no dollars in his campaign warchest, outlined just prior to his State of the State address his new “Agenda for Progress“. Essentially this Agenda, acting as a primer for his speech, outlines his future priorities, reflecting his new humble approach to governing.

But it seems that everything in his Agenda is more of the same – exactly the same as he’s been “delivering” for the past two terms.  As an example, he talks up jobs, making a fairly bizarre correlation between the birth of the ski industry in Vermont and renewable energy:

Who shut down Vermont Yankee?  This guy!

Who shut down Vermont Yankee? This guy!

That starts with jobs. In the 1930s, Vermonters with a vision cut the first ski trails, forging an industry that today accounts for over 30,000 jobs and over a billion dollars in annual economic activity. I believe that today we are at a similar point with renewable energy innovation in our state. Through innovation, expertise, collaboration, and strong, supportive public policy and regulation, we can power Vermont forward and give our state the tools needed to become the nation’s energy innovation leader.

In case the governor missed it, he’s managed to jack electrical rates up for that same ski industry that is so heavily reliant on cheap and consistent energy supplies by actively working to shut down Vermont Yankee. You don’t create jobs by increasing the costs of an industry, or any industry.  That destroys jobs. Creating a more expensive and less reliable energy source – a critical piece of infrastructure – dis-incentivizes new businesses from siting in Vermont, and discourages the expansion of existing businesses, because a primary cost driver is going to increase so much that already-thin margins shift to red.

The gubernatorial fantasy continues, however, since he’s claiming that we have a foundation of some kind to build upon:

“We have the foundation to achieve this success. The clean energy sector has created over 15,000 good-paying jobs for Vermonters and, at a time when other neighboring states have seen energy prices spike, our largest utility Green Mountain Power was able to lower rates by 2.46 percent.”

Well. The “clean energy” sector is hugely driven by subsidies, which means, in case the governor lacks this understanding, that either tax dollars or tax breaks are given to these corporations in order to achieve a political outcome, not an economic one. “Clean” energy (an oxymoron only a politician can love) isn’t clean, nor is it cheap, nor free from disasters non-financial.

Fire, like energy, is also sustainable with enough fuel and oxygen.

Fire, like energy, is also sustainable with enough fuel and oxygen.

Secondly, the energy that is “clean” can also be described as expensive, sporadic, and foreign-owned – since Gaz Metro drives so much of the utility bus now for Vermonters. This means that rates will have the unhappy effect of being less regulated by state entities and more regulated by terms of a contract – a contract with huge advantages to Gaz Metro because we had fewer local and regional options for energy supply with Vermont Yankee gone, a shutdown Vermont Yankee that Shumlin now proudly boasts as one of his “accomplishments”.

Peter also lays claim a 2.46% rate reduction, as if this magically occurred when the cheapest energy source in the state was shut down. That lower rate is temporary, and he knows it, because he designed it that way to coincide with his election schedule: That 2.46% represents the extortion, er, payout that Vermont Yankee was forced to cough up as part of their closing deal.  That reduced rate will kick right back up to its historical levels – and beyond! – in 2017. It is a temporary rate decrease, funded by Entergy, an entity whose revenues were paid by electrical consumers.  In other words, the rate decrease is in part funded by dollars we already paid in our prior electrical bills.  This decrease in rates seems as temporary as Peter’s recent claims to have been humbled at the ballot booth.

Ah, but Peter has more, doesn’t he?  He is an endless font of unsustainable speaking:

I am proposing to build on this progress with a new Energy Innovation Program that will spur community-based renewable energy development, create more than a 1,000 new jobs, put money in Vermonters’ pockets with a net savings of hundreds of millions of dollars on energy bills, and cut greenhouse gas emissions.  

Darth Shumlin?

Darth Shumlin?

Anytime the governor states that he’s going to create a new program invovling energy in the state, it really means that he’s going to increase taxes  or fees, and then subsidize otherwise non-viable corporations to build and install more expensive, unreliable, and inconsistent energy sources – all on your dime. He creates these things not out of thin air, but out of the thinning wallets of Vermonters.

He’s actually claiming that energy prices will go down as our reliance upon much more expensive solar and wind, and out-of-state spot market purchases for energy will increase dramatically. The only money being put into pockets is the tax dollars being redistributed to corporate cronies and lobbyists for the “sustainable” energy industries – which means dollars will not wind up in the average Vermonter’s pocket.  Peter also manages to avoid stating how many hundreds of millions Vermonters did not have to spend by buying on the spot market, instead of from Vermont Yankee.

Peter wraps up his looming Agenda thusly:

We owe it to Vermonters to bring spiraling health care costs under control, to begin to address the pressure of property tax increases, to continue the work on job growth, and on education and training from pre-K through college and beyond. We should continue bolstering our mental health system, investing in our downtowns, and turning the tide of opiate addiction to keep families healthier and communities safer.

Health care costs “spiral” because the existing versions of single-payer, Medicare and Medicaid, do not reimburse at cost. Peter talks a lot lately about addressing the “cost shift” but neglects to note that the federal gov’t controls the strings regarding Medicare/Medicaid reimbursements, he does not – so while he’ll loudly applaud federal dollars that are garnered to prop up a collapsing budget, he’ll simultaneously complain that the federal government’s version of single-payer is an abject failure. Reducing mandated hospital margins won’t cut dimes from an organization that’s serving an increasing population of Medicare enrollees – even while the governor makes claims that the number of uninsured have decreased in Vermont, simply due to their enrolling for Medicare coverage that they were already qualified for well before Vermont’s single-payer came into being last year.

I firmly believe that our best days are ahead of us and that Vermont continues to be the best place in America to live, work and raise a family. Over the next two years, I will work hard every day to ensure that is a reality for every single Vermonter.

The governor seems to be the only one believes this these days, since Vermont’s demographic death spiral, its consistent ranking as being one of the worst states to do business in, and the fact that Vermonters are having fewer children in the state that Shumlin claims to be the “best place” to raise a family in, well, it

Is there a federal scooper subsidy available?

Is there a federal scooper subsidy available?

indicates to anyone with eyes and ears that Peter does not live in the same Vermont that the rest of us live in.

Maybe if Peter spent less time out of Vermont, and more time living in it, he’d understand the realities of living in Vermont as Vermonters do, not as a wanna-be Health and Human Services Secretary in a Clinton administration might casually ignore the mess we’re living in – a mess he’s worked very hard to help create.

Peter’s Paralysis

Winners.  They do whatever it takes to win.  If that fails, then they go back and try to change the rules so they can win again.  Putney’s semi-favorite son, Governor Peter Shumlin, recently suggested that Vermont change its Constitution so big guys like Peter who can’t seem to convince Vermonters as to how fantastic a job they’ve done as governor can get a pass when it comes to, well, getting elected:

Hey, those tax revenues are looking great!

Hey, those tax revenues are looking great!

The Vermont Constitution should be changed according to Governor Peter Shumlin, D-Vermont.

He made the comment after the tight race for governor that will be decided by lawmakers. Shumlin suggests that any statewide candidate who wins a plurality over 40 percent is deemed elected. The current law is 50 percent. And since Shumlin did not get there on election night, lawmakers will decide the winner on Thursday. Shumlin also questions whether Republican Scott Milne is prepared to govern if he wins the legislative vote.

Hey, don’t let a little thing like people voting get in the way of you staying governor, Peter.  As massively ego-centric a desire this is, what’s truly stunning is that it comes just weeks after this same Peter, the guy who says he cares so much about Vermonters that he spent 141 days out of Vermont from January 2013 through September 2014, said that last fall’s election results left him “humbled”.

So quotes from just a few months ago like this one, from the guy who in 2012 won 57.8 percent of the vote

“We have faced our share of setbacks in the past couple of years, and I know people are disappointed in how I have handled some issues,” Shumlin said. “I recognize I have work to do to regain the confidence of many Vermonters in the coming weeks and months. I will work with my team as well as legislators from all political parties to assess our coming legislative agenda to ensure that we are representing the will of Vermont voters.”

– is now using this convincing language (below) to tell us all how critical it is that he get back to the fine work of dismantling the state’s economy, er, passing a budget:

“I mean I gotta tell you, how hard we’re working here to try to get a sensible budget, we put together a team before we got here, but we would be scrambling to put a team together, Government would literally be paralyzed while this candidate tried to suddenly pull it all together in a really short time,” said Shumlin.  

Is this the team that "scrambled" to put the last budget together?

Is this the team that “scrambled” to put the original budget together?

Then let’s take a look at the last budget Shumlin put together, since he thinks it’s critical that he does this again, because, y’know, he’s got a “team” and all.  The same budget that, based on the Governor’s own proposed budget assumptions, forced the legislature back into session one month after the budget was passed to make budget cuts, cuts forced by declining tax revenues that stubbornly refused to adhere to the governor’s forecast.  That budget was built on the consensus budget, one using forecasted revenue growth percentages that can only be described as “optimistic”.  Another way of describing them might be “catastrophically stupid”, and the result has been yet another call to cut the budget.  The same budget that Peter so proudly touted last year, and now Peter says his experience in putting a budget together is the reason to vote for him over Milne?

Since Shumlin’s going to tout his simply fantastic record – a record that earned him just a bare percentage point or two more votes than his competition, compared to a couple of years ago when he was winning by 10-20 basis points – let’s look at the latest unemployment numbers (prepare to put on your shocked face).

While the unemployment rate dropped a tenth of a percent from October to November 2014, and the number of unemployed is down, there are still 100 more people unemployed in November 2014 than there were in November 2013.  Shumlin’s economic miracle, perhaps, or perhaps his current budget is on fire because he has no idea what he’s doing:

Mediocrity unchained.

Mediocrity unchained.

Vermont’s legislature will now be forced to vote for Vermont’s next governor because the sitting governor, the incumbent, couldn’t muster enough votes, after getting his signature legislation passed and put into place, to beat a Republican candidate who came in very late in the race, had just a fraction of Shumlin’s campaign spending to rely on, and had little name recognition.

Shumlin fears that government would be “paralyzed” if Milne were elected.  What Shumlin fails to understand, and never will understand, is that a government that does less – especially as Shumlin’s destructive record attests – might be the best thing to happen to Vermonters in the last 4 years.  Funny how Shumlin never seemed to be paralyzed when it came to raising money for his campaign, and traveling all around the country seeking out-of-state donations.

I guess being “personally humbled” means something different to Shumlin than it does to the rest of us.  As Calvin Coolidge once said, “No man ever listened himself out of a job.”  If Shumlin heard a message loud and clear last November, as he told us he did, then why is he almost out of a job?