Vermont State of the State Address 2003

Following is the full text of Vermont James Douglas's' State of the State speech, delivered Ja. 23, 2003.

Mr. President, Mr. Speaker, Members of the General Assembly, fellow Vermonters:

Two weeks ago, I laid out for you a vision for Vermont's future. It is a vision rooted in optimism and confidence in the people. It is also a vision that recognizes the challenges that together we must first meet in order to fulfill our common goals.

A prolonged economic slowdown caused by global recession and Vermont's own competitive disadvantages has resulted in hundreds of businesses laying off workers or going bankrupt, closing their doors and casting thousands onto the unemployment rolls. As a result, the State has lost millions in tax revenue for funding important programs.

In order to maintain a balanced budget over the past two years, the state relied on shifting dollars among funds, depleting rainy day reserves and making rescissions. But today, those easy fixes are largely exhausted.

Recession and a slow recovery continue to depress revenues even as the cost of our current level of government services outstrips our most optimistic revenue estimates. Collectively, the states face the worst budget crisis since World War II. Although many larger states are in even worse condition, Vermont, too, must make difficult choices.

We can do nothing and continue down a path that leads directly to deficits, a weaker economy and an uncertain future. We can continue to tread water, making only those adjustments that will get us through the fiscal year, while delaying more difficult choices for the future.

Or we can confront the certainty of these challenges honestly and forthrightly now so that we may begin to lay the foundation for a prosperous tomorrow.

I choose the third approach.

Today I submit to you a fiscal year 2004 budget that is responsible, forward-thinking and compassionate. This is a balanced budget - balanced on the bottom line and balanced in its call for sacrifice. It addresses today's fiscal difficulties and begins to slow the unsustainable growth of government, even as it meets our obligations to the most vulnerable among us. My budget is an honest budget. It is a budget our state can afford, and it does not raise taxes, which would be something Vermonters could not afford.

Given the difficult choices this budget presents, some may be inclined to take the easy road of tax increases in order to avoid addressing the difficult structural issues affecting state government. The problem, however, is not that Vermonters are under-taxed; it is that government has overspent. Today state government is a nearly $3.4 billion enterprise. It touches everyone's life and reaches into everyone's pocket. At a time when our economy is fragile, and Vermonters are having to make do with less, state government must as well. The latest forecast approved by the Emergency Board lowered the FY 2004 revenue estimate by an additional $5 million. The Board was careful to warn that any number of macroeconomic or global geo-political factors could cause revenues to drop even further. Economists indicate the risk is all on the downside. If we continue to spend at the current rate, a deficit of $30 million will fall upon us in the coming fiscal year. A deficit this large would delay economic recovery and threaten future prosperity. So my budget limits General Fund spending growth to only 1 percent, for a total of $893.8 million. When special funds, the transportation fund, and the education fund are combined, spending increases are limited to 1.7 percent, or a total of $2.3 billion.

In order to achieve this difficult task, I have asked most department heads to find savings of 5 to 10 percent of their prior year appropriations in order to prevent even greater sacrifices by the public. Wasteful spending must be eliminated, some programs reformed and some agencies and departments reorganized to better serve Vermonters in a manner that is more efficient and less costly.

I developed this budget on a set of principles from which I will not stray:

First, government must live within its means because every dollar we spend beyond our capacity to pay is a dollar that must be repaid by our children.

Second, government will fulfill its commitment to the neediest Vermonters because a society is judged by how it treats the most vulnerable.

Third, we should not dip even further into the pockets of struggling taxpayers.

Fourth, sacrifice must be shared broadly so that no one is asked to carry an undue burden.

Finally, the most direct route back to prosperity is to invest in Vermonters' education, skills and aspirations.

My budget lives up to these principles and any budget that arrives on my desk for signature must as well.

While fiscal constraints require that we reduce government spending, my budget recognizes that even in tough times - especially in tough times - we need to invest more in programs that will lead us back to prosperity.

Today, I am announcing a $106.8 million job creation and economic security package. My jobs program is the most significant investment in the entrepreneurial spirit of Vermonters in recent history. At full implementation, this initiative will create thousands of new jobs and save thousands more.

This jobs program is based on a simple premise: that the best way to achieve long term prosperity, maintain a balanced budget, protect our environment, provide necessary services and position ourselves to reduce the oppressive burden of taxation is to grow our economy; and the best vehicle to achieve our goals is the creative ambitions of the people of Vermont.

My jobs program includes several new proposals that will make more money available to entrepreneurs through the Vermont Economic Development Authority so they can begin new businesses and grow existing ones.

I propose a major expansion of the Vermont Jobs Fund, to allow the financing of $60 million in low-interest loans to entrepreneurs.

I also propose the creation of the Vermont Opportunity Fund that will provide $25 million in mezzanine level financing for established small businesses that require new capital to take their next step.

Through this package of growth incentives, we can open wide the doors of economic opportunity, and send a strong message that Vermont welcomes job creation and encourages bold innovation.

Too often when we speak of expanding opportunity, we forget about a group of people who represent the best of Vermont in every way. Vermont's farmers are facing especially troubled times. Many do not have the resources they need to upgrade technology, learn new management skills, and improve their operations to make their farms profitable.

I am committed to the economic security of our family farmers so I am proposing $15 million of low cost financing for our agricultural community through the Vermont Agricultural Credit Corporation.

This budget funds the VEDA component of my jobs program by restructuring VEDA's debt. My plan requires no increase in appropriations, no increase in the State's tax supported debt, and no expansion of the full faith and credit pledge by the state of Vermont.

This piece of the jobs program will provide Vermont employers, entrepreneurs, and farmers with better access to capital at lower costs so they can create good jobs and fulfill their dreams.

Individual Development Accounts - similar to IRAs - allow low-income Vermonters to save, tax-free and supplemented by a government match, for a down payment on a home or to start a new business.

Vermont's IDA program is still in its infancy, but it is a promising tool to allow low-income families to invest in their futures, build assets and achieve economic independence. Therefore, I propose to more than double funding for the IDA program.

I am also providing additional funding of nearly $1.2 million to the Agency of Commerce and Community Development to invest in programs to recruit new businesses to Vermont, market Vermont's tourism industry, and train our workers for 21st Century job opportunities.

In a rapidly changing economy, it is important that we empower Vermonters with the tools they need to compete. I propose bolstering our commitment to worker training with increased grants to the Department of Economic Development's Vermont Training Program, over half a million dollars in new funding for the Workforce Education & Training Fund and an expansion of the Apprenticeship Program.

In this year's capital bill, I am proposing that we concentrate our efforts on maintaining and preserving existing State infrastructure.

I recommend spending on projects important to our environment. These include $7 million to upgrade our water and pollution control facilities; $750,000 to help farmers abate non-point source pollution; a half million for dam maintenance; an additional $500,000 to upgrade our parks; and $350,000 for the Kehoe Conservation Camp.

I also propose $4.2 million in funding to begin construction on the long awaited Rutland Court House; one and a quarter million dollars for a new state police barracks in Middlebury and improvements to the Pittsford barracks; an additional $600,000 for facility improvements and equipment for our police and fire services; and a half million dollars to continue our planning efforts to replace our antiquated health and public safety laboratory facilities.

My capital budget also provides a half million dollars each to develop two regional technical academies for our secondary students so that young people can get the training they will need to succeed in tomorrow's workforce. We have made tremendous progress over the past several years in reducing the state's debt and improving our bond ratings. Despite our progress, Vermonters still shoulder a heavier burden of debt than residents of most other states. Therefore, I support abiding by the recommendation of the Debt Affordability Committee to maintain the $39 million debt ceiling for next year.

A critical component in any economic development strategy is transportation. A strong transportation infrastructure is vital to economic progress and the safety of Vermonters. I propose that the State allocate $3 million of its bonding capacity for vital transportation projects, such as the Circumferential Highway, the Bennington Bypass and the Mississquoi Bay Bridge.

I also propose increasing funding for town highway programs, and spending an additional $11.7 million - a 55 percent increase over this year - for paving projects to improve our crumbling state highways and bridges.

This is an important investment that will begin to reverse the neglect of our roads, and help put our economy on the road to recovery.

I have outlined a series of proposals that I believe will help ensure that no family is forced to leave Vermont to chase hope and opportunity. But I am increasingly concerned that the bright future we build today could be undermined if the scourge of hard-core drugs is allowed to take further root in our communities.

Drugs like heroin and crack cocaine are relatively new to Vermont, but their proliferation is frightening. Our state has always been a peaceful place, isolated from the culture of drugs and violence that infects our nation's urban areas. But in search of new markets for their lethal commodities, drug dealers now target our communities, our schools, and our children.

More than anything, these drugs threaten our way of life. All the values that make Vermonters great -our independence, thrift, work ethic and community spirit are endangered when drugs command our bodies. Addicts are not independent; they are dependent; they are not prudent in their finances, only concerned with funding their destructive habits; they are not industrious, but unproductive. When drugs come into our neighborhoods, violence follows and thugs and criminals dominate our streets. This is not the Vermont way.

In order to preserve our families and our way of life, I propose a four and a half million dollar investment -- $2.5 million in state dollars leveraged with $2 million in federal funds -- to combat Vermont's growing drug problem. My Drug Education, Treatment, Enforcement and Rehabilitation Program, or DETER, appropriates over $350,000 per year to embark on a four-year effort to place a substance abuse counselor in every middle and high school so we can identify at-risk youth and teach all kids about the dangers of substance abuse.

Young people are particularly vulnerable in the unsupervised hours after school gets out, but before parents get home. I propose spending an additional $1.3 million on after-school programs and job opportunities to promote positive youth development, and to relieve our kids from the boredom that leads to poor decisions.

In order to provide the help that addicts need to set themselves free, I propose spending nearly $580,000 to increase clinical treatment capacity, over $780,000 on a new opiate treatment center, and additional funding for an offender re-entry program so inmates can be rehabilitated and resume a productive life on the outside.

This is a compassionate program of education and treatment that teaches kids the truth about drugs, and offers a second chance to those who have gone astray.

But there will be no compassion for those who target our children and our families for destruction. We need to send the strongest possible message to drug dealers that if they come to our state for the purpose of poisoning our children for profit, they will suffer the most severe consequences.

Along with strengthening other penalties associated with drug dealing, I propose that if you deal hard drugs to a child who dies as a result of using those drugs, you should spend the rest of your life in jail.

And today, convicted drug dealers can enter your neighborhood to live, and begin peddling their deadly wares without you ever knowing they are there. So I am proposing a "Megan's Law" for criminals convicted of trafficking in heroin so families have the right to know when danger resides within reach of their child.

The enforcement element of my DETER program sends a message loud and clear to those who make it their business to prey on the most vulnerable in our society - Vermonters are prepared to make your lives very, very unpleasant.

I am asking the Vermont State Police to play a major role in combating the drug problem in our state. They will also be central to our ongoing homeland security efforts. But today, the size of our force has dwindled to the point where the public and the troopers themselves are at risk.

I am committed to filling the 34 total trooper vacancies so that by 2006 the state police will be at full force. We have already taken a major step toward that goal. In the 2003 budget adjustment we funded 8 new troopers. In the 2004 budget, I propose funding an additional 10 troopers. And I am also providing funding necessary for the timely opening of the Springfield correctional facility.

During tough times, more Vermonters turn to government for help in securing health care. The Medicaid program is the cornerstone of Vermont's health care commitment to the poor, elderly and disabled. Nearly 138,000 Vermonters rely on health care assistance from the state. I am proud to announce that my budget ensures that not one of those Vermonters will lose access to benefits.

But the fact remains that the cost of Vermont's Medicaid program is growing so rapidly that without real reform, the program will quickly collapse under the burden of its own weight. Vermont ranks second in the percentage of its residents on Medicaid -- nearly one out of every four Vermonters receives benefits.

In recent years, the General Assembly has added substantial new revenue to this program in order to maintain its viability. You raised the cigarette tax and the provider tax; you appropriated additional state money and received new federal funding. Despite millions of dollars in additional funding, the program remains unsustainable.

Without reform, the Health Access Trust Fund year-end balance for FY '04 will be just over $4 million. By the following year, the fund will run a deficit of $14.6 million; and left unresolved, this deficit will balloon to nearly $150 million by FY 2008.

In short, if action is not taken this year to begin to slow the growth of Medicaid, the program will go insolvent next year, threatening to leave thousands of the most vulnerable Vermonters without health care coverage.

I will not let that happen, and I challenge you to join me in saving Medicaid.

My budget outlines a compassionate course of action that improves the Medicaid program and begins to extend its solvency, while ensuring the neediest Vermonters are protected. The overwhelming majority -- nearly 70 percent -- of beneficiaries covered under traditional Medicaid and the State Child Health Insurance Program, including Dr. Dynasaur - that is the poor who are disabled, blind, or elderly, expectant mothers, and children who have no insurance or who are underinsured - will see virtually no changes.

But Vermont has chosen to extend Medicaid coverage to those who do not qualify for traditional Medicaid, either because their incomes are too high, or because they do not meet other eligibility requirements. Currently, Vermont offers benefits that are among the most generous in the nation, and under my budget, we will continue to do so. In fact, I propose Medicaid spending increases totaling $16 million.

Not only does the Medicaid reform package I am recommending preserve traditional Medicaid, but it reduces the cost of health care for the poorest and sickest Vermonters who benefit from our expanded Medicaid programs.

My plan maintains traditional Medicaid, reduces health care costs for the most vulnerable, and preserves Vermont's health care safety net for the future by replacing the complicated and regressive co-payment system we currently operate under with a simple, progressive deductible system.

Under this system, the healthiest beneficiaries and those with higher incomes are being asked, on average, to pay more for their health care coverage than they have in the past in order to insure that the neediest are protected from catastrophic health care bills.

In order to prevent abuse of taxpayer dollars, I also apply the same resource test to VHAP beneficiaries that applies to traditional Medicaid patients.

This Medicaid reform proposal represents a test of leadership. Some may have honest disagreements on my approach and to them I offer my cooperation in finding common ground. I have explored many different options for improving this program, and I believe this is the fairest approach. But I will welcome any other proposals that achieve my objective without crippling our economy and harming working Vermonters with higher taxes.

This discussion must rise above politics. I have put my best proposal forward with only the best interests of Vermonters in mind. If we work together, I am confident that we will arrive at the best solution.

I am also calling for a major restructuring of the Agency of Human Services. This agency is the largest in government, with nearly 3,000 employees in 9 departments and offices.

The previous administration recently published a report revealing the many ways this Agency has failed Vermonters and allowed families to fall through the cracks of this massive bureaucracy.

We can and must do better. My administration is developing a plan that will streamline the Agency of Human Services to provide better, more coordinated service to Vermonters so no family is forgotten.

We need to adapt Vermont to a 21st Century economy, and we should begin by creating a 21st Century government. Vermont ranks last in digital government according to a recent study. That means state government is doing things less efficiently than it could, less conveniently than it could, and it is doing those things at greater expense than it should. It's no wonder Vermonters are frustrated.

In order to bring government into the 21st Century, I propose a major reorganization of how technology in state government is managed. This restructuring calls for a new Department of Information and Innovation headed by a Commissioner under the Secretary of Administration.

I will give the new Commissioner of Innovation and Information the authority to provide strategic direction, oversight, and accountability for all activities related to technology within state government. My proposal will centralize state communications and computer services within this new department, creating direct efficiencies across the enterprise and implementing advances that will allow government to better serve the people.

I will also bring together some of the best minds from outside of government to initiate a review of how government can function better, utilize technological advances and improve our systems and services. Government could use a little private sector sensibility and this review will help accomplish that.

In order to make Vermont a global technology leader, our people need access to personal computers. Computers have become critical to educating our children, doing business, and communicating worldwide. To bring technology into the lives of more Vermonters, I am proposing two, one-week sales tax holidays on personal computers. These tax holidays will occur before the winter holidays and in August before children return to school.

This proposal will be a boon to business and help families take advantage of all that computers have to offer.

This budget is about our children and our future. The key to unlocking the full potential of the next generation is education. So while I have asked many to sacrifice in this budget, I am proposing a 2 percent increase over the 2003 baseline to the University of Vermont, Vermont State Colleges, and the Vermont Student Assistance Corporation so more young Vermonters will have the opportunity to pursue a higher education.

Moreover, I am holding harmless the state's commitment to the education fund. This will be accomplished by transferring $239 million from the General Fund, generating $3.2 million in new Powerball revenues, and saving $3 million by capping the Act 60 property tax assistance at $2,500, affecting only a small fraction of the total number of households currently receiving assistance.

When Act 60 passed, Vermonters were told that it would reduce their property taxes. Instead, property taxes continue to skyrocket and Vermonters continue to suffer. For the past 5 years, the Legislature has searched for a fair way to reform our system of funding education. There are no easy answers and we must work together to find a more permanent solution to this dilemma.

But Vermonters demand tax relief now.

In fiscal year '04, Vermonters will be overcharged by sixteen and a half million dollars on their statewide property tax bill. When people are hurting, and government is taking more money than it deserves, we ought to give it back. In order to provide relief, I propose returning over $13 million of that money to the people by cutting the statewide property tax by three cents, from $1.10 to $1.07.

I am particularly concerned about the effects of property taxation on our struggling family farmers. In 1985, Vermont had over 3,000 dairy farms-18 years later we have half that number. Vermont has lost one dairy farm every four days for the last decade. Today, many farmers find themselves literally having to sell the farm just to pay their property taxes. So I propose that we eliminate the statewide property tax on all agriculture and forest land and buildings enrolled in the current use program, saving farmers and forestland owners $3.3 million each year.

Coupled with the $15 million VEDA loan program, a renewed effort to reinstate the Northeast Dairy Compact, new funding to promote farm products grown in Vermont, and elevation of the Commissioner of Agriculture to the Secretary level, we can say to our farmers: we care about you, we're thinking about you, and help is on the way.

The budget I have outlined for you represents a bold and ambitious agenda. It will help our economy recover as we aggressively pursue a long-term strategy for economic prosperity; maintain our commitment to the environment; and offer immediate property tax relief for struggling Vermont families.

My budget pledges a renewed commitment to our family farmers; invests in our children's education; extends the solvency of Medicaid while meeting our obligations to the most vulnerable among us; and initiates a compassionate and comprehensive program to prevent drug use before it starts, and to end drug abuse where it has taken hold.

This budget will help make our streets safer, our roads and bridges better, and government more efficient and less wasteful. President Kennedy rightly observed that: "To govern is to choose." These are the difficult times that require difficult choices. But if we work together, we can do more than just meet the challenges ahead; we can rise above them to fulfill an even greater mission - to build for our children a brighter tomorrow where they can fulfill their highest potential and live out their most imaginative dreams.

That future is within our reach, and so I ask you all to join me in delivering on the promise of Vermont.

Thank you.
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