VEPC Defends Unwarranted Subsidies
Below is a memo I sent to the Joint Fiscal Committee. It deals with the VEPC/VEGI background growth rate issue I blogged about on August 13. The issue is on the JFC’s agenda for tomorrow’s meeting. This is an opportunity for the committee (including two gubernatorial candidates) to finally stand up to VEPC and stop wasting the taxpayers’ money. At a time when the administration (often with the approval of the Leg.) is cutting programs and jobs, it is outrageous that this charade continues. Short of killing the program (only the full Leg. can do that), this is a way to make VEPC more accountable and efficient. I hope readers will communicate with the members and ask them to do the right thing.
To: Representative Michael Obuchowski, Chairman Joint Fiscal Committee
Date: 9 November 2009
Re: Comments on VEPC’s pre-filed testimony re. the VEGI background growth rate methodology
Cc: Joint Fiscal CommitteeThe Auditor’s findings highlight a serious flaw in the program that needs to be remedied. As the principal author of the first review of VEPC, I first noted this problem nine years ago. I am grateful that the committee is taking the time to reconsider the issue.
VEPC claims that changing the methodology will introduce a “bias” into the cost-benefit analysis. Interesting choice of words. The bias would be toward reducing waste in the program because the current method subsidizes job creation that would have occurred without the incentives.
VEPC stated, “Such biases would ultimately and unintentionally discourage job creation from small and recently embarked business endeavors”. There is absolutely no evidence to support this claim. Presumably, the remedy would not affect applicants with little or no history in Vermont. In such cases, VEPC could use the industry growth rate just as it does now.
VEPC argued that “The current practice of sector-based, long–term…hurdle rates for background growth is an economically sound process that has worked well”. It may have worked well for companies that received unwarranted subsidies, but not for taxpayers. Applying a 2% industry-wide background growth rate to a firm that has grown at a rate of 6% makes no sense whatsoever.
VEPC praised the so-called “standardized approach” that creates a “level playing field”. But why should the “playing field” be level if it results in waste? Many applicants come to VEPC with a history. To ignore that in the name of uniformity is to ignore the intent of the program — pay only for incremental new jobs. VEPC’s reliance on the “uniformity” card is nothing more than misdirection.
VEPC noted that changing the methodology would require increased due diligence. At what point can we say there is enough waste in the program to justify more due diligence? Over time, the cost to the treasury may have been millions of dollars. To me, that seems like sufficient justification.
As the legislature looks for efficiencies in state government, no program should be off limits. I am aware that crafting a solution will not be easy; it’s complicated. At the very least, I hope the JFC will convene the technical advisory group to dig in and come back with recommendations.
Members of the Joint Fiscal Committee
Representative Michael Obuchowski, Chair
Senator Ann Cummings, Vice Chair
Senator Diane Snelling, Clerk
Representative Janet Ancel
Senator Susan Bartlett
Representative Martha Heath
Representative Richard W. Hube
Representative Mark Larson
Senator Peter Shumlin
Senator Richard Sears
November 11th, 2009 at 1:23 pm
These links will give you contact information for the Representatives and Senators on the Joint Fiscal Committee.
November 11th, 2009 at 1:26 pm
For the record, this item was placed on the JFC’s agenda at the request of Representative Mark Larson (and approved by the Chair, Mike Obuchowski).
Thanks Mark (and Obie)
November 11th, 2009 at 6:44 pm
Tinker Bell is the fairy in the play Peter Pan, who is revived from near death by the belief of the audience. The Tinkerbell effect describes those things that exist only because people believe in them. More on this later…
It was those same feelings of two years ago that drew me to the steps of our nation’s Capitol for the September 12th March on Washington DC. Many interpretations have been given as to why some 100,000 Americans came from all corners of our country in peaceful protest. My interpretation dates back to those feelings of two years ago.
For it was almost two years ago to this day, on October 7, 2007, that I founded what is now Vermonters for Economic Heath. Statewide in both the Burlington Free Press and on radio, I advertised this fact and our website, found at http://www.vteh.org. Our organization traveled the state and using facts and statistics, we presided over more than a dozen “Town Meeting Forums,” presenting both Vermont’s and our nation’s dire economic condition. All Vermont legislators were invited. I’ve written numerous articles on this subject. Thousands of dollars of my personal savings were used to finance this venture.
What were those “feelings” of two years ago? Here’s a portion of our website’s introduction which was sent to all legislators on October 7, 2007:
“In The Gathering Storm, Winston Churchill’s stated purpose was “to show how easily the tragedy of the Second World War could have been prevented.” In Churchill’s time – as now - a storm was brewing but “people were viewing it and not doing anything.” In Vermont, an economic and demographic storm is brewing and, like Churchill’s time, Governor Douglas, Speaker Symington, Senator Shumlin and others in Montpelier are doing little but viewing this coming tsunami. Montpelier’s recalcitrant culture continues to ignore Vermont’s approximately $3.5 billion unfunded liabilities as well as our nation’s $50 trillion Medicare and Social Security deficit that will surely make its way back to Vermont. And from the highest taxed state in the nation, what is Montpelier’s response? Montpelier’s response is to “shuffle the chairs on the deck of the Titanic” through talk of increased income and other taxes that would continue its modus operandi of obfuscation and distraction. Folks, look at the numbers and demographics; we’re not going to tax ourselves out of this hole!…”
If it’s still unclear to you what those “feelings” of two years ago were, let me summarize them in a statement: Duty to country and fear for family.
Famed investor Julian Robertson, in a recent interview, had this to say on this subject: “I think that my solutions do cause some temporary pain in America and I think the only way we’re going to get that is for the American people to be masochistic enough to ask for that because we can be sure that the politicians are not going to ask that of us…but we don’t seem to be willing to ask sacrifice of really anybody here except our military and I think that’s sort of tragic.”
A society cannot consume and not produce. Just prior to our recession, Vermont’s private-sector job growth this decade was 0% while state government payroll and benefits and education spending rose some 70%.
Sacrifice includes challenging Vermont’s culture of environmental and land-use extremism; a kind of “Environmental McCarthyism.” And sacrifice includes challenging Vermont’s insular, bloated and monopolistic education culture that’s approaching 50% of our state’s budget. The origins of Vermont’s economic decline can be traced back to the growing “fiscal and cultural cancers” of these two mainstays.
Vermont and our nation are being led down dangerous pathways by leaders who substitute wishful thinking for facts and economic realities. If you believe that by wishing hard enough for something, it will come true; continue to vote for Montpelier’s fairytale-like political incumbents. And, if you believe that Vermont’s economy can be revived from near death by this belief, Tinker Bell lives.
November 11th, 2009 at 7:55 pm
as usual, your comment did not address the issue raised
your sad self-promoting diatribe is ideological and derivative
the only “extemism” here is yours
November 11th, 2009 at 9:27 pm
On most Web sites I subscribe, that’s called SPAM.