The 10-year Winter Of Vermont’s Employment Discontent

Vermont is currently enjoying one of the lowest rates of unemployment in the country.  Enjoying.  Yes, like most things in Vermont,

An economy so strong you can't stop it, you can only hope to contain it.

An economy so strong you can’t stop it, you can only hope to contain it.

“enjoying” comes with a bit of a caveat.  If by enjoying you mean “having a low unemployment rate with one of the weakest state economies in the country”, then yes, there is much to be enjoyed.

Yet even in the state’s own monthly statement on the labor market (November 2016), there seems to be some signs of reality slipping in.  Those signs only appear after the preamble, of course, because low unemployment is automatically great news for Vermonters:

The Vermont Department of Labor announced today that the seasonally-adjusted statewide unemployment rate for November was 3.2 percent. This reflects a decrease of one-tenth of one percentage point from the revised October rate (3.3 percent). The national rate in November was 4.6 percent. As of the prior month’s initial data, the Burlington-South Burlington Metropolitan NECTA was tied for the sixth lowest unemployment rate in the country for all metropolitan areas at 2.2 percent (not-seasonally-adjusted). Overall, Vermont’s unemployment rate was also tied for sixth lowest in the country for the same time period.

That must mean thousands of people are moving to Vermont to enjoy its robust economy and vast repositories of high-paying jobs just waiting to be filled by eager workers, right?  Right?

No.  The number is just a reflection of the declining size of Vermont’s labor force, not the number of unemployed.  In fact, the state’s lowest unemployment rate for the year was 3.1%, back in May 2016.

While the unemployment rate barely changed between May and November, the labor force shrunk by 1,200 people, and the total number of employed shrunk by 1,300 people, which results in a total unemployed number that’s barely changed.  Yet there are 1,300 fewer people employed between the state’s lowest unemployment rate month (May 2016) and last month (November 2016).

2016-labor

Telling Vermonters in a press release that Vermont’s unemployment rate is tied for sixth-lowest in the country is so meaningless (absent any context), it’s almost deceptive.  But the November press release goes on:

“The Vermont economy is more stable than the month-to-month data might suggest, as increases and declines are “ironed out” at the

Welcome to Vermont!

Welcome to Vermont!

conclusion of the year. What we can see is a slower rate of job gains this year than in recent years. Yet, with Vermont’s low unemployment rate, it’s still a tight labor market with recruitment and retention challenges for our employers; and a limited availability of workers can adversely impact economic expansion and growth.

Yes, it’s always going to be a tight labor market when the labor force is shrinking annually, and has been since its 40-year peak in April, 2009, at 361,200 Vermonters in the labor force.  In November, 2016, that number is 344,750.  That’s 16,000 fewer workers in the labor force in 7 years.  Vermont is featuring an annual worker reduction of more than 2,000 workers per year.

A couple of numbers from the state’s historical labor data that never seem to make it into the state’s semi-rosy press releases:

  • The average monthly number of workers in the labor force for 2016 is 345,000.  In 2006, this average is just shy of 357,000.  A reduction of 12,000 workers in the labor force.
  • The average monthly number of people employed in the labor force for 2016 is 334,000.  In 2006, this average is just shy of 344,000.  A reduction of 10,000 employed workers.

In fact, taking a look at a few of the lowest employment months in 2016, and comparing them to the historical high numbers in 3 cateogories – Labor Force, Employment, and Unemployment – and then compare them to the 2009 numbers, a certain trend becomes clear:

  • Vermont’s number of employed is relatively the same for the past 10 years.
  • Vermont’s labor force is shrinking dramatically, at a rate higher than the decline of unemployed – which creates a decreasing unemployment rate.  This decreasing unemployment rate masks the fact that there is little to no job growth in the state for the last 10 years.

The historical context is…painful.

But the state’s conclusion as to how to address this issue, the fix, is a howler that has to be read at least twice to understand the depth of the disconnect:

Vermont needs to effectively utilize every state and federal job-training dollar to get people into jobs, and we need to address issues that will help Vermont be more successful: promoting gender equity, workplace civility, bringing under-represented populations into the workforce, creating job training programs that guarantee employment at the conclusion, and resolving the “benefit cliff” so that anyone who wants to work can do so without suffering adverse economic impacts.

Oh, so that’s all it takes!  Gender equity will create high-paying manufacturing, technical, and financial jobs for all inequitably-gendered Vermonters to enjoy!  I’d gasp with pride but I’m too busy gasping in astonishment.

Let’s look at that State of Vermont sanctioned checklist to fix the economy a bit more closely:

  • Gender equity (I’m assuming this reflects how much you have invested in the value of your house based on gender?)
  • Workplace civility (remember, you have to have a job first before the workplace’s civility can be measured by the Vermont State Civility Department)
  • Bringing under-represented populations into the workforce (like actual Vermonters, I’m guessing here?)
  • Create job training programs (because decades of job training programs have resulted in the numbers above, so let’s double-down on that approach).
  • Resolve the benefit cliff (this from the state that tried to institute single-payer, a system that has failed in Vermont as well as nationally, and has created people taking more part-time jobs because Obamacare’s incentives are upside-down).

Here’s what’s not mentioned in the press release, so I offer these up as suggestions to the State of Vermont, if they’re not too busy creating gender civility or the like:

  • Lower taxes – on income and property.
  • Reduced regulation by a state that’s paying for advertising on the horrors of contractor workers being, y’know, employed.  As a
    I hear there's an opening at WalMart. I'm on it.

    I hear there’s an opening at WalMart. I’m all over it.

    contractor.  By agreeing to a contract.  For work.

  • By creating a business-friendly business environment.  When you’re ranked 46th out of 57 states, well, there’s some room to grow.
  • Stop electing governors who promise something for free but winds up costing $200 million to “cover” only a small fraction of Vermonters who were uninsured, but qualified for insurance of some kind regardless of Peter Shumlin’s flailing attempts at implementing single-payer, and, well, you’d get more businesses interested in investing and expanding in Vermont when they know their costs won’t swing on the whims of state politicians interested in national offices.  Like in DC.  (Ahem).
  • Stop electing governors who usurp the authority of the state’s Public Service Board (which is supposed to represent the peoples’ interest, not the governor’s) and shutter the cheapest and most reliable electricity in the state’s history – Vermont Yankee.
  • Stop electing governors who tout new ‘clean-energy’ jobs as part of the state’s job-growth numbers, while happily ignoring the fact that federal subsidies – funded by taxpayers – pay for the bulk of those new ‘jobs’.

That said, the first step for any corrective action is up to Vermonters, who, at least in the last election cycle, seemed to have grasped what works, and what does not work.  It’s time for the State of Vermont to catch up to its citizens.

 

 

 

 

 

 

 

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Vexit: The Vermont Exit From The Progressive Union

Great Britain, in re-claiming its sovereignty by famously voting to exit the EU, has set a new standard in terms of trying on new political ideas, and finding them wanting.  The difference for Britain and its people, in this case, is that they could disconnect from the EU experiment if they didn’t like it.  As just one maddening example shows, it turns out that the EU defining how olive oil should be served on restaurant tables might not be in anyone’s best interests, except for an EU bureaucracy that seemed to function only to create additional costs for businesses with no

Sorry, that bottle of oil is completely unsafe and might explode.

Sorry, that bottle of oil is completely unsafe and might explode.

discernible benefit to the public good, or to the business itself.

Why would anyone want to put up with this insanity?  As Great Britain demonstrated, if a free people choose to exercise their own power, they will decide not to put up with said insanity.

Vermont’s example shows, however, that it takes more than talk to change a few decades of EU-esque progressivism’s slow but determined encroachment into the decision-making space of every citizen.  The encroachment never happens in one swift stroke.  Incrementalism is the key, and as more layers of bureaucratic power and spending are added, annually, the new norm is established.  The next year’s barnacles are built on the prior year’s established barnacles.

A few of these barnacled examples from Vermont:

Act 250:  What was started as a way to manage growth in Vermont, and to apply a common set of guiding principles and rules has devolved, utterly, into a chokehold on economic growth.  A dilapidated example of which is evident to anyone getting on Interstate 189 off Shelburne Road, in Burlington, where they can see the Vermont’s largest accidentally-funded skatepark, which started construction in 1988, and only last year was the final hurdle cleared in allowing construction to continue.

1988 to 2015.  27 years to build a road.  A 2.9-mile road, one whose planning began in 1965.  Even with a recent green light given by the

You can just *feel* the economic vitality oozing from its unused surface.

You can just *feel* the economic vitality oozing from the unused surface.

Vermont Supreme Court (which tossed out a final appeal to block further construction), the City of Burlington is only targeting construction to begin in 2018.

So call it a 30 year delay in building 3 miles of road to route interstate traffic off the highway, into the city.  10 years per mile, of delay.

And Peter Shumlin has said Vermont is “open for business”?

Speaking of the business-friendly environment Vermonters have come to know and love under the Progressive agenda, one of the icons of small businesses in Vermont, Bove’s, was fined in 2008 for labeling their products in a fashion that the Progressive agenda does not approve of, including (gasp!) the fact that not every component in the sauce is made in Vermont.

The Attorney General’s office says that the Bove’s company sold several types of jarred pasta sauces and other products under the “Bove’s of Vermont” label. But the tomatoes were from California and some of the sauce was made in New York. State law prohibits companies from using the word “Vermont” to market products made outside of the state.

Granted, there is a concern about something being labeled inaccurately, but where is the line drawn?  Does the glass for the jars need to be made in Vermont, too?  The manufacturing tools used at the manufacturing facility – are those made in Vermont?  The jar lids?  The labels?  The oregano?  Modern manufacturing is a worldwide supply chain equation, and the state has no knowledge of, nor expertise in, any one single product, much less everything made in Vermont.

As an example, the state regulates wood.  Well, thank God that that issue has been figured out.  I was concerned that Christmas trees would be mislabeled, and angry Christmas shoppers would riot when this duplicity was discovered.

Vermont's lingering wood question, finally resolved through governmental excellence.

Vermont’s lingering wood question, finally resolved through governmental excellence.

 

EB-5:  Long a darling of the Shumlin administration, the EB-5 program was designed to attract foreign investment in Vermont capital projects, of which there is something of a shortage.  Like water in a desert, Vermont needed a federal program to let dollars rain down on its citizens, because without Progressive leadership to fix Vermonters’ problems for them, where would they be?

Well, they wouldn’t be investigated by the SEC for fraud, for one thing.  But hey, what’s a few hundred million in loans floated around in what seems to be a Ponzi-like effort to leverage investor dollars in every place but the capital project itself?  As others have noted, when campaign contributions come from people benefiting from public dollars, even a thin veneer of deniability shatters upon closer inspection:

Wait. You did *what* with the money?

Wait. You did *what* with the money?

The current circumstances at Q Burke and Jay Peak are a blow for the entire state of Vermont. Economic development in communities which have been historically neglected is absolutely essential to the financial vitality of our state. The fact that the EB-5 funding scandal is the product of, in this case, a handful of angel funders who have little connection to Vermont speaks loudly to the desperation of public officials who wanted to believe that the primary developers of these projects, Ariel Quiros and Bill Stenger, were white knights. They weren’t.

Many will point to the fact that the alleged fraud in this case was eventually uncovered and point to the hard-working forensic accounting specialists who largely go unheralded as evidence that our system of oversight worked. To the extent that these alleged white collar crooks dipped into the public till and enriched themselves at the expense of all Vermonters that is in fact true. But, we should have never, EVER gotten to this point.

Campaign contributions showered the state Democratic party and its leaders, most notably Gov. Peter Shumlin and Sen. Patrick Leahy. Quiros and Stenger did not make those contributions out of the goodness of their hearts. They expected something in return for those campaign monies. While unseemly, under our system that kind of relationship between elected officials and supporters looking to gain or sustain influence is not illegal.

Single-Payer:  Another Progressive fantasy, “Single-Payer”, which mostly involves getting other people to pick up even more costs in addition to what they’re already covering due to the cost shift and Medicaid block grants, wound up being mightily flushed into the outhouse of Vermont’s history, along with a couple hundred million in taxpayer dollars to pay for a site the state did not need, but Peter Shumlin did in order to raise his political profile to national levels.

So Vermont spent someone else’s money, again, for nothing.  Although the fact that it failed in Vermont, and Shumlin had to admit to its failure, which probably contributed to him not running for office again, might have been worth the investment.  In a jaw-dropping turn of

Hey, who's got $2.6 billion I can borrow?

Hey, who’s got $2.6 billion I can borrow?

phrase, though, Peter keeps the Progressive dream alive, by using phrasings like “Vermont’s not ready yet”, as if there’s an as-yet untapped pile of Vermonter-hidden gold in the $2.6 billion dollar range that’s just lying around, ready to be used for single-payer.

Instead, Shumlin hid his financing “plan” until after an election.  Why?  Because that’s just good science, Vermonters!

The governor kept the development of his financing plan under wraps for several years and had come under increasing pressure to include members of the public in the process. He waited, however, until after the election to make his move. The delay may have cost him voter support as he narrowly defeated an relatively unknown Republican challenger, Scott Milne, by only 2,434 votes in November.

The reality was that the Progressive dream Peter touted was not even remotely possible, under any set of financial circumstances, yet Shumlin rode the wave of its popularity to successive elections until even he could no longer hide from facts, or hide the facts from the public.

“We obviously wish that the numbers were different. It’s a huge disappointment for me, it’s the biggest disappointment of my public service so far, but we’ll make progress by pushing forward in other ways,” Shumlin said.

What should be disappointing to Vermonters is how he spent millions of taxpayer dollars on a vehicle to national office, yet Vermont was still stuck with him.

Now it’s easy to complain, so what’s the cure for Vermont’s ills?  Is there a federal grant program that could be tapped to repair what might have become an irreparably broken Vermont, after decades of abuse?

Or, instead, can Vermonters figure this out on their own?  Here’s a few suggestions that might help the state change course:

Cut taxes:  Match other states that have similar population size, demographics, geographics, etc.  New Hampshire comes to mind here.  It turns out that their aggregate rate of state and local taxes (as of 2011) ranks them 44th (at 8%), and Vermont 9th (at 10.5%).  Here’s an idea:  If people have more of their own money to spend on goods and services, aggregate demand goes up.  The economy grows.  That’s how it’s supposed to work.

Encourage business:  The costs of business can be broken down into some simple cost drivers:  Labor, materials, and energy.  What did Vermont do for its businesses in those categories?

a.  Increased the cost and reliability of energy by shutting Vermont Yankee.  Shumlin took pains to make sure he was credited for increasing business costs for Vermonters.

b.  Increased the already-high cost of labor by mandating health insurance coverage categories for everybody, essentially, mandating a Cadillac plan.

c.  Increased the cost of gas by raising taxes on it, a cost which every business uses in one way or another, and Vermonters use to drive to work and to drive to places where they might, oh, buy wood.  This cost is passed on to the buyer at every level of a business’s operations, for everything they purchase.

Cut Taxes:  Did I mention cutting taxes?  Vermont is ranked 49th for economic outlook, which, unless I’m doing my math wrong here, means Vermont is near to reaching Progressive nirvana, by being next to the best at being worst:

Only New York is worse than Vermont when it comes to tax and regulatory policies that foster economic growth, according to a new report on economic competitiveness between states.

According to the eighth annual Rich States, Poor States, Vermont is 49th out of 50 states on economic outlook due to the state’s ratings on 15 different variables, including tax rates, labor policies and overall regulatory burden.

Oh, and cut taxes.

Finally, there’s a broader, more philosophical argument to make, one that aligns with what used to be something of a political signature for Vermont, the town meeting.  The idea of subsidiarity, essentially meaning a de-centralization of political control, kicks all the way back to de Tocqueville, but is anathema to today’s Progressivism.

Alexis de Tocqueville‘s classic study, Democracy in America, may be viewed as an examination of the operation of the principle of subsidiarity in early 19th century America. De Tocqueville noted that the French Revolution began with “a push towards decentralization… in the end, an extension of centralization.”[1] He wrote that “Decentralization has, not only an administrative value, but also a civic dimension, since it increases the opportunities for citizens to take interest in public affairs; it makes them get accustomed to using freedom. And from the accumulation of these local, active, persnickety freedoms, is born the most efficient counterweight against the claims of the central government, even if it were supported by an impersonal, collective will.”[2]

Virtually nowhere in the Progressive agenda do you find calls for a reduction in power, or control.  Every Progressive item in Vermont, and at the national level, is to either take control of decision-making from the citizens, or to reduce their Constitutionally-based rights, if it furthers

Town Meeting in Charlotte, Vermont. Not in Washington, DC.

Town Meeting in Charlotte, Vermont. Not in Washington, DC.

the Progressive agenda, and garners more votes, which equates to an even further increase in control.

The idea that others represent us politically becomes less and less realistic the further away from us they get, both physically and philosophically.  Ideally, however, the opposite should be true:

The laws you live under should be made by the people you live with.

Progressivism, in its most modern sense, is a champion of centralized control.  Great Britain has learned that lesson.  As Churchill once said, the US will be sure to do the right thing, eventually, after we’ve exhausted all the other possibilities.

Let’s hope that doesn’t take too long.

What A Difference A Year Makes!

Nothing succeeds like success!  Or, it does if you’re Annie Noonan, the Commissioner of the Vermont Department of Labor, and your job is to cheerlead mediocrity.  Since Vermont has such a low unemployment number, even when bad weather (from the ski industry’s point of view) makes for fewer of those high-paying seasonal service jobs, Annie’s here to tell that there’s a silver lining to the unemployment cloud:

January 26, 2016:  “The lack of snow directly impacted the number of jobs in Vermont in December.  People who had been hired by employers in the leisure and hospitality sector were laid off when the snow didn’t arrive as expected, and ski lifts were idled, hotel rooms weren’t booked, and restaurants weren’t serving the winter-season visitors.  As such, the December employment data had notable employment loss; fortunately, the situation is turning around, and many of those laid off workers are now back to work.  Vermont employers are still hiring, and job training programs and internships are available for many Vermonters.  The Department of Labor encourages anyone looking for work or a career change to visit one of our 12 regional career centers.”

Well.  Vermont employers are still hiring.  Great news!  So what kind of jobs are they hiring for?  Before answering that question, let’s look at Vermont’s 2015 economic performance from an employee point of view.  Meaning someone who’s actively looking for work:

Hey, unemployment's lower! But, um, so are the employed. Oh.

Hey, unemployment’s lower! But, um, so are the employed. Oh.

Hm.  The Total column represents Vermont’s burgeoning labor force.  So there’s roughly 5,000 fewer people actively seeking employment in Vermont in December 2015 than there was in January 2015.

As the unemployment column shows, about 5,000 fewer people were unemployed in December 2015 than there were in January 2015.  So how can the unemployment number drop from 4.6% to 3.1% in 12 months, if those two numbers are the same?

Answer:  Because the overall employment number is almost exactly the same.  330,000 people were employed in January 2015, and 330,000 people were employed in December 2015.  Net new employment is all of 100 people.

That’s it.  That’s the Shumlin administration’s 2015 job creation record.  100 net new jobs.

What industries were able to reap this whirlwind harvest of jobs?  What businesses could absorb this upwelling of employment?  Well, government, mostly, and health care & social assistance.  In other words, taxpayer-supported jobs, not private-sector jobs, the jobs that provide the tax revenues to support the public sector.

Feel the economic...burn?

Feel the economic…burn?

And how is Annie Noonan’s boss, Peter Shumlin, addressing this massive job crisis in the Green Mountain State?  Oh, he’s telling businesses to divest from the coal and gas industries:

MONTPELIER – February 3, 2016 – Gov. Peter Shumlin stood with Vermont business and education leaders today who support his call for Vermont to use divestment as a tool to help combat global warming. The Governor made the call in his State of the State address earlier this year for Vermont to follow California’s lead in divesting state pension funds from coal assets. The Governor also urged that the state go further and divest from ExxonMobil assets.

So, in short, the governor manages to eke out 100 new jobs in 12 months, and then he’s telling businesses how they should run their asset portfolio.  This from the same guy who’s crashing the state’s budget on an annual basis before slinking out of office at the end of 2016.  As others have noted, submitting revenue estimates with 6% growth rates – when the historical trends are half that number – seems like a less

If only the governor's budgets were this accurate.

If only the governor’s budgets were this accurate.

than intelligent way to formulate next-year budgets.

The first consensus revenue forecast Shumlin saw as governor in January 2011 predicted that general fund revenues would grow by close to 6 percent in the following two years. In general, forecasts have fallen since then.

This was catastrophically bad financial planning, and only a fool would assume doubled growth rates based on no reason whatsoever.

Which leaves me one question:  I wonder if Shumlin will have another 100 jobs to take credit for in 11 months, on his way out the door?

A Tale of Two States

Vermonters, let’s face facts:  New Hampshire is an upside-down Vermont.  Or, maybe more accurately, Vermont is the upside-down state,

I like this map. It's old-timey!

I like this map. It’s old-timey!

and New Hampshire has been right-side up all along, but Vermont’s politicians never seem to have noticed.  As it turns out, there’s some data to back this New England economic inversion up.

First, let’s take a look at the two states side-by-side, in terms of Median Household Income and the Unemployment Rate.  While both Vermont and New Hampshire enjoy (“enjoy” being a relative word here) a low unemployment rate, there’s just a slight difference of note regarding incomes:

Vermont strong! Um, except for incomes.

Vermont strong! Um, except for incomes.

 

Now let’s take a look at New Hampshire:

Hmmm. How is this state not like the other?

Hmmm. How is this state not like the other?

So, if an enterprising young individual was looking to choose a state to live in, and had NH and Vermont to choose from, which state do you think would be more appealing?  A $15,000 difference in median household income might be a deciding factor, no?  Does Peter Shumlin tout New Hampshire’s low unemployment rate and higher incomes than Vermonters, since he’s always talking up Vermont’s low unemployment number?

Speaking of incomes, you can only spend what you take home.  If given a choice, would you want to live in a state with a higher aggregate tax bite, or a lower one?

state local tax burden vermont

Consistent top 10, baby! And *above* the national average!

And how is New Hampshire so different?  Take a look at a the ranking column:

When it's better to be in the bottom 10 than the top 10.

When it’s better to be in the bottom 10 than the top 10.

Now let’s talk the size of the labor force.  One state has an increasing labor force, while one sad, desolate state’s labor force is consistently decreasing.  10 bucks to the first person who can guess which state is suffering from labor force shrinkage.  Go on, guess.  I double-dog dare you.  I perhaps might even triple-dog dare you.

First, let’s look at Vermont:

Hey, those are great trendlines.

Hey, those are great trendlines.

 

New Hampshire:

Decreasing unemployment rate and an increasing labor force. This is not Vermont.

Decreasing unemployment rate and an increasing labor force. This is not Vermont.

 

In short, New Hampshire has higher incomes, lower tax rates,

And choosy college grads, too.

And choosy college grads, too.

a similar unemployment rate, an increasing labor force, and an ongoing uptrend in

incomes versus Vermont’s stagnating income.

If given a choice, which state would you choose?

 

Health Care In Vermont: The Overruns Strike Back

Several years ago, when Peter Shumlin and a crowd of adoring sycophants raised their tiny, shrill voices in a chorus of acclaim for single-payer in Vermont, a few people were raising their hands and asking questions about how to pay for it, regardless of the merits of a single-payer system itself.  Those people who had the temerity to ask impertinent questions were routinely shouted down, and found themselves in

Not only are we shoving you off a cliff, we're going to incur a couple of hundred million bucks in costs for nothing! Ha ha ha! Ahem.

Not only are we shoving you off a cliff, we’re going to incur a couple of hundred million bucks in costs for nothing! Ha ha ha! Ahem.

league with those awful people who wanted to shove Grandma off a cliff.

As the reality of the single-payer implementation materialized, even Shumlin had to finally concede that there was, indeed, no way to pay for it.  He delayed his plan to finance single-payer, and only released the plan after his last election, which he won by only a few thousand votes, over a last-minute challenger who had little to no campaign funding and support behind him.  Then, well past the November election, Shumlin announced single-payer was dead in December 2014, and finally presented his financing plan as evidence of its death, almost 2 years after he was mandated to do so.

So what’s happening now with Vermont’s defective “single” payer website?  The administrative costs are ongoing, and going up, well beyond the scope of what was originally promised to not cost Vermonters anything.  From VT Digger:

The Shumlin administration has placed a partial dollar amount on state staff costs stemming from manual processes and workarounds associated with Vermont Health Connect’s messy open enrollment period earlier this year.

The amount? $800,000 per month. That’s for the costs incurred for “staff augmentation” needed to process renewals manually “this winter and spring,” according to Vermont Health Connect spokesman Sean Sheehan.

The renewal and open enrollment period was from November 2014 to March 2015, which would mean the state paid at least $4 million to work around the incomplete IT system.

“Staff augmentation” is code for “additional unanticipated payroll spending for a website that was promised to work easily for all Vermonters at no additional cost to Vermonters, because it would be paid for by federal monies.”  As it turns out, implementing your own version of an exchange website is expensive, will incur costs not anticipated in the original scope, and will impact Vermont’s overall state budget negatively when it’s already operating on razor-thin margins.

So another $4 million is paid out of pocket to process routine, standard, run-of-the-mill changes made to health care plans that used to be done entirely outside of the state’s control.  Now, in order to provide health care to Vermonters, these changes are now being ably handled by the same people who once said it wouldn’t increase the budget by a dime, and would, in fact, save money.

This is a failed project, by any project management standard.  The scope, cost and schedule have all slipped, multiple times, and there is no

What do you mean this isn't an effective way to cut hospital costs?

What do you mean this isn’t an effective way to cut hospital costs?

solid date in place for recovery, nor any kind of a finalized recovery plan.  In fact, a large-scale IT project that switches software vendors in the middle of the project is an air-horn klaxon-esque indicator that the requisite requirements work was not done up front, which is what any project manager knows is critical to success.  The state cannot escape the triple constraint any more than it can escape the reality of gravity, or, apparently, the reality of Vermont’s politics.

Vermont Health Connect’s implementation was a political vehicle for Shumlin, not a project to actually provide health care.  Even if you issued every Vermonter an insurance card, magically, insurance that was paid for out of a unicorn’s lockbox of gold coins hidden deep in a cave in Buel’s Gore, that in itself does not provide one second’s worth of health care to any Vermonter.  It is access to health care, not an insurance card, that should determine whether or not Vermonters have what Peter Shumlin has called a “right” to health care.

Vermonters have access to health care.  They had it before the state decided to spend several hundred million dollars failing to create a website.  The mix of payers was available to every Vermonter, regardless of income level – commercial insurance, Medicare, Medicaid, VHAP, etc – every Vermonter had access to one of the payers, and had access to care.

The website itself is meaningless.  It’s just an enrollment vehicle, and even in that it fails.  It also fails because it’s not integrated with Medicare, or military health plans, and can’t handle plan changes without laying out hundreds of thousands of dollars in additional spending, monthly, to process the changes manually.

Would health care costs decrease if the dollars spent to implement a website were spent on care instead?  If we spend $200 million on a website, and the state’s largest hospital’s budget is $1 billion (in net patient revenues), then Shumlin threw 1/5 of a year’s worth of budget away on an unneeded failure.

As Shumlin’s own website states, he’s “determined” to get tough things done:

As Governor, Peter is determined to get tough things done. Since his inauguration, he has been working hard to create jobs for those who need them and raise incomes for those who have jobs, control skyrocketing health care costs, expand broadband and cell service to every corner of the state, reduce recidivism, invest in quality education opportunities, and rebuild our roads and bridges. Taken together,

Nope. We're gonna need a bigger rope. Or a global budget?

Nope. We’re gonna need a bigger rope. Or a global budget?

these and other key goals represent an ambitious agenda to create a brighter economic future for Vermonters.

I guess Shumlin’s definition of “control” means something entirely different to him than it does for the rest of us.  If anything, Shumlin increased the cost of health care, by:

  1. By deciding to create a Vermont version of a health care enrollment website when the federal version was available, he’s incurring millions in additional costs in the creation, maintenance, and manual support required to keep the site operational.
  2. Increased the financial reporting and regulatory compliance burdens on all the state’s hospitals, which in part means additional staff hours required to maintain unique budget reporting to the Green Mountain Health Care Board.

Not one of the things done by the Shumlin administration has provided care to a Vermonter that needs it.  Not one thing.  And instead of getting tough things done, Shumlin is now quitting the office, and the Vermonters he was so “determined” to help.  While the Green Mountain Care Board awarded Blue Cross/Blue Shield a 5.9% increase, this was lower than the request rate increase of 8.6%, which will mean that there may or may not be monies available for reimbursement at the lower, approved rate.  Kind of like how Medicare only reimburses a certain dollar amount for any procedure, regardless of actual hospital costs.

It turns out that helping himself to a several governorships was Shumlin’s most successful achievement, considering that all of his determination has not changed the reality on the ground that hospitals, insurers, and patients have to live with, on a daily basis.

Back In Black

Recently, the State of Vermont published a revised revenue forecast for 2016 that puts the state

Laughter is the best medicine.

Laughter is the best medicine.

budget, finally, back in the black.  Is this financial wonder due to strong economic growth, a “snapback” from the Great Recession?

No.  As the report itself states, on Page 1 (h/t to Vermont Digger):

The slowest economic recovery in post-WW2 history will likely continue in FY16 and FY17, with some acceleration bringing slightly above-average revenue gains, though very close to previous expectations. Virtually all of the current changes in General Fund revenues relative to the prior January forecast, per the below chart, are the product of statutory changes made in the last legislative session, and represent about $30 million in new tax revenues.

So the budgetary forecast wasn’t “fixed” based on significant reductions in YOY spending, nor by accelerated economic growth.  The General Fund revenue growth is all based on new taxes.

These tax changes primarily impact the General Fund, with the largest tax changes affecting personal income and sales taxes. Without these new tax revenues, the General Fund would have increased by about $9 million in FY16 and declined by about $1 million in FY17, relative to January projections.

But even this outlook has its caveats, as indicated near the end of the report, specifically regarding the General Fund (the largest revenue source in the budget), on Page 15 (1st paragraph):

As illustrated in these tables, and consistent with past projections, longer term revenue growth from the mix and structure of the taxes in the three funds analyzed herein is unlikely to keep pace with recent levels of expenditure growth (emphasis added).

In other words, tax revenue growth rates do not match expenditure rates, which means the state is still consistently budgeting to spend more than it takes in.

But the real impact of Vermont policies is being felt where it’s always felt – in the lives and pockets of working Vermonters.  The forecast cites the low unemployment rate Vermont is “enjoying”, as if that constitutes evidence of some kind of recovery:

Vermont employment growth has also strengthened in recent months, with year over year growth in the past 12 months accelerating to 1.4%, vs. 0.7% in the preceding 12 month period. This has pushed the State unemployment rate to 3.6%, the lowest in New England and the fourth lowest in the U.S. 

Vermont employment has increased in recent months, but compared to historical employment levels the state is still an employment trainwreck.  The number of employed Vermonters, what the state’s forecast calls “employment growth” has increased from prior months, to 336,550 in June 2015.  In January 2015, that number was 334,550, so clearly some hiring is occurring.

2015 Unemployment snag

But to put this in a larger perspective, the last time Vermont had 336,550 employed, it was October 2012.  In other words, it’s taken Vermont 2.5 years just to climb back to 2012 levels of employment.

To give it more of a historical perspective:  What was Vermont’s highest employment level in the last 10 years?  344,150, in April 2006.  Which means Vermont now has roughly 8,000 or so fewer people employed now than 10 years ago.

2006 Unemployment snap

Vermont’s labor force – the number of people available and willing to work – has shrunk in almost direct correlation to the decrease in employment numbers.  The labor force in April 2006 was 356,700.  In June 2015, the labor force is 348,950, a difference of -7,750.  This is why Vermont’s unemployment rate in April, 2006, of 3.5%, looks so much like June 2015’s unemployment rate of 3.6%, even though we have about 8,000 fewer people employed.

To put this a bit more painfully, Vermont has lost an average of 800 jobs every year for the last 10 years.

So while the state’s latest forecast loudly touts the low unemployment rate, it neglects to mention that a) the total number of Vermonters employed is at historical lows, and b) the labor force itself has shrunk.

A shrinking labor force is not an indication of economic health.  It’s an indication that there are fewer opportunities for employment in the state.

Oddly, the report also discusses income inequality (page 7 of the report), as if a more equal distribution of wealth is a desired goal, and discusses the “owners of capital” as if it’s straight out of the Marx/Engels reader.  But as more and more people drop out of the labor force, it’s entirely unsurprising that incomes are reduced.  In fact, since the state’s own long-term labor forecast calls for the largest job growth sectors to be in the service industry, whatever policies the state has been putting into place to improve the economy, and thereby the incomes of Vermonters, is not working.

By the state’s own admission, its economic policies are having the opposite of the desired effect:

Vermont's economic policies in a nutshell.

Incomes are down in the recession – so let’s fix that by raising taxes!

The report goes on to state:

Income growth has become increasingly concentrated among the highest income groups over the past 30 years and this has continued during the current economic recovery. past 30 years and this has continued during the current economic recovery.  Between 2009 and 2012, recent studies estimate that virtually all real U.S. income growth accrued to the highest 1% of all income tax filers.  These same analyses, however, suggest that in Vermont, income inequality has not been quite as pronounced, with income growth among the top 1% during this same period of 21.8% vs. growth among the bottom 99% of about 4.6%. They also suggest that longer term income inequality, though growing from lows in the late 1970’s to levels in 2012 not seen since the late 1920’s, are similarly less pronounced in Vermont than in the nation as a whole.

So income growth is only good if it’s at the lowest income groups?  Considering that the highest income groups pay the vast majority of income taxes collected, is the state arguing for reduced incomes at the highest levels so things are less “unequal”?  How will budget gaps be filled when the rich are no longer quite so rich?  Since half the country pays no net income taxes, how, exactly, would increased state expenditures be paid for if the 1% didn’t have increased incomes?

As the report says on Page 11:

The increasing volatility in revenues due to a growing reliance on Personal Income,

Deep thoughts for a Vermont legislature.

Deep thoughts for a Vermont legislature.

Corporate and Estate taxes, was on full display in both FY14 and FY15. In FY04, these three tax categories comprised 50.6% of Available General Fund tax revenues. In FY15, they represented 60.9% of revenues, and are expected to exceed 62% within the next five years.

So while bemoaning inequality, the report also states Vermont has become and is increasingly becoming reliant on personal incomes to constitute the bulk of General Fund revenues.  Shouldn’t the state, then, be celebrating wage inequality?  Who else is going to fund the General Fund?

The state’s forecast now shows that the anticipated budget will be in the black, but so did the prior years’ budgets, which sometimes required a budget recission one month after the budget was passed. When the legislature scrambles to find yet another tax, this time in the form of one on sugary drinks, one which places both an additional cost of compliance on the backs of business owners and increases the aggregate tax burden on Vermonters, and then counts itself as a fiscal hero for doing so, the environment is created that assumes that this is the way budgeting and the state’s economy blame shiftshould work.  In other words, Vermont will see these same steps taken again and again.

What’s really happening is that the state is patching holes in a sinking ship, and is running out of things to patch it with.  What doesn’t help is the state’s continuing demonization of those who pay the majority of the bills in the state, and who will share an ever-increasing burden of doing so.

 

 

 

A Quitter’s Work Is Never Done: The Shumlin Short-Timer

The Putney Powerhouse, Peter Shumlin, is quitting – and as an odd comparison to what it’s like to quit in the private sector, he gave himself a

Peter looks great in yellow.  It's definitely his color.

Peter looks great in yellow. It’s definitely his color.

year and a half’s worth of down time before he hangs up his spikes.  Or his gubernatorial epaulets.

This is somewhat in contrast with Peter’s prior exhortations for Vermonters not to quit, on such things near and dear to his heart like single payer.

“What I would argue strongly is don’t quit before we start,” said Shumlin. “Don’t quit before we start.”

I guess it’s OK to quit after you start, if you’ve got the steely backbone of a Peter Shumlin.

But, since he’s decided to become Sir-Quits-A-Lot, Peter’s now going to be laying out his laurels for all Vermonters (and potential future US Senate voters) to coo over, lovingly, while he puts his feet up in his office as a short-timer, and tells us “we” have a lot left to do:

“Now we have a lot left to do; let’s get back to work,” he said, according to the Free Press.

Shumlin cited his work to reduce unemployment rates and expand high-speed Internet access and preschool education, the Free Press reported. He also touted various laws he’d signed, including one requiring that genetically modified foods be labeled, another raising the state’s minimum wage and a third offering free meals in schools.

Let’s tackle Peter’s accomplishments one by one, since he’s so helpfully listed them for us:

Unemployment:  As has been shown elsewhere, Vermont’s low unemployment number is essentially meaningless, and based largely on the reduction in active labor force, not an increase in the number of employed.

In fact, in 2014, the total labor for shrunk from 349,400 (Jan 2014) to 348,400 (Dec 2014), a reduction of 600.  The unemployed number for

Great news!  More people are unemployed!

Great news! More people are unemployed!

those two same date ranges increased by 150, from 14,300 to 14,450, but the unemployment rate stayed the same – because the number of people who dropped out of the labor force exceeded the number who became unemployed.

Remember – Peter’s claiming this as an accomplishment.

The state’s own short-term labor outlook shows that 9 of the top 10 growth jobs in Vermont do not require a college degree. What kinds of salaries are generally available if you don’t have a degree?  How easy is it to live in Vermont with one of the highest aggregate tax burdens in the country?

Vermont’s total personal income, as measured by the BEA?  Ranked 50th out of 57 states.  That’s as far from first place as you can get, and Shumlin is touting his economic record here?

Oh, and Vermont’s ranked the 43rd best state for business by Forbes.  So Peter’s also got that legacy working for him.

Expanding High-Speed Internet:  Well, that’s a feather in your cap, if you think using federal grant money to extend fiber or wireless down the last miles of Vermont’s roads is a critical piece of infrastructure-building.  It might very well be, but the market drives those

I can see Peter's 2014 election results right here in the corn field!

I can see Peter’s 2014 election results right here in the corn field!

demands, not the state – unless, of course, there are federal dollars involved and one can make some hay claiming that this infrastructure will help bring jobs to Vermont.  If the expansion of access has been so successful, why aren’t we seeing job growth?  And why aren’t we seeing new office buildings go up on those scenic Vermont roads, all over the state, where a data pipe is now available?

Why is it you find dockworkers located near docks?  That’s where the work is.  If there were more work available in Vermont, you would see the demand for data infrastructure increase, and it would already have been built out in those areas where the demand is.  That the smallest ends of the demand curve for internet access sit on the last few miles of Vermont roads, out in the sticks, does not mean that providing data to those locations will salve the economic wounds inflicted by decades of anti-business deeds, and rhetoric.

GMOs:  Just a quick note to politicians:  Every foodstuff is genetically modified.  That there are newer ways of doing this does not erase

Look at those evil, GMO-tainted seedless grapes!

Look at those evil, GMO-tainted seedless grapes!

millenia of modifications, it just makes those changes occur faster.  Labeling on the package isn’t going to change anything, in the same way that labeling cigarettes as being dangerous to your health doesn’t change the fact that smokers will buy them.

This is an accomplishment?  It’s like saying labeling the weight of the package in the product is an accomplishment.

Minimum Wage:  As has been repeatedly and tiresomely noted, raising the minimum wage increases unemployment.  The CBO estimated that an increase to $10.10 would decrease employment by 500,000 workers nationally.  Again, this is an accomplishment?  Raising the cost of anything involving the production of a good or a service means the price goes up, which means (generally) that demand for that product or service will go down.  Which means that there will be less demand, or need, for the labor to provide that product or service.

Offering “free” meals in schools:  Maybe Peter needs to go back to school himself, because TANSTAAFL says otherwise.  Touting something as free does not make it so; those meals are paid for by tax revenues, not a magically free meal-delivery system.  Oh, and how are

MmmmMMMMMmmm!  You first, Peter.

MmmmMMMMMmmm! You first, Peter.

those meals looking, by the way?

But what’s really driving Peter’s self-imposed exile is the massive and unmitigated failure of single-payer, his “signature” piece of legislation.  A failure so large that Peter decided he would only detail how big the failure is until after his last election in November 2014, an election that was so close it had to get tossed to the Vermont legislature to decide.

Only after he was safely back in office in December 2014 did Shumlin decide to acknowledge publicly what everyone else has known for a year or more:  That his version of single-payer was a mismanaged hack job that spent hundreds of millions of tax dollars on a website that still doesn’t work, years later, and so, he bailed on it:

Shumlin had missed two earlier financing deadlines but finally released his proposal. But he immediately cast it as “detrimental to Vermonters.” The model called for businesses to take on a double-digit payroll tax, while individuals would face up to a 9.5 percent premium assessment. Big businesses, in particular, didn’t want to pay for Shumlin’s plan while maintaining their own employee health plans.

He didn’t “miss” them – he purposefully chose not to release his proposal due to political considerations, because there was no way that implementing single-payer wouldn’t raise taxes by an enormous amount.  The estimated cost was $2.2 billion and the state’s total budget is already $5 billion.  That’s roughly a 50% increase in taxes.

“These are simply not tax rates that I can responsibly support or urge the Legislature to pass,” the governor said. “In my judgment, the potential economic disruption and risks would be too great to small businesses, working families and the state’s economy.”

Note that implementing single-payer would not guarantee any additional access to care.  It would just give everyone an insurance card.  There’s an enormous difference between covering everyone under one insurance plan, or even 50 plans, and the insured actually being able to see a doctor.  Ask Canadians.

And that was for a plan that would not be truly single payer. Large companies with self-insured plans regulated by ERISA would have been exempt. And Medicare also would have operated separately, unless the state got a waiver, which was a long shot.

Again, since the state’s demographics mean that MediCare spending gobbles up massive chunks of the state’s budget, it also means that

This does not look like a soft landing.

This does not look like a soft landing.

single-payer wouldn’t address the primary cause for commercial insurance rate increases – the Medicare cost-shift.  His proposal ignores it entirely.

In short, even Peter can read the writing on the wall.  Considering his near-defeat last fall, even in a state as politically progressive as Vermont’s, another Shumlin term was rapidly becoming a pipe dream for the Man With A Questionable Plan from Putney.

 

 

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.