The Scott administration on Monday laid out a plan to close a nearly $200 million hole in this year’s state budget caused by the coronavirus crisis.
The budget adjustment proposal would use excess Medicaid dollars, additional revenue from alcohol sales, and reserve funds to balance this year’s budget, which ends June 30.
The state’s general fund is expected to lose $48 million in revenue this year because of economic toll wrought by the pandemic.
An additional $142 million expected this year won’t come in until shortly after the new fiscal year starts on July 1 because several tax deadlines were pushed.
To replace lost revenue, the governor is proposing to use more than $45 million in Medicaid dollars.
A COVID-19 aid package signed by President Donald Trump in March gave the state an additional $40 million in Medicaid funding.
The administration is proposing to use $38 million of that and an additional $8.7 million in Medicaid funding unspent this year to help close the gap. The leftover Medicaid dollars result from fewer people seeing doctors and not undergoing as many procedures, according to Adam Greshin, the finance commissioner.
“Here we are taking advantage of kind of a bizarre side-effect of the COVID-19 crisis,” Greshin told the House Appropriations Committee.
“And that is despite the fact that we’re in a full-blown health care crisis, the usage of health care you might say is down sharply,” he said.
Greshin also said “for better or worse,” tax receipts from liquor sales during the COVID-19 crisis were up by $4.6 million.
But the vast majority of the governor’s budget adjustment — $138 million — will come from the state using revenue in the General Fund reserves.
The proposal is to replace those funds at the start of the next fiscal year when individuals and businesses pay taxes owed by the new July 15 deadline.
The state’s general fund currently has $224 million in reserve funds.
Moody’s Analytics, a major ratings agency, recently said that Vermont’s finances were better positioned to weather the COVID-19 crisis than other states’ because of the reserves accumulated over the last decade.
The budget adjustment proposed by the governor avoids making cuts to departments and agencies. With very little time left in the current fiscal year, it wouldn’t be possible, or make sense to cut spending, officials said.
Rep. Kitty Toll, D-Danville, the chair of the House Appropriations Committee, said cuts wouldn’t produce any savings at this point in the fiscal year, which ends June 30.
“We’re so late in the year right now with the budget adjustment,” Toll said.
“To make big changes, to try to put them into effect with two weeks left at the end after the signature might be difficult to do.”
Next year’s revenue picture looks even worse, with the latest projections showing that losses are expected to triple.
“We’ve tried to close the books on this year and we’re well aware that there will be some challenges awaiting us in the FY21 budget,” Greshin said.
“So we thought we would kind of take it light this year.”
Since March, the state has paid out $40 million to cover the cost of its COVID-19 response, according to a breakdown by the administration.
Most of that spending, however, will be covered by the $1.25 billion the federal government provided Vermont in the CARES Act to pay for expenses incurred by Covid-19.
In addition to the general fund, the education and transportation funds are also projected to see deficits by the end of the fiscal year. Fiscal analysts anticipate the education fund will see a $54 million dollar hole and the transportation fund will face a $44 million budget gap.
Greshin said that these deficits will be tackled in separate pieces of legislation in the coming weeks.