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The Story of Lost Opportunity...and Its Consequences



Op Ed - The Story of Lost Opportunity...and Its Consequences - Cornelius Hogan, Plainfield, VT

The State of Vermont is witnessing and participating in an unraveling of the capacities of its governments at all levels. And much of the problem could have been avoided.

Lost opportunity is grossly wasteful. This is because it is accumulative. Major opportunity lost at one point in time repeats itself in every subsequent year, until the accumulation becomes a serious threat to financial stability. This has happened in Vermont roughly over the last 15 years, and now government and the people it serves, are paying the price.

Let's take a quick look at several lost opportunities, that if realized at the time of the opportunity could have made a significant and even major impact on our current fiscal mess.

Sometime in the mid 1990's, after we had climbed out of the 90-91 recession, the legislature and the administration embarked on a budgeting technique known as 'waterfall spending'. In short form, it simply meant that revenue in excess of the amount budgeted for government that was realized during the fiscal year in question, would be spent on a list of projects and programs until the excess revenue was spent. Assuming an average of 5 million of excess revenue spent for about 10 years until health care, corrections, and other programs began to eat up the excess, I estimate about 50 million dollars could have been avoided and used to take some of the pressure off future spending needs. That is major league lost opportunity.

In 2004, the Zuccaro Corrections Overcrowding Commission recommended finding and paying for ways to supervise about 400 people in our prisons who are non-violent in our communities using enhanced field supervision and GPS monitoring technology which is used in other states and countries around the world, and at the same time, bringing back an equivalent number of 400 prisoners and avoid the cost of housing these people in out of state facilities, netting about 10 million dollars of avoided cost per year (not to mention the economic multiplier effect in Vermont). If enacted that would be another accumulation of dollar cost avoided of about 60 million. And now, in 2010, a new report from the Minnesota 'Challenges' consulting group, commissioned by the Legislature to find 38 million dollars in governmental efficiency, recommends essentially the same thing, six years later (for about 600 prisoners in out of state facilities). Another example of large lost opportunity.

A third example is the prospect of reducing the administrative costs in our educational system. This discussion, in one form or another, has been going on for about 15 years in Vermont. Assuming a very modest avoided cost of about 5 million a year (that is a mere 4/10th of 1% on a 1.3 billion dollar budget.) this represents an accumulated avoidable cost of about 50 million dollars if we had acted just 10 years ago.

These three areas of lost opportunity loosely represent about 160 million of avoided cost by the current year 2010, with an additional avoided cost of 20 million in 2011. These numbers are roughly equivalent to the General Fund deficits we are facing this year and next. Yes, the current recession would have caused government to tighten its belt, but the level of ripping and tearing of capacity and services for people could have been largely avoided.

It is naive to believe that these avoided costs would have automatically dropped to the bottom line. But in part, they could have reduced our taxation burden, and/or, given government and its agencies some cushion that would have been there when we needed it. Constant opportunity analysis t is the kind of efficiency seeking behavior that business regularly undertakes. It is an even handed way to avoid the boom or bust cycles that Vermont government has increasingly shown its inability to manage.

And there are more examples of ideas ignored. Mary Powell, of Green Mountain Power and David Coates the highly respected financial analyst, in 1995 in their citizen commission report recommended clear and present opportunities for governmental belt tightening which were mostly ignored. Report after report over the last 10 years, having to do with the severely mentally ill in Vermont, recommended changes that could avoid millions of dollars a year and at the same time improve services substantially to that trouble population. They have also not been acted on. And the recent years of balancing the state's budget with 9 million dollars a year with fictional State Hospital receipts only adds to the lack of budget credibility.

Even if the budget as presented for 2011 were adopted in whole the pain has not yet been fully exposed. Some are estimating an additional 30 million in specific cuts beyond much of the soft targets outlined in the budget will be needed to overcome the inachievability of reductions outlined in the Challenges for Change consultant's reports and other unrealistic cuts in Corrections and other agencies that cannot be achieved in mere months.

This is a story of Vermont government's chronic mismanagement, by both the executive and legislative branches and the leadership of both parties over many years.

So, what are the opportunities available to us today that if not dealt with will only exacerbate our problems going forward? Interestingly, they are similar and sometimes the same as outlined above. It is never too late to act decisively. Plus there is the opportunity to redesign our health care mess to begin to avoid about half of the roughly .30 cents on every dollar spent on health care that has nothing to do with our care. The numbers are big.

Knowing that our overall health care spending in Vermont is breaking the 5 billion dollar mark this year (up from over 2 billion dollars in 2001), the avoidable annual overhead costs of health care today is in the order of magnitude 250 million dollars. Action taken early in the last decade could have avoided cost in the order of magnitude of well over 1 billion dollars. Avoiding this wasteful cost would have a salutary Impact on not only our government's budget, but the budgets of families, towns and cities, businesses, hospitals, school districts, and even workman's compensation.

But there is a mega opportunity even beyond these lofty numbers, and that is to put government spending on a more sustainable rhythm and cycle. Governor Richard Snelling understood how to do just that, and how to engage both the Legislature and our citizenry in the process. I recall vividly his prime time presentation on WCAX in the teeth of the 90-91 recession when he graphically showed how government can arrange its financial affairs to be efficient and save substantially in the good times so that the capacity to take care of those in need was available in the bad times. This included the ability to carefully raise revenue on a temporary basis when needed.

We have no choice now. We must think boldly and bigger if we are going to upright ourselves from the corrosive and accumulative cost of past lost opportunity, and we must regain our ability to think and plan around full economic cycles.

Cornelius Hogan, Plainfield, Vermont

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