Gov. Jim Douglas Offers Somber, Final Speech 

In a subdued, if not somber, 40-minute speech Gov. Jim Douglas delivered his final state of the state address to the Vermont General Assembly Thursday, calling on lawmakers to once again work hand-in-hand with his administration to "write the next chapter in the proud history of the state of Vermont."

Democratic leaders — including those who hope to succeed him — largely panned the content of the governor's speech, but said they are willing to keep an open mind on some of his proposals. Republican Lt. Gov. Brian Dubie, who is also hoping to succeed Douglas, applauded the governor's call for fiscal restraint — both in state spending and in local school districts.

"I think he's reflecting the air that's hanging over the chamber and that air is an acknowledgment of the tough decisions that are facing the legislature," said Dubie. "I think he was also saying that regardless of who is the next governor do your best with this budget and the next budget, because it's going to get tougher next time."

Gov. Douglas lauded past efforts where his administration and the Democratic-led legislature have worked together on common goals: tougher drug laws and tougher penalties for sexual predators, as well improvements in health care and the environment.

"As we look to make programs and services better and more affordable, we need only to look to these achievements, particularly in health care, as a beacon for the kind of positive change that’s possible when we work together toward a common goal. In that spirit we must partner again," said Douglas.

That cooperation is in stark contrast to the tenor of last year's session when Gov. Douglas was handed not one but two veto overrides by the legislature — one on same-sex marriage and the other on the budget.

On the opening day of the session, Douglas, Dubie and legislative leaders stood shoulder to shoulder, announcing a bipartisan, sweeping effort to restructure parts of state government in order to save money.

The shine began to peel ever so slowly off the veneer of that first day, as lawmakers grumbled about some of Douglas' proposals — proposals the Legislature has rejected in the past.

Sen. Susan Bartlett (D-Lamoille) — chairwoman of the appropriations committee and a candidate for governor — said Douglas' overall subdued and somber tone hit the right note given the size of the budget deficit lawmakers are facing down this year, and next. This coming fiscal year, they need to fill a $150 million hole, while in FY 2012 that number shrinks slightly to $100 million.

"But, what I think was different is that this year the governor seemed to be saying, 'This is my first offer,' rather than, 'This is what you must do,'" said Bartlett. Bartlett said that message was reiterated in private briefings with Douglas staffers.

I guess those two veto overrides left a lasting impression.

Sen. Doug Racine (D-Chittenden), who is also running for governor, said Douglas' speech sounded like a list of missed opportunities than a call to action.

"I think he sounded tired and the speech was almost like a lament about all of the promises he's made over the years and hasn't been able to deliver," said Racine. "He said we were going to have a cleaner lake by 2009 and we didn't, he ran on jobs, jobs, jobs, and he also said he was going to expand broadband to all corners of the state by 2007 — and didn't. And, then he went on to simply complain about the property tax."

Racine, however, does agree with the governor on one thing:Tthe taxes raised last year to help close the budget gap should be rolled back at some point, as they were in 1991 when some tax increases were later sunsetted. But, Racine cautioned, that might not happen as quickly as Douglas wants because the state is projecting deficits in the next two fiscal years.

Secretary of State Deb Markowitz, another candidate for governor, said Douglas did offer some controversial ideas in his speech, which should make for an "interesting session." An understatement, for sure.

Still, Markowitz noted lawmakers should keep in mind a couple of principles: "First, it's important that we find ways to jump-start the economy, but as I think we've seen from the Bush administration is that broad-based tax cuts have not helped in that regard. Second, was businesses are telling us is that they need affordable capital."

Markowitz said Douglas, and lawmakers, are right to be concerned about the cost of government — both in schools and at the state level — and should be encouraging efficiencies.

"But, that said, it's hard to come up with a solution that is going to fit each individual school," said Markowitz. "The decisions about what is best are going to be made by the people in those communities."

Google executive Matt Dunne, a former state senator himself, said the governor is right to call on lawmakers to focus on economic development and job creation.

"But, I'll be curious to see the specifics of his proposals," said Dunne. "When I was in the legislature I worked to develop a seed capital fund and wrote the bill that created the first broadband grants in Vermont."

Dunne is skeptical that the governor's broadband initiative will bring true high-speed Internet to rural areas. He also thought Douglas' rant against school spending was misplaced.

"What I felt was missing from his school funding analysis was the rising cost of healthcare and how much its costing local school districts," said Dunne. "Even if you ask the teachers to pay extra in premiums, you'll lose that savings in a matter of two years at the current rate that premiums are increasing."

Dunne said health care reform — a system in which everyone pays and everyone is covered — and focuses on health outcomes, not just providing services, needs to be front and center when it comes to improving the overall economy and reducing costs for government and businesses.

Douglas called on lawmakers to find common ground with him to spur job creation, expand broadband and wireless coverage, and reduce property taxes. Douglas will offer more specifics on January 19 when he offers his budget address.

Quickly, though, during a briefing with reporters ahead of the speech, the Douglas administration is proposing:

•  Rolling back the increases in capital gains and estate taxes from last year, but keeping in place the lower income tax rates. This could add about $6.5 million to the state deficit in FY 2011, and possibly $13 million in FY 2012.

• Eliminating the cap on the Vermont Economic Growths Incentive program, which offers tax incentives to businesses that either locate to Vermont or choose to expand in Vermont. Currently, the program can only offer $10 million annually in incentives.

• Relicensing Vermont Yankee.

• Using some of the federal stimulus money to expand loans from the Vermont Economic Development Authority, as well as seed and start-up capital for businesses.

• Spending $3.17 million from the federal stimulus money this year to create a competitive grant program, dubbed Backroads Broadband, that would expand broadband service to rural towns. Private companies would vie for the funds, even companies that are required — by their state certificate of public good issued by the Public Service Board — to provide broadband to the "last mile."

Douglas will be laying out a number of options to reduce spending in education, too. He's calling on new teacher hires to contribute 20 percent toward their health care premiums, and for an early retirement program to help trim down the teaching rolls by 1200 teachers in the next four years. That would increase the teacher to student ratio from 11 to 13, said Tom Pelham, deputy administration secretary.

Other proposals to curb education spending are focused on income sensitivity. First, Douglas will propose expanding the renter rebate program to households with $54,000 in annual income. However, he wants the Legislature to increase the percentage of income some families pay toward property taxes.

For example, rather than paying only as much as 1.8 percent in education taxes, Douglas would like to see families earning between $60,000-$75,000 pay as much as 2.25 percent, and families earning between $75,000-$90,000 pay as much as 3.5 percent.

Pelham has noted in the past that too many Vermonters are desensitized to the true cost of education spending because income sensitivity has been expanded to families earning as much as $90,000 a year. When Act 60 was first passed, income sensitivity only applied to households earning $60,000 or less.

Douglas said these changes are necessary in order to right-size government spending in Vermont, and to help the state come out of the recession in a strong footing.

"The trajectory of the Vermont economy for the next decade will be shaped by our decisions this year. If we are content to limp out of this recession, hobbled by flat job growth, we can choose to recycle old ideas and hope for a different outcome. But if we want to spring out of this recession – strong and nimble – we must have the heart to reform, the wisdom to act and the courage to stand against those who will say it cannot be done," said Douglas.

"These times demand new thinking – they demand bold action – and they demand it now," he added.

While bold action is what Douglas is calling for, legislative leaders said they would take more of a "wait and see" attitude in regards to the governor's proposals.

House Speaker Shap Smith said he was prepared to have House committees take time to vet the governor's ideas before rejecting them outright.

Senate President Pro Tem Peter Shumlin, however, indicated that the governor's focus on the education fund might not (again) be a welcome approach to solving the budget crisis.

"As we approach the difficult choices ahead we will be guided by two core principles. First, we remain cautious of balancing Montpelier’s economic shortfalls on the backs of hardworking property taxpayers," said Shumlin. "Second, we strongly believe that local control, town meetings and our school boards have served the state well. We will not usurp this local control and take away the important decisions Vermonters make regarding their communities and their children."

Shumlin also criticized the governor's call to roll back tax increases next year. Adding to the deficit, without explaining where money will be cut, seems premature.

Photo credit: Andy Bromage