- Associated Press - Thursday, February 12, 2015

MONTPELIER, Vt. (AP) - Top aides to Gov. Peter Shumlin warned Thursday that Vermont’s unionized state labor force could see more than 400 layoffs if the union does not agree to re-open its contract and negotiate pay cuts.

Meanwhile, the chairwoman of the House Ways and Means Committee gave voice to the expectation that a 0.7 percent payroll tax increase sought by Shumlin to pay health care costs likely will die in the committee.

“I think it will be pretty hard to get it out of my committee, based on the questions people are asking,” said Rep. Janet Ancel, D-Calais.

The two pronouncements reflected a fiscal crunch in Vermont that has worsened in the past month and has various sides digging in their heels.

Lawmakers began their session in early January facing an estimated $94 million gap between projected revenues and needs for fiscal 2016, which starts July 1. The picture grew cloudier Jan. 22, when two economists who forecast revenues for the state downgraded their projections by $18.6 million, raising the budget gap to more than $112 million out of an expected $1.4 billion general fund budget.

“We’ve been spending our time trying to understand the governor’s budget” and haven’t really begun to address where the extra $18.6 million in savings or new revenues would come from, said Rep. Mitzi Johnson chairwoman of the House Appropriations Committee.

The comment came a day after Johnson’s committee held what she said was an unprecedented meeting with the Ways and Means Committee on how to address the state’s money woes.

“It’s the first time in my nine years on the committee that we have been asked to make additional cuts right after a governor’s budget has been proposed to us,” Johnson said at the joint meeting.

Some Republicans at the session called for big structural changes in state government, though were not specific on how they would be achieved.

“For years we’ve been nibbling away at this budget thing,” said Rep. Robert Helm, R-Castleton. “It’s not going to be any prettier next year.”

And even this year, proposed fixes have been slow to find broad support.

Shumlin had asked for the payroll tax to address a long-simmering problem affecting the state’s Medicaid program and, indirectly, private insurance that people get from companies like Blue Cross Blue Shield. It’s a “cost-shift” in which Medicaid pays doctors, hospitals and other health providers too little to cover their costs, so they raise the rates they charge the private insurers to make up for the shortfall. The practice is widely seen as a hidden tax on private insurance.

Shumlin said the payroll tax would raise about $90 million a year and draw down federal matching funds to help the state pay more to Medicaid providers.

If the Ways and Means Committee rejects the health care tax, not only would addressing the cost-shift likely be left by the wayside; $16 million of its proceeds were to cover other cost increases in Medicaid, money the Legislature would have to find elsewhere.

Meanwhile, Shelley Martin, president of the Vermont State Employees Association, said the union had taken pay cuts and freezes during and after the Great Recession and was not prepared to give more.

Union statements to that effect are what prompted top Shumlin aides to warn Thursday of a possible round of layoffs in which the unionized workforce of about 5,500 would be cut by more than 400.

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