 Vermont PBS in cooperation with Orca Media and the Vermont Press Bureau presents Capital Beat, the Week in Review from the Vermont State House. Here's host Neil Goswami. Welcome everyone to Capital Beat. We're glad you could join us this week. The House last week passed its budget on a 143 to 1 vote. We'll talk about who that one person was. And joining me to discuss the state budget this week is Representative Kitty Toll, Chairwoman of the House Appropriations Committee, and Senator Jane Kitchell, Chairwoman of the Senate Appropriations Committee, which will take up the budget at this time. Thank you both so much for being here. Thank you. Most people probably know this, but one very interesting aspect to the appropriations process this year is that you two are sisters. Perhaps one of the most unique setups in a legislature, state legislature in the country. You're both from Danville. You grew up there, raised there, and you both represent that area. And now you're both in control of a almost $6 billion state budget. Has there been a bit of sibling, sibling rivalry as you go through this process? No, not for either of us. I make a point of never speaking for my sister, but I would say no in this case. We obviously do talk, but there has been discussions, but nothing that would cause the hair on the back of my neck or her neck to raise. Would you agree with that? Well, I think so. I think it just shows what a small place Vermont is, and I would make the statement I was here first, of course. But no, I think House and Senate approach bills very differently. They approach the budget differently. The composition of the committees are different. And so I think that really is what influences how the House and the Senate might look at issues quite differently. Well, it's very true that the two chambers do approach the process differently. And state law requires that the budget begin in the House, so it does every year. And you had first crack at it. Perhaps maybe the more difficult position to be in taking the governor's proposed budget and trying to figure out how to turn that into a living, breathing document that the House will pass. As I noted at the top of the show, 143 to 1 vote, which is pretty remarkable. Nobody can remember a vote like that, that lopsided in recent history. So we started this year, you were looking at a $70 million budget gap. That's the difference between expected revenues and expected expenses. Maybe you can start us off with a brief overview of how you put together a budget that closed that $70 million gap. The governor's budget was given to the House first, as you mentioned. And there were provisions within the governor's budget that were not widely embraced by either Senate education or by the House membership. And so our committee at that point had to switch gears, knowing that leveling school budgets was not going to be something happening this year. And we took the current budget and the current services and worked from there, adding initiatives that we could afford to make investments in and looking where we could make reductions and continuing investing in current services that's critical to Vermonters. And that's how we proceeded. Yeah, there's $18 million or so in additional enhanced federal funding from the student or the child health insurance program, a lot of federal funding there. $10 million from Medicaid money that had not been spent in previous years and had sort of been collecting. And then you did make some reductions in spending. We did. Which is always a difficult conversation for lawmakers like yourselves, but also Vermonters who depend on some of those things. How difficult is it as you go through a budget with such a large gap to sit down and actually figure out where you can make reductions without doing too much harm? Well, you mentioned the easy ones that we were able to take off the top. And so making those first reductions is always the easiest. And before town meeting break, we were down to about $18 million. The last 18 and especially the last five, that is where there's more disagreement and finding common ground becomes more difficult. The Ways and Means Committee, they were able within their miscellaneous tax bill by not there were no new taxes and fees. They did not support any new taxes and fees. But using compliance within systems already in place, we're able to produce $5 million to go to our bottom line. And then reductions that we made, there were small reductions made throughout many areas of state government, whether it was travel or positions that were not filled. But the big areas were within human services within the grants that go out to communities. And we made going into fiscal year 18, two and a half million dollars in reductions in grants. Okay. One of the things that the governor wanted to do was spend more money on early education and childcare and higher education. That is something that didn't really make it into the House budget plan. The funding simply wasn't there after you went through the exercise of closing that gap. At what point did you realize you weren't going to be able to embrace some of this new spending that he proposed? We had to get to zero. So we had to have a balanced budget. And it was early on that we knew it was going to be a challenge to fund many of the governor's initiatives that he laid out. And those are important initiatives to all of us. But it was also important to legislators not to put pressure on the property tax and moving these expenses to the property tax in the out years would have created additional pressure in that area for Monters. We were able to make a few investments, but we were not able to make the investments in childcare. And hopefully as the economy grows, we will be able to make those needed investments. One of the things that we've heard from both the Senate, the House, and administrations this year and in the past is that the budget needs to be more sustainable, that the growth of the budget is expanding too quickly, that revenues aren't keeping up. What does the House version of the budget do to make it more sustainable in the future? The House version of the budget actually makes the reductions in the expenditures and the spending within the budget that brought us in at just a 1% growth rate over all funds, general fund, federal fund, all funds was just 1%. If you look at just the growth within the state funds, we were less than 1%, just a tenth of 1% by making reductions in areas that make people uncomfortable. These were not easy reductions to be made. And so we're starting to bend that gap between the anticipated revenues versus what we expect for expenditures. And we use no one time money for ongoing expenses. One time money were applied to one time needs only. Right. And so we are using ongoing money for ongoing expenses. So there's no built in gap there? No, we're bending that curve. Okay. I did mention it was a 143 to one vote. Representative Warren Van Wick of Ferrisburg Republican will be a footnote in history as the vote against the budget. Myself and a few other reporters had a chance to watch you speak to Warren Van Wick after the vote. And I saw somebody in yourself who was sort of trying to understand why he would cast a no vote when everyone else found a way to support the budget. How frustrating was it to have that loan no vote? I think after you've put in weeks and weeks of work and you're that close to a unanimous vote, it was not so much frustrating, but more disappointing. Our committee made a large effort this year for a very transparent process from Vermonters in communities and within all legislators allowing time for every legislator who wanted to testify to come into our committee. Each member in the Appropriations Committee was assigned a group of members in the house so that everyone had contact with the entire membership and we felt our outreach had surpassed this year, you know, was much ahead of other years. And so I would have liked to have heard from all members who had concerns so that we could address those concerns or at least understand what the issues were that would cause no votes. Okay. Senator Kitchell, before I get into asking you what they did wrong and how you'll fix it, I just want to ask you the budget brought the Democratic Party into the fold. It kept progressives in the fold and it managed to hang on to the Republican caucus but for Warren Van Wick. How were you able to accomplish that? As I said, nobody has seen a vote like this on a budget in a very, very long time, if ever. So what how did you keep everyone in the tent as you as you went through this process? I think different pieces of the budget were attractive to different individuals. Obviously, the no new fees and taxes was was very enticing to many Democrats and to many Republicans. And we did make some investments within areas that that allowed the progressives and independence to also join in. We made some changes to the cold weather exemption that that, you know, people were unhappy about. But we also invested in shelters for the homeless. And we also changed the language within general assistance to include emergency housing. So even though we made a reduction in one area, we enhanced another area. And I think that those changes within the budget were very appealing, as well as an understanding that legislators had that we were preparing ourselves for the uncertainties at the federal level. Right. Senator Kitchell, you've just heard your sister discuss the House version. It is now your responsibility to guide the senator appropriations through a similar process and take a look and maybe tweak it or make some larger changes. You have just taken possession of the bill. But but what at first glance, do you see that works and what might need some some fixes until we finalize and figure out what we have for available revenues. And certainly the no new taxes and no new fees construct is going to apply. We I think there's certain areas one would be the provision around electronic monitoring for corrections and the extent to which we can move from our current level of under 10 to what is provided for and savings are attributed from electronic monitoring in the House version. The advantages just say electronic monitoring is like the yes, yes, yes. And so we're having a lot of discussion around well, you can have electronic monitoring. These are individuals who are past their minimum. But what about the housing? What about the other services that have to go with monitoring to support a successful presence in the community? The other area of certainly that has been identified is higher education. And for those of us who have state colleges, and we do we have Lyndon state, we know that, in fact, our financial support of our state college system is has atrophied over the years. And so the House budget provides for taking 2 million out of the higher ed trust fund. Now higher ed trust fund I have a history with because there was a proposal to take 10 million out of it a few years ago to build a building for Community College in Brattleboro. And I said, no, the purpose and the reason that trust was established was to provide financial assistance to Vermont students and attending college. So to move money away from students to the institution, the house, it's going to weigh it one way. The advantage being second bite at the apple. Maybe there's some, you know, we might have some additional one time monies that are available. But, you know, that's how you weigh that out in terms of how you address what is an ongoing need for financial support. And it provides assistance for one year. Is there, you know, will there be alternatives to that? So I think that's, for example, another area where really want to look at how our systems are performing. And from my perspective, the budget is really where your policies and your priorities ultimately get put in place with the dollars that you put behind them. So, you know, another area that the governor proposed, but when the money wasn't there was guardian ad linems. They are surveys which show that kids are going into foster care or in foster care. That's the one in their volunteers are really key. And we're trying to move more children through for permanency and termination of parental rights. And we, for whatever reason, and I will admit, I didn't pick it up last year when we put in a major package to address that increased caseload for child welfare, child protection, we put in deputy state's attorneys and social workers and, and defender general and judicial resources. But that last player was not included. So whether we can do it or not, I would say it's a priority for us to make sure that cases are heard promptly that children who are in need of permanency get them. And how we will be able to do that is is a challenge for us. The one thing that I would say is the House and Senate are very different because the Senate actually senators serve on two committees. So that brings a lot of policy experience in depth just by virtue of people being on transportation or on judiciary or agriculture or whatever, just as part of just working knowledge. And so that obviously influences discussions and what people, you know, focus on in terms of what our priority should be. And certainly children are about as vulnerable as one could get. Right. Well, the issues that you raised are very important issues and very important for a lot of people. They're not necessarily big construct problems with the budget. Does that mean your committee and the Senate will be able to move quickly on your side of things? Well, we don't have too much time if we're going to get out of here, you know, May what six or something. So we're going to have to move quickly. There are certain things that we want to look at. It's no secret. We took testimony in the EB five office. And we're going to have a discussion about should the state be not the regulatory side, but on the marketing and the, you know, the financial transaction and that kind of involvement. And the other and the House had language in it, but at some point, Vermont life, it's operating at a deficit, it's been operating at a deficit for a long time. It's something we've struggled with. And is this a year you make a decision or do you look at different alternatives? And the fundamental question is, should the state of Vermont should government be involved in the publishing business? Yeah. And depending on what the answer is to that, then it makes a big difference between how you want to proceed. So those are discussions that have occurred in testimony that ultimately would have to come in and we make some decisions around, do we, you know, give more time? Do we do this? Or, you know, what route do we take? The governor began, ran his campaigns and ran his election largely on no taxes, no fees, no new taxes, no new fees. The House adhered to that message. Will the Senate look to do the same? Or will, is there a chance that you look at some additional revenue capacity this year? I would say at this point, we're not looking at new revenue this year. We're looking at where money is currently being spent. And so I think from that revenue perspective, there was some discussion, certainly one of the governor's initiatives was around housing. And that required a million dollars of general fund, along with money from BHCB to support that housing initiative. The Senate had suggested a revenue source, but at this point, that's all on hold. So I think that's indicative. There was the $2 occupancy fee that was passed by the committee and then withdrawn, I believe. Yes, that's, well, no, the bill's in my drawer, but it will be withdrawn, I should say. Well, it just won't see action. Okay, all right. Fair enough. One or the other is going away. Yeah, there will not be a $2 occupancy fee. Not, well, one never says never in this business, but I don't think that's very likely. The idea is to adjourn around May 6th or somewhere within that range. Any chance that it's that you all are out of here earlier than that? I don't know. I don't know. A lot depends on, you know, how quickly things get negotiated. Sometimes it's the totally unexpected bill that ends up creating unanticipated havoc at the end. Okay. One thing we haven't discussed yet, and which sort of looms large over both of your committees in the entire legislature is the federal budget situation. We know that President Donald Trump has put forth a budget framework that would do some very drastic things to federal funding here in Vermont, not to mention around the country. What, when you were putting the House budget together, how did you address that issue? And what was the game plan moving forward to address any potential major funding cuts from the federal government? A couple of things. When we made the reductions with the AHS grants, we gave a lot of flexibility to the Secretary of Human Services. So if reductions did come down, they could dovetail the reductions with the reduction with the target amount that we had come up with. It was important for us not only to fill our reserves, but we have filled them above statutory level. And that was a priority for the House Appropriations Committee. There's another fund that prepares us for year 2022 where we have a 53rd week and a 27th pay period that hits at the same time. In a couple of years ago, we were not prepared for that, and we were short millions of dollars that is fully funded to date to the amount that we need to at this time to be prepared for 2022. And in working with ways and means, if there is capacity to raise additional revenue, it was felt that it was important to step back and not look at raising additional revenue so that we have that capacity when, I'm going to say, when reductions do become clear from at the national level. Yeah. As your committee jumps in, how concerned are you about what's coming? At this point, I think all I can say is we suffer from ill-defined anxiety because we don't know. And our congressional delegation says that's the President's budget, but that's not the budget that we produce. And until you know for certain what you're dealing with, but I would say that when 35% of the state budget is federal dollars, there cannot people need to understand this state would not have the capacity to step in and make that whole. You cannot back down. No, you can't. And in fact, I think the experience showed that we had catamount coverage that was in place before the health care reform, the ACA was passed. And while we tried to mitigate the impact, we weren't able to completely make everybody at the same benefit level. I think you have to only look at our reach-up program in the federal block grant. We have not been backfilling for the fact that that hasn't increased since 1996. So I think we have to be honest. That's why it's going to be really important to set up what are the priorities? What are those key services or benefit levels that Vermont can find sustainable? And sometimes it's luck of the draw. One of the things that's luck of the draw this year that helped with the budget and the governor's budget is the reach-up caseload went down. Three million dollars was available to support the budget without any, without having a negative impact. But you don't always have your caseloads and that helps on closing the gap. But I was here when we had the big recession and we rode those caseloads up and we rode those revenues down and that was a very different environment. So I think we just have to say to people those decisions and the level of federal support is just well beyond the capacity of a state of 620,000 people to create any expectation that it's all going to be made whole. Where do you even begin when you're trying to prioritize what to address or what not to address in a situation should we find ourselves in where there's significant drop in federal funding? I mean, how would you even begin that process? On the house side it was a directive of the speaker for all the policy committees to set priorities. And those priorities needed to be related to the House Appropriations Committee so that when we started to make our decisions on balancing the budget we could understand the priorities of the of the policy committees. And so that practice is now in place in our budgeting process where they weigh in on the on the decisions that we're making. Yeah, at some point the Senate will complete its work on the budget and pass a version of it and you too will end up on opposite sides of the table and what's known as a conference committee when the House and Senate look to reconcile differences in the two bills. Will that be a familiar scene for the two of you being sisters? Have you squared off in ways before that will require a back-and-forth and a negotiation? Well, we were both on the conference committees last year. It's just what role you're playing. And the other thing is it's three people from each side and the other is you try to figure out where there is agreement where you can come up with some kind of compromise. So I will have to wait and see. I don't assume they're just going to agree. In a very different comparison we have a family dinner every Sunday night and Jane and I are across the table from one another and there's a lot of discussion about politics within all of the family dynamics and so we have those discussions weekly. Who's the better negotiator? She's a better cook. We'll put it that way. So maybe a tacit admission that you're the better negotiator? No, we have different strengths across the board. We're going to have two very different teams. Last year I guess it was Senator Westman, Senator Sears and myself. But the chair does bring considerable sway to the process. There's no question about that. Well I think it'll be a fascinating thing to watch for folks like me and the media who get a front row seat to seeing how all of this unfolds. So I look forward to that. And we are just about out of time so I want to thank you Senator Kitchell and you Representative Toll for joining me today and we look forward to seeing the progress of the budget over the next few weeks. And we thank you for watching. On behalf of Orca Media and Vermont PBS I'm Neil Goswami with a Vermont Press Bureau. We hope to see you next week.