Budget address continued

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Click here to read the first part of the governor’s budget address or to hear the audio of the speech.

Budget address, part 2:


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.

End of address

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