WCAX.COM Local Vermont News, Weather and Sports-YCQM - Jeb Spaulding, Beth Pearce - July 24, 2011

YCQM - Jeb Spaulding, Beth Pearce - July 24, 2011

July 24, 2011 -- Administration Secretary Jeb Spaulding and Beth Pearce, D-State Treasurer, join Darren Perron and Keith McGilvery to discuss state revenues and the state budget.

TRANSCRIPT:

> good morning, everyone. I'm darren perron.

 Our newsmakers this morning are secretary of administration jeb spalding and state treasurer beth pierce.

 Thank you both for joining us. Let's start with the state's fiscal report. The forecast that just came out. The state finished this past fiscal year with about 34 million in surplus money. On thursday economists said that the windfall came from income tax on wealthy vermonters and a large uptick in corporate and estate tax revenue. Economists say the surplus is a one-time occurrence, though. And that they warn that we shouldn't expect a similar gain in the future. Let's hear what state economists had to say about that and we'll get a response from you.

 Terrific.

 Broken positively the second half of this year like it did. We didn't get the one-time, you know, revenue positives that we did, which i think go a long way toward explaining the plus $34 million. Most of it. I would almost argue that we may have been before you with a revenue forecast downgrade.

 So the vermont economic outlook decent but not fantastic. Where did this surplus money come from to begin with?

 Well, first of all, i think it's across the board. You already mentioned, darren, that the income tax and the corporate tax were the two big contributors over the last six months let's say. On an annual basis, the sales tax was up about 5% for the year. And the meals tax about 4%. So that's not bad, given where we've been coming from. Certainly better than the previous two years, where we were treening -- trending down significantly. The income tax and corporate tax i think are an indication of some recovery in the economy, particularly the stock market from the income tax perspective. You know, the economists did mention that it was largely one-time. That there is growth in the next year. But actually the growth in the general fund for the year that we've just started july 1st through june 30th is our fiscal year. So the year we've just started is going to be just about $35 million more. If we get to the point talking about the pressures on the budget, you know, $35 million on a $1 billion plus budget is not a lot of growth. So we've got a challenge ahead. It's slow and growing it's but slowing down. I think what they were saying is primarily events outside of our borders are causing us some head winds and they would be things like higher fuel prices. Even the terrible situation they've had in japan has had an impact on manufacturing output. And the uncertainty in europe and in our own capital as to whether we have the dpooft deal with our fiscal issues, is slowing down the economy. So, you know, there's no question about the fact. There's no way around it. F.y., '11, that just ended june 30th, was very strong, it was up 11.5% from the previous year. When you add up all the pieces from the estate tax and all the other things that funnel into the general fund, it was almost $120 million more collected in the year that just ended than in the year before that. Of course, it's always -- then important to add right after that that we're still collecting less than we did in f.y. 2008. So it shows you -- basically the treasurer would say it's similar to the pension fund investments. We've recovered to where we were. Last year was a good year. We still have a ways to go and we're anticipating most likely a slower year ahead.

 That's why not sort of celebrating at this point. Obviously good news that we ended with a surplus. But $35 million, $34 million is not huge.

 It's not huge. I think one thing i can say with assurance, would love to have the opportunity to do it, at the end of the legislative session, there was some talk that we might need to have a special session and raise taxes to deal with, you know, the federal budget cuts that we're likely to be coming. As we finished the fiscal year, the legislature and governor had agreed to set aside some of the unanticipated revenues to buffer federal cuts. We came in ahead of what our projections are. So additional money going into the human services case load, reserve fund. And i don't think there's really any likelihood that we will need a special session or that we'll need to raise taxes to deal with f.y. '12.

 Let's get into that a little bit more, that the governor proposes what we do with the surplus money. He'd like to see us offset some of those federal cuts, about $20 million would then baout into the -- then go into the reserve fund.

 That's the thing. If you ask people in washington what are they likely to do? You get a blank stare or worse. Or they tell you the truth. They have no idea what's likely to happen. You know, one of the big fears that people have is with the low-income heating assistance program, it provides heating oil for low-income vermonters. And vermont's allocation this year was about $25 million, under what the president proposed, it would go down to about $11 million. So, you know, more than, you know 50% cut. And what we got this year. And most people say, well, if that's what the president is proposing, then the other side is going to propose somewhat less. We don't know that for sure. That would certainly be a major cut. Even in the fiscal year that just ended, we saw cuts in community development block grant programs, some of the water, sewage and treatment plant grants that came from washington. And we can see cuts in education, workforce training, a whole array of reductions coming from washington. But we really don't know for sure. You know, as we're talking this sunday morning, people should realize we recorded it on friday. And maybe there is a grant bargain that took place between the time we recorded this and people are watching this sunday morning. So the situation in washington, d.c. Is very fluid. But as we speak, nobody can tell us for sure what kind of federal cuts are coming. And i often say, look, you know, we know they have to get their fiscal house in order. We appreciate it. We understand that. We're from vermont. We keep our budget stablization reserves full. We don't spend beyond our means. We try to look look ahead and we expect them to do the same and they need to do that. My hope is they do it a measured fashion, that doesn't just pass the buck to the states and we'll certainly be working with our congressional delegation to try and make that happen. Difficult to predict right now.

 The governor has been vocal about using some of this surplus to make state hospital improvement. Talk to us about that. What are we talking about?

 Well, you know, we have a state hospital facility for mentally ill vermonters that is really substandard. It's currently not certified under the federal standards system. And it's been a priority for a decade or more to do something. And governors have tried to get it recertified through the federal system without luck. As the governor likes to say, our most vulnerable vermonters deserve better. And when he came in and made his initial speech last january to the legislature, he said i am going to come up with financing and a replacement facility for that vermont state hospital. You know, we are still working on how big a facility we need. Whatever size we have, we want to make sure there's room for expansion. You know, he talked about perhaps having some beds down in the southern part of the state at the retreat. But whatever the final size the facility, it will be expensive. And as the treasurer will talk about i'm sure at some point in the program, we are very conservative with the amount of debt we issue in vermont. So taking some of the unanticipated revenues and reserving them so we can pay for the new state hospital with cash instead of borrowing, would be a prudent use of the funds, particularly since the economist mentioned a lot of the funds are one time in nature and not likely to repeat. So using one-time funds to build a neal absolutely needs to be done without borrowing, will save taxpayers money in the long run. And that's one of the things that the governor proposed. He also proposed increasing our budget stablization reserves. And this is one of the reasons vermont is a aaa rated state. Most states that even have had reserve funds in the last couple of years, have spent them down. Our budget stablization reserves, at the end of this fiscal year, were full 5%. And they're anticipated to be full at the end of f.y. '12. And he feels that 5% -- and actually if you talk to the rating agencies, they'll tell you these days they don't feel 5% is a big enough buffer. You really should have 7%, 8%, maybe even 10%. He's proposed using a portion of our unanticipated revenues to build those reserve funds.

 I think that's very important to the credit rating of the state. The rating agencies take a look at our conservative debt management. We have fixed-rate debt. So it's not subject to interest rate variation. We have a very healthy reserves, as the secretary has said. We have fully funded our statutory reserves. But moving up to 8% as the governor mentioned in yesterday's meeting, would be a good step to maintain those ratings. This was a very tough climate that we're in with the unisn't in washington. And the steps that we can take that are our in control, we should take the steps.

 For vermonters watching at home on sunday morning, why is the rating so important? What's the impact that has on day-to-day life?

 For one the rating impacts the cost of borrowing for the state. We are anticipating doing up to a $90 million bond issue this fall, probably in october. And a one quarter of a percent to a half percent change in that could make a difference of about 2-point $3 million to $4.6 million in the cost of that borrowing. So we want to keep the cost of borrowing down. Our credit rating is important to us. We work very hard with the rating agencies to make our case to them. And we do it through good financial management, conservative debt management, and prudent use of our reserves. Not spending those down without a plan to replenishment is important for our future, particularly with the confusion we're seeing now in washington.

 And we can kind of boast that vermont has the best credit rating in new england at this point.

 We do.

 At one time there was some concern that moody's investor service, given the debate that's going on in washington, was going to take a look at state's credit ratings, even states with good credit ratings like vermont. You would express some concern about that. Are you still concerned or have we jumped that hurdle already?

 We're concerned but we're doing pretty well right now. The moody's on july 13th issued a statement that if the federal -- if the united states debt rating went down, the credit rating went down, that they would also look at 15 -- the 15 aaa say state. The highest rated states. They've done an analysis and sometime this week they issued a statement that five of the 15 would likely be impacted if the united states credit rating was to be reduced from aaa to aa1. Vermont was not on that list. Now if the rating for the federal government was to go down further, if we don't get our house in order, vermont is still subject to some review. But we're pleased that we were not impacted on the first cut. And we believe again that our conservative practices have fared well in this process.

 I mean, to me it is a clear example, though, of why vermonters and americans should be concerned about the congress dealing with the debt situation, first of all, not tieing our deficit reduction plans to a raising of the debt ceiling. Some people say it doesn't really matter. You know, what they do down there, it's just a game or politics as usual or what have you. When you start to see a credit rating, a reduction on the united states could affect states like vermont through no action of our own, it gives you a pretty good example of why we should be concerned and hope that congress does address the situation. The other thing that sing important to point out is that i think the rating agencies -- they want more than just seeing the debt ceiling raised. They want to see some illustration that congress can function to solve our long-term fiscal problems. And certainly we have them. I mean, there are -- i know you've had guests on this show that have -- made very strong cases as to how the current debt trajectory is unsustainable. And we need to turn that around in a responsible fashion. The investor community represented by the rating agencies want to see us, do we have the capacity as a government to actually address those situations. And if we don't, then you will see not only the state of vermont, you will see interest rates on individual vermonters, whether they're adjustable rate loans or future student loans or mortgages. You know, we're all going to be paying more. So it's a real situation that people need to encourage our legislators to deal with.

 All of our wallets are sort of on the line here.

 Absolutely on the line. Jed raise as very valid point. When you look at the credit rating for the united states, at aaa, when an investor is making a choice about an investment, they look at that credit rating and they analyze the risk. If the risk goes up, if you move the rating down from aaa to aaplus or aa1, what you do is you increase the risk and the investor wants to be compensated for that. So interest rates will rise. If interest rates rise for the u.s., what that does, it cascades all the way through our economy. Interest rates for car loans, interest rates for credit cards. Interest rates for mortgages will go up. Interest rates for education will also go up, it's a real shame. Because at the same time the budget proposals that we see out of washington going to have an impact on the pell grants. So that's a double whammy for a lot of folks. So this is very important to every vermonter and everyone in this country and frankly the world that we straighten this out. The cost of goods will also increase, because as those interest rates change and the confidence in our economy changes, it's going to have an impact on the value of the dollar, which will push up the price of imports, including oil. Our economy is very fragile right now. We do not need this. Playing chicken with the debt ceiling is a very dangerous game.

 More with the treasurer. More with the secretary right after this. Stay with us,

 welcome back, everyone. Treasure, let's talk about some money out there. The vermonters may not know they have. This is unclaimed property that you're taking care of. And keeping track of. What are we talking about here?

 Sure. Well, unclaimed property is a property that's been sent to the state. What that means, for instance, if you were a college students and you had an apartment and you had a utility deposit, for instance, and you forgot about that after you moved out, you're happy with graduation and moved on, that money, rather than stay with the utility company, would be asheeted to the state, so that we can then try to find the owner of that property. It happens with banks, insurance companies, paychecks, last paychecks and also state income tax refunds. We find folks that don't actually cash those. So that money is asheeted to the state. We have about $52 million that's available to vermonters. We take a number of steps to try to reach out to folks to reunite them with their property. We do a number of visibility things at fairs. Try to catch people there. We do advertisements. And we have a great web site. I would encourage you to go there. It's -- you can go to www.vermonttreasureer.gov and then hit the unclaimed property button. And we can do a search by town, you can do a search by name and get your money back. Or you can call us. It's 1(800)642-3191. And we would be delighted to give you back your money.

 Now, i know that search is pretty easy for people to do at home. It's more than just a lost paycheck or a deposit. You find some pretty interesting things in vermont, right?

 Yes, we do. We also get safety deposit boxes. And those are turned over to us from banks after they've been dormant for a period of time. And you get some pretty amazing things. You get a wide variety. You might have engagement rings or jewelry in there. One individual has a bill for a sports car in there. I'm not sure why. We have a cadbury egg, which again is a little bit mind boggling. Not that valuable. But we also have -- one particular occasion a few years back, we had a package of what the bank called old scrapbooks. If n. It you have a picture of grandma moses and on the other side a letter from her. And salvador dolly, some notes written by brahm's. It was quite a collection. We were able to get that back to the individual, because the owner of this safety deposit box was a volunteer firefighter in his town, and the town clerk remembered him. And what we do is we reach out to town clerks, we reach out with state legislators who might know the folks in their town and make every attempt to get that money back. I believe this number is a little bit old. But we are the second highest percentage in the country for return of all the state treasurers and folks that are responsible for unclaimed property. And that's just a great story.

 Over $9 million in unclaimed property, right, in the last fiscal year alone.

 $9 million collected. About $5 million that was returned to individuals last year. Probably it was about 14,000 individuals as well. Probably going to be a little less when we get the final numbers in the terms of the dollars and probably in the same range in terms of the number of claimants. One of the things that with the downturn in the economy, you'll find that folks are looking at that list more often. And something that they might not claim that was $15 or $20 a couple years ago, they're now looking at claiming those. I had one individual who had been laid off, really needed that money. And we did everything we could to expedite it. In fact, we have a new service called express claims. And if it's under $2, you're at the same deterioration, we can get that out to you in very quick time.

 Looks like we have to take a peek and see if we have anything. Switching gears jolted a little bit. Vermont had a bottled waited ban that was due to take effect july 1st. What are we doing? Are we moving forward with that?

 Well, we are viewing what we had attempted and probably going to put a slightly different version in place. I do want to emphasize. This was not a bottle water ban for all vermonters. It was for state government for the executive branch of the state government to say, look, you know we are supportive of conservation efforts. We realize that all of us that live in municipalities are contributing our hard-earned dollaring to maintain municipal water systems. And, you know, we ought to try to reduce, reuse and recycle whenever we can. And so we put in place a policy that restricted taxpayer funds buying really those large water bubblers. And the idea was to -- actually again conserve, support municipal water and make sure the taxpayers' dollars are used as frugally as possible. And we still support that as a policy. When we put it in place, and it became effective, we received a tremendous amount of feedback from state employees. Everything like i work in a highway garage and there's only one sink here.

 Which we have video of. You can probably say for yourself as well, you wouldn't want to drink out of that sink.

 No. And then we found out a lot of things like the regulations that say you're not allowed to have people drinking water in a bathroom. And there are state offices in certain places where they have nothing but a bathroom sink. And there are -- there were enough legitimate concerns raised that we thought we should put the policy on hold, take another look and find out, okay, is there another way to skin this cat. I imagine where we're going to end up, we'll have a policy that says, really here is what we're trying to accomplish. Conservation, support municipal systems and frugally use of taxpayer dollars. Given that we'll provide the flexibility for our state managers to say, okay, for example, on the fifth floor of the pavilion, where my office is at the governor's office, number one, it's air conditioned, number two, we have a kitchenette, number three we have an old-fashioned water fountain near the elevator. And we've gotten rid of our two big water bubblers and we're not bringing them back. On the other hand, if you're on the fifth floor of a building with no air conditioning, no kitchenette, and the only thing you have is a bathroom, and not only that, and those buildings in many cases the old fashioned water fountains were taken out, plastered over where they were, it would cost you more money to put the water fountain back in just than just to maintain the water bubbler. So we're going to have a policy that encourages the best practices. But provides flexibility so that it actually works in practice.

 All right.

 Mr. Spalding, we might have you look forward with us. You're a u.v.m. Grad. This week the president decided to step down a year ahead of when he had originally planned to do that. You called a number of leadership positions in vermont. Any interest in that job, a temporary base or long-term?

 I haven't even thought about it. But now that i thought about it for five seconds, the answer is no. You know, you never know where you're going to be ten years down the road. I feel incredibly lucky to be where i am. Some viewers may know, i had the good fortune to be elected to a fifth term as state treasurer last novembered. And when the governor asked me to come in, you know, and take a leap of faith and join his administration as secretary of administration, which is largely dealing with the state financial. So it was sort of progression. That's something i haven't thought of. I'm just getting started and i hope the governor has an opportunity to stay in his position for a while. I'm looking forward to helping him accomplish his agenda.

 I just want to say that he gave up the best job in the state. States treasurer.

 I don't debate that.

 Speaking of that, miss treasurer, you know, you were appointed to this position because mr. Spalding got the promotion to secretary. Will you run for that seat the next time around? You're at this time filling, you know, what would have been his term.

 Well, i think that i'll put it this way. I haven't made a formal announcement. But you can count on it. I've opened up a campaign account and i've -- do plan on looking at this very seriously. You can count on it. This is my life's work. I love treasury. I've been in government finance for 30 plus years. I'm showing my age. But i love this work. And this is -- this is something that i would love to do on behalf of vermonters. I think that we have a lot to offer in the treasurer's office in terms of prudent financial management, coupled with some good christmas -- ideas about future, for instance, energy financing. I'm hoping we can do more there. We've done a lot of great work in the area of pension reform. And i'm looking forward to continuing that agenda.

 So we can say at this point that you're declaring right here on channel 3's "you can quote me," you can running for state treasurer?

 I'll be making a formal announcement down the road.

 Okay.

 Listen, could i take a step back on the u.v.m. Question. Say i'm not interested. But i do want to take the opportunity to say -- i'll even just put it in a financial perspective. I mean, the university of vermont is it -- is one of the most important assets we have in the state. Our economic future is tied to the university's future. There's no doubt in my mind somebody is an undergraduate and graduate degree from the university of vermont, that the president has brought that institution very far forward in the last decade. We're lucky he's been there. You never know what unforeseen circumstances are going to come up. We wish he and his wife the best going forward. But i think his legacy is going to be extremely positive. And that the university is strong you -- stronger than when he came and there's lot of good people and good programs in place that i think are going to continue to make vermont a very dynamic and vital place going forward.

 Okay. I think we have to leave it at that point. Secretary spalding, treasurer pearce, thank you both for joining us. We appreciate your time today. And thank you for joining us, everybody. We'll see you soon.

 Have a great sunday. Captioning provided by caption associates, llc www.captionassociates.com