Vermont

State Budget Practice Report Cards and Budget Resource Guide

While Vermont is the only US state without a law or constitutional provision requiring a balanced budget, it follows the example of its rule-bound peers. Its grades for budgetary practices were above average in three of the five categories evaluated by the Volcker Alliance for fiscal 2015 through 2017.

The state received an overall A—the top grade—for its near-absence of budget-balancing maneuvers, and it earned B’s for the transparency of budgetary information and its use of fiscal reserve funds. Vermont did less well in budget forecasting and legacy costs, which include funding of public worker pensions and other postemployment benefits (OPEB), principally health care.

Vermont improved in budget maneuvers, a category measuring a state’s reliance on one-time actions to achieve balance, earning a B in 2015 (because it deferred health expenditures) but A’s in 2016 and 2017. Its B’s in reserve funds reflect general adherence to best practices: The state has separate budget stabilization accounts for the general, transportation, and education funds but does not link them to revenue volatility. Healthy reserves are important in a state with a highly progressive tax structure and a small population, which leaves revenues at the mercy of changes in the earnings of relatively few high-income residents.

Vermont’s transparency grade was restrained by an absence of disclosure of deferred infrastructure maintenance costs, something only Alaska and California provide. Its straight D’s in legacy costs reflect a lack of actuarially recommended OPEB funding and a pension funding ratio of 68 percent, versus an average of 72 percent for all states in 2015.

Download Printable State Report Card

To emphasize the need for clear and comprehensible budgets to inform citizens, promote responsible policymaking, and improve fiscal stability, the Volcker Alliance in 2016 began a study of budgetary and financial reporting practices of all fifty states. The Volcker Alliance’s mission is to improve the effectiveness of the administration of government at all levels. Making state budgeting more transparent and accountable is an important part of that goal.

The report cards presented here are taken from the 2017 Volcker Alliance report, Truth and Integrity in State Budgeting: What Is the Reality? which proposes a set of best practices for policymakers. For those wishing to gain greater insight into state fiscal issues, the accompanying budget resource guide is derived from the Alliance publication State Budget Sources: An Annotated Guide to State Budgets, Financial Reports, and Fiscal Analyses (2016). 

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