Vermont's "fiscal realities" may be grim now, but if the state doesn't take reformative action this year on issues such as unemployment insurance, unfunded retirement benefit liabilities and property taxes, the pain will grow next year, a panel of state officials told an audience at College of St. Joseph on Monday.

Commissioner of Labor Patricia Moulton Powden, state Treasurer Jeb Spaulding and Commissioner of Taxes Richard Westman gave the collective presentation, titled "Vermont's Fiscal Realities," before a group of about 60 people.

Each official oversees a division of state government for which Gov. James Douglas has proposed substantial policy changes this budget season to help reel in some of the state's more costly programs. Some of those proposals call for raising taxes on certain groups, particularly the plan to try to right the state's bankrupt unemployment insurance fund; it is expected the state will need to borrow $93 million this year alone to pay its unemployment obligations.

Part of the proposed solution in that fund calls for incrementally raising taxes on employers through 2013 and cutting unemployment benefits, according to Powden – not unlike the proposals shared by Spaulding, who spoke about scaling back retirement benefits to state employees and teachers, and Westman, who explained that the administration is hoping to reduce the number of residents receiving income sensitivity to try to control property tax increases necessary to cover education funding.

"We still want to be a generous state, but we need to have our generosity more in line with what we can afford," Powden said.

While unemployment insurance presents a $300 million to $700 million problem for the state, according to Powden, Westman said the state is on the "verge of trouble" with its property tax. By exempting so many various groups and entities from the property tax, the state has "created huge holes in our property tax base … putting the tax on a smaller and smaller base," said Westman, who was appointed to the position by Douglas in August.

Spaulding said the state has an estimated $2.5 billion estimated unfunded liability in the combined costs of its retirement health care and pension benefits for teachers and state employees. Already the state has sat down with the teachers' union, Vermont-NEA, and negotiated some changes, including increasing the retirement age to 65, Spaulding said. He said he hopes to apply the same model of negotiation to the state employees, although perhaps not the same concessions.

Before talking about the retirement benefits, however, Spaulding said the state's financial situation isn't "all bad news." Vermont recently had its AAA bond rating renewed, and is one of only 11 states in the country to hold that rating, he said. The state also hasn't engaged in any short-term or cash borrowing in at least five years, and has managed to balance its budget one way or another every year – occurrences that aren't happening around the country.

Spaulding also took issue with a Fox News video clip that the presentation's sponsors played at the beginning of the forum. In it, the Fox News commentator displays a map of the country with a progressive display of the states with the smallest budget gaps to the largest budget gaps in the country. Vermont is placed in the worst category, for states facing a 25 to 49 percent budget gap.

Spaulding said that "from everything he knows," that statistic is not true. He also questioned the source of the information, which Jim Eckhardt, chairman of the Rutland County Pro-Business Coalition, later said was the federal Congressional Budget Office.

The video clip did not state what budget figures it was using. However, Douglas has proposed a $1.1 billion general fund budget and faces a $150 million – or 13 percent – budget gap.

stephanie.peters@rutlandherald.com