How To Spend a Windfall

I’m not one to look a gift horse in the mouth…

…but the $2.7B one-time federal tsunami of cash coming into a state of 624,000 people is a big deal, especially when Vermont’s total 2021 budget is already $8+B.

This adds up to almost $11B or $17,628 for every Vermonter or $41,862 for each of Vermont’s 263,000 families – $10,000 above Vermont’s median income and 2/3 of Vermonters’ average family income.

I’m not suggesting that we shutter state government and pass the wealth on to Vermonters. We all know the potential harm unearned money can do.

My grandfather did not believe in inherited wealth and, apart from leaving a modest trust for my grandmother when he died, he gave all his considerable fortune to three charities.

When she died, my grandmother left me $28,000 and I got my father’s war pension of $300/month until I was 21, as he died in the Pacific theater four months before I was born in 1945.

22 years later, I was married with two children, attending UVM during the day and working the student nightshift at IBM. In those days, both were real money and helped me over several rickety bridges – paid our modest rent and put food on the table.

Today, the $2.7 billion earmarked for Vermont includes $731 million worth of direct $1400 payments to those earning less than $75,000 and $152 million for rental assistance, $47 million for child care subsidies and support for childcare providers.

There’s $293 million for Vermont’s K-12 system, $65 million for colleges and universities, and another $76 million allocated to cities and towns. The remaining $1.3 billion can be spent at state discretion over the next 45 months.

The danger here is that we see this influx of cash as a panacea to sustain the ingrown flaws in government process and administration that we’ve ignored for so long.

Using this one-time windfall to simply caulk an ageing ship-of-state rather than to deliberate together and redefine the goals and values on which we agree, using the money to redesign rather than just keep afloat our foundering ship-of-state, we will have wasted a once in a lifetime opportunity.

By way of example:

• Do we spend the money on a new prison or reexamine the criminal justice system with any eye towards investing new money in preventing the conditions that form a glidepath into jail, such as mental health care, employment, a livable wage, and addiction treatment?
• Do we up-fund the $5B deficit in the Vermont State employee and teachers’ pension funds and then face the same unfunded accruing deficit in another decade? Or do we honor our past commitments and negotiate a sustainable co-funded retirement system like the ones most workers rely on?
• Do we extend the hospice term of our four Vermont State Colleges or do we reengineer the Vermont State College(VSC) system for sustainability, using the one-time money to streamline programs, deploy new technologies, and lower operating cost and tuition?
• Do we force Vermonters into self-service online technologies for benefits management, telemedicine, government transactions, and distance learning without investment in ubiquitous statewide broadband? We have no plan. Splashing money is not a coherent strategy.
• Do we forge ahead with OneCare and induce the medical community to invest in prevention and maintaining population health instead of shoring up the costly transactional business model that depends on a steady market of sick people needing treatment?
• Do we blunder forward with our decades-old mainframe IT systems, patching here and there and spending more money remediating the system’s mistakes or do we spec and bid a new government information management system that will enable efficiency in the decade ahead? Can we even function in the near term?

I recently served on the board of a Vermont company whose president was hired as an “optimizer.” In business most of my life, I’d never heard of the position and was curious.

I learned that an “optimizer” takes nothing for granted in a company, questioning and assessing every policy, practice, position, and process to determine its cost-efficiency, as well as its ability to deliver a quality product profitably. I found a lean, effective, and quality-focused operation with an employee base that was proud to work there.

Our soon to be $11B ship-of-state needs an optimizer to help manage this one-time windfall. Change creates winners and losers but so does life, and failure to change makes us all losers in time.

Every business has an operating budget and a capital budget. Government conveniently conflates the two, ballooning rather than optimizing the operating budget.

A capital budget is a strategically vetted list of one-time investments to enhance the efficacy of the operating budget expenditures and improve systems and processes.

Especially now, it’s critical that we understand the difference and craft our capital budget to enable us to streamline our operating budget. This means retiring ineffective or cost-inefficient programs so we can reinvest in ones that work – especially with this windfall. If we use this new money to shore up our operating budget, we will have wasted the opportunity to do more with less.

Imagine if we used this one-time money to examine and forge consensus around our shared goals for wellness, education, housing, broadband, the food chain, public transportation, care and wellbeing of our children, the environment, and then redesigned our baroque systems to achieve those shared goals rather than preserving the interests and privilege of those deeply vested in preserving a deteriorating and unsustainable architecture of government. Like the human body, the body politic will defend itself against efforts to lose weight.

Governor Scott talks about his “affordability agenda,” cudgel used to forestall new programs, regulation, and taxes.

What if we understood an “affordability agenda” as how we optimize the ship-of-state to better deliver on shared goals for the wellbeing of Vermont’s citizens with what we already spend and we were to use the influx of funds allocated to the government sector for funding that optimization rather than sustaining our bloated budget?

I found a recent VT Digger headline indicative and troubling.

“Guns, marijuana and pensions: What will survive the legislative session?”

I’ve lived here since 1947 and, in that time, don’t know of anyone who wanted marijuana who didn’t have it, or, for that matter, anyone who wanted to own and carry a gun who didn’t. The pension resolution will address the retirements of some 15,000 of Vermont’s 145,000 workers. And, while a desirable outcome, the elimination of sales and use tax on feminine hygiene products will make little difference in the overall wellbeing of Vermonters.

I kept wondering about homelessness, hunger, healthcare, housing, and the wellbeing of our children.