This afternoon, a joint Executive-Legislative “Emergency Board” will be asked to consider whether to authorize spending another $15 million from the state’s General Fund.

That’s the largest of the several state funds that together face a $150 million deficit for the coming fiscal year (FY 2011, starting July 1), or $112 million if the state can really save $38 million via the government streamlining plan introduced with great fanfare last week.

Yes, that’s the same deficit that Gov. Jim Douglas says must be eliminated by spending less. The Democratic leaders of the legislature agree with the Republican governor here, but he’s the more resolute budget-cutter. When the Democrats said last week they hoped to “do more with less,” Douglas at one point interjected that he wanted the state government to do “less with less.”

So who wants to spend an additional 15 million smackeroos?

Yup, Mr. Budget-Cutter the Governor himself.

Meaning that the deficit would rise to $165 million (or $127 million if the state can….see above)?

Not a bit, says the Douglas Administration.

“It should reduce the deficit if the jobs are created, and that means an increase in income and payroll taxes, sales and use taxes, transportation taxes and fees, (all of which) results in more net revenue,” said David Mace, the Director of Communications of the Vermont Agency of Commerce & Community Development.

A plausible if debatable assertion, which will be considered in some detail below. Meanwhile, what is definite and not debatable is that if the Emergency Board (the Governor himself plus four legislators) does what Douglas asks, the State Treasury will pay up to $15 million to a bunch of companies which promise to expand their work force, or to move into the state from elsewhere, thereby employing more Vermonters, thereby culminating in the happy state of affairs described in the previous paragraph.

There’s nothing new about this. In one way or another, the state’s been doing it for years. It is now doing it through something known as VEGI, which even though it is pronounced (and sometimes spelled) “Veggie,” is not a pseudo-burger, but the acronym for the Vermont Economic Growth Incentive Program, which is in turn part of VEPC, the Vermont Economic Progress Council, which in turn is part of the Agency of Commerce and Community Development.

The Emergency Board meeting has been called because VEGI approved applications totaling $4.5 million late last year, but the “economic activity,” as Mace put it, by the subsidized companies didn’t begin until this year. So that $4.5 million counts against VEGI’s 2010 annual cap of $10 million.

But now VEGI has applications from four companies totaling $16 million. If they are all approved, the total will exceed the cap. So Douglas wants the Emergency Board to lift the cap from $10 million to $25 million. (And, later, he wants the Legislature to abolish the cap entirely)

And who are these four companies?

That’s a secret. The information is not being divulged, said Mace, citing an exemption to the State’s Open Records Law (From the statute establishing VEGI itself, he said. Title 2, Subtitle 2, Part 3, Chapter 151, Subchapter 11E, § 5930a (h)).

Even the legislators on the Emergency Board don’t know. One of them, Rep. Martha Heath, the Westford Democrat who chairs the House Appropriations Committee, said she understood that two of them were Vermont companies, two firms thinking of moving some or all of their operations into the state.

Heath said she thought the Board would put off its decision, recessing until a later date (but before January 28, when the VEGI board has to decide on the applications), “so we have time to get some information,” including “what (raising the cap) would do to revenues. We need to take a good look at it, and not take a chance about increasing the deficit.”

At this point, she said, she and the other lawmakers on the Emergency Board (the chairs of the four money committees, all Democrats) are not challenging the whole concept of pursuing “economic development” by offering subsidies to companies that agree to move in or expand. But she acknowledged that some in the Legislature have those questions.

As do many outside the Legislature, and outside Vermont. Paul O’Neill, President George W. Bush’s first Treasury Secretary, said that when he was head of ALCOA he never made a plant siting decision based on a state or local tax subsidy. He took the money, he said, because if someone is going to give you money, you take it. But he decided where to do business based on the quality of the work force, proximity to material and markets, and other traditional business considerations.

Not that VEGI and similar programs simply throw money willy-nilly at businesses which say they’re thinking of moving into the state or hiring more workers. On the contrary, VEGI has an elaborate set procedure that requires applicants to submit a great deal of statistical evidence to support their contention that they will add jobs. If they don’t, they don’t keep getting the money (these are usually multi-year obligations) or may even have to give some back.

According to a study by the Federal Reserve Bank of Boston, “to approve a firm’s application, the state must determine that the firm’s project (a) would not have occurred without the incentive (the “but-for”test) [that means ‘but for’ the subsidy, the business would not expand or move]; (b) will provide a net fiscal benefit to the state…and (c) will meet “quality-control” guidelines, such as minimum compensation requirements for new jobs.”

The experts make that determination, Mace said, based on “an economic model.”

Very professional. But this model, Mace said, is the “proprietary,” property of a consulting firm called the Remi Company, apparently meaning that it isn’t reviewable by citizens, lawmakers, or state economists.

Besides, economic models are…well, models, useful, but not always precise. In this case, some of their findings have to be based on information that is not just subjective, but hypothetical. That whole “but-for” business, for instance, rests in part on the assertion of a business official that his or her company will act differently with the subsidy than without it.

Even pro-business state Auditor Tom Salmon, in a report about VEGI, noted that that “a critical decision to award incentives is difficult to audit,” and that “the awards are not based on a company’s financial need and…companies are not required to furnish financial statements, business plans or tax returns with applications.”

That report by the Boston Fed found that in VEGI’s first year, “the state authorized $9.7 million…and projected that the recipient companies would create 1,310 new jobs from 2007 to 2012. This implies an average gross cost of around $7,400 per job.”

If those jobs paid about $50,000, the worker wouldn’t pay more than about $1,500 in state income taxes (assuming he/she was married with children, a homeowner itemizing deductions). That worker would have to buy a lot, stay in a lot of hotels, eat lots of restaurant meals and drive many miles to pay another $6,000 or so in state taxes.

Martha Heath said state officials were not claiming the subsidies would pay for themselves in one year, but in nine.

Maybe they will. But how would anyone ever know?

Another year looms, and with it another session of the State Legislature. Because it’s another year of recession, it’s another year of not enough revenue to pay for all the scheduled spending, so it will be another year of debate over how much to cut, and where, and maybe the state should look for a little more revenue.

That’s “higher taxes” in English.

A year, in other words, rather like last year.

But remember what the guy said about how you can’t step into the same river twice (same river bed, maybe, but different water; the guy was Heraclitus [535-475 BCE]), and in all likelihood this year’s budget will not quite be déjà vu all over again. Expect a new factor.

It’s a likely flap over the Rainy Day Fund, the state’s savings account. Though there were rumblings from some liberals last year about possibly dipping into the savings, the proposals never rose above a whisper.

This year, the talk is likely to be louder. To begin with, the legislative leaders have – for now – ruled out new or higher taxes, eliminating – for now – the most obvious alternative to deep spending cuts.

That makes the Rainy Day Fund a more attractive alternative for those on the political left, who can be expected to push it harder.

Most likely to no avail, and not just because the spending cut advocates of Gov. Jim Douglas’s Administration are dead-set against using the Rainy Day money. So are the relevant committee chairs of the Legislature, even though they are Democrats and (by and large) liberals.

“I don’t think that’s prudent,” said Rep. Martha Heath of Westford, the chair of the House Appropriations Committee.

Neither does Rep. Michael Obuchowski of Bellows Falls, chairman of both the House ways and Means Committee and the Joint Fiscal Committee. Obuchowski said “Rainy Day” money was designed to be used for “unforeseen circumstances” that occur during a fiscal year after the budget has been adopted, not to make up for revenue shortfalls in preparing the annual budget

(Heath’s Senate counterpart, Sen. Ann Cummings, Democrat of Montpelier, took the same position, according to a story in the Barre-Montpellier Times-Argus last September)

“Rainy Day Fund” is something of a misnomer, actually, because there are three of them – one for the General Fund, another for the Education Fund, and still another for the Transportation Fund. They are, in a sense, the state’s forced savings accounts. By law, according to Maria Belliveau of the Legislature’s Joint Fiscal Office, five percent of the previous fiscal year’s appropriation for the General and Transportation Funds, and a slightly more complex formula for the Education Fund, is put aside in the Rainy Day Funds.

Sort of like a non-voluntary Christmas Club.

Together, the funds hold more than $100 million, a little more than the projected shortfall for Fiscal Year 2011, which starts July 1.

So, say some interested parties, why not use the money, or at least some of it? Isn’t that better than laying off another few score state workers, or cutting health care services for poor children, or not repairing potholes in the roads? Not to mention better than raising taxes. Other states have dipped into their versions of a Rainy Day Fund. Why shouldn’t Vermont?

That’s the message likely to be heard starting next month from some advocates of generous social service programs. For instance, the organization known as One Vermont, a coalition of health, education, and neighborhood groups and supporters, calls (on its web site) for a “balanced approach to addressing Vermont’s budget shortfall,” which would include “the use of new revenues, rainy day funds, federal funds, and possible debt.”

Using similar language, the liberal think tank Public Assets Institute calls for “the balanced approach—which includes restoring lost revenue and using rainy day funds in addition to cuts,” because it “recognizes that all Vermonters both use public services and pay taxes.”

One, though so far only one, of the five Democratic candidates for governor, State Sen. Doug Racine of Richmond, has also endorse the “balanced approach” concept, using both temporary tax increases and the Rainy Day money to avoid deep spending cuts.

That’s the argument, and on its face, it appears to have some merit. If this money is for a “Rainy Day,” today would seem to qualify. Fiscally speaking, the state, like the rest of the country, is suffering the heaviest downpour since the Great Deluge of the 1930s.

Furthermore, other states have dipped deeply into their comparable savings accounts (only Arkansas, Kansas, and Montana don’t have some version of a Rainy Day Fund). According to a report last summer by Stateline.org, at least “11 states committed upwards of $1.5 billion from their rainy day funds for the 2010 budget cycle,” and more were seriously considering it.

Many of those states are more conservative than Vermont, and some of them, such as Minnesota and North Carolina, virtually depleted their reserve funds to avoid deeper spending cuts or tax increases.

But Vermont seems unlikely to follow suit because of an apparent political irony: Vermont Democrats may be relatively liberal, but they are also Vermonters, as reluctant as their Republican predecessors to dip into capital or deplete their saving accounts.

Continuing with the irony, these liberals are like the conservatives of the past, but not like those of the present, at least on the national level, where most conservatives have embraced former Vice President Dick Cheney’s contention that “Reagan proved deficits don’t matter.”

During the decade now in its final two days, conservatives in Washington voted in deep tax cuts without corresponding spending cuts, and created, with the Medicare prescription drug bill, a totally unfunded new entitlement program.

Both Heath and Obuchowski said they would be willing to consider dipping into Rainy Day money if, after the Fiscal Year 2011 budget is adopted, the economy improved and revenues seemed likely to rise. In that case, they said, knowing the funds could be repaid quickly, Rainy Day funds could be used as what would effectively be an up-front loan to shore up important programs.

That happens anyway. The Rainy Day Funds don’t just sit there. Various state funds borrow from them to finance programs, then repay them as tax revenue comes in. Otherwise, state funds might have to borrow in the commercial market, and pay interest.

Obuchowski and Heath both expressed guarded optimism that the state might succeed in its effort to “do more with less,” as Obuchowski put it. The Legislature has granted a $200,000 contract to a Minnesota-based consulting firm for advice on how to scale down state government without reducing the quality of state services.

Obuchowski said that though Legislative leaders were very reluctant to increase taxes, they might be open to selective fee increases to increase revenue. Even then, though, he acknowledged, there would probably have to be “some reduction in services.”

And remember, on the assumption that almost nobody would read in anyway, there will be no post Friday. A happy, healthy, and prosperous 2010 to one and all.