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.
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 found here contain grades of the state's budgetary practices during the fiscal years of 2015 through 2017. Each state received marks in five critical categories, based on their adherence to best practices in several key budgeting indicators. The five categories covered methods used to achieve budgetary balance as well as how budgets and other financial information are disclosed to the public.
States received grades of A to D-minus (there are no “failed states”) for their procedures in estimating revenues and expenditures; their use of one-time actions to balance budgets; how they oversee and use rainy day funds and other fiscal reserves; the adequacy of their funding of public worker retirement and other postemployment benefits; and the quality of transparency of budget and related financial information. The grades are based on research conducted by public finance and budgeting professors and students at eleven US schools of public administration or policy. The universities’ research efforts were augmented by Volcker Alliance staff, data consultants at Municipal Market Analytics, and special project consultants Katherine Barrett and Richard Greene.
State Budget Sources
State Budget Sources: An Annotated Guide to State Budgets, Financial Reports, and Fiscal Analyses is a resource published by the Volcker Alliance designed to help public officials, policy advocates, journalists, academics, and concerned citizens fully understand the critical fiscal decisions that governors and legislators must make. The guide includes the links below to budgets for this state as well as legislative analyses of budget bills and treasurers’ or comptrollers’ monthly state cash-flow statements; capital spending plans; reports on public-worker pension funding and returns; and reports by local and national fiscal research organizations, bond rating firms, and associations of state fiscal and finance officials.