Shumlin loses key spinmeister as bad news mounts in Vermont

By Bruce Parker | Vermont Watchdog

The unexpected departure of Jeb Spaulding as secretary of the Vermont Agency of Administration spells the loss of one of Gov. Peter Shumlin’s most useful spinmeisters, even as bad news mounts against the governor from all sides.

As Spaulding looks ahead to a new job as chancellor of the Vermont State Colleges, the official line from last week’s announcement is that the administration secretary found an opportunity for career advancement. An equally compelling story, however, is that Spaulding, the state’s budget chief, saw black clouds forming on the horizon and decided to run for cover.

The announcement of Spaulding’s departure came after five straight months of tax revenue misses and a subsequent $31 million revenue forecast downgrade by state economists.

Cracks in the Shumlin administration’s rosy economic outlook emerged in April, when the monthly revenue report in the most important

month of the fiscal year revealed personal income tax revenues missed their target by $22.85 million, or 14.8 percent. While former Deputy Secretary of Administration Tom Pelham called the numbers “a big miss,” Spaulding was upbeat: “We do not believe April’s income tax results indicate a change in our steady positive economic trajectory.”

May delivered another significant dip, as the personal income tax component — the largest source of revenue to the General Fund — missed by 10.8 percent. Spaulding found a silver lining, saying, “We are essentially on budgetary target for the year.” He said it was “encouraging” that the personal income tax category was marginally up year-over-year.

In June, when personal income tax revenue missed the target by 7.7 percent, Spaulding grew exuberant, saying, “Revenue forecasters practically hit the nail on the head in terms of projections for the fiscal year. That’s pretty amazing.” He spoke of “our strengthening state economy” and said the administration was “very pleased.”

When personal income tax receipts missed by 4.8 percent in July, the positive spin continued along the same lines.

But when personal income taxes missed by 9.8 percent in August, Spaulding finally sounded the alarm.

“The lagging performance in the withholding component of the Personal Income Tax, which was $4.3 million or 9.8% below target for the month and the main reason General Fund revenues as a whole are under projection, is concerning and requires ongoing attention. …The underperformance suggests that underlying wage growth may not be as robust as the state’s low unemployment rate would ordinarily indicate,” Spaulding said in the report.

With that warning, Spaulding hit the eject button and parachuted out of the Shumlin administration. His departure may signal that economic reality is setting in.

On July 24, Shumlin held an emergency meeting to slash the 2015 budget after economists identified a $31 million gap in projected revenue. The Joint Fiscal Committee approved a Shumlin-proposed rescission plan weeks later, reducing the Legislature’s spending increases for the year. The appearance of a balanced budget seemed illusory at best, however, since $10 million of the cuts came from eliminating a 1.6 percent rate increase to Medicaid reimbursements for health-care providers. Lawmakers said the issue would need to be revisited in the new legislative session in January.

Spaulding won’t be around to put a positive spin on the governor’s budget woes.

In fact, the administration’s PR power is dwindling as Shumlin faces mounting problems on all sides.

First, Shumlin failed to get the Internet backbone of his single-payer health care agenda up and running. After spending $67 million to have technology contractor CGI create Vermont Health Connect, Shumlin fired the group. On Sept. 16, Shumlin called a surprise news conference to announce Vermont Health Connect was going offline for a while — a drastic move that has shaken the confidence of Vermonters of all political persuasions.

Next, despite months of rosy talk of economic recovery and low unemployment, businesses appear to be fleeing.

The departure of IBM looks to be slated for October after the computer giant purportedly offered $2 billion to Abu Dhabi-owned semiconductor firm GlobalFoundries to take over its money-losing chip-making plant in Essex Junction. The sale could bring new job losses for Vermonters.

When Benways Taxi went out of business in July, the owner of Burlington’s largest taxi provider blamed high costs related to Vermont’s health care system.

On top of all that, this past week brought renewed talk of a 12.5 percent payroll tax to fund Shumlin’s single payer health care system, collapsing support for Shumlin among Second Amendment groups, and evidence Vermont’s population has flatlined as more people are moving out of the state than moving in.

Spaulding’s exit, it seems, is well-timed. His replacement will need to find new and creative ways to spin the budget, single-payer financing and other bad economic news.

The outgoing administration secretary is not entirely off the hook, however. Once Spaulding begins his new job as chancellor of the Vermont State Colleges, he may have to explain his role in subjugating the Higher Education Trust Fund to the new Vermont Enterprise fund — that fast-dwindling $4.5 million cash reserve better known as Shumlin’s keep-IBM-in-Vermont fund.

Contact Bruce Parker at bparker@watchdog.org