Q&A with Howard Dean, Governor of Vermont.

In Vermont, this is the best time of the year.

The tourism season is just beginning, the leaves have turned to brilliant shades of red, gold, and brown, and, if all goes well, the stream of visitors will not slow until the snow melts sometime next April.

The state's autumn colors make campaigning a more palatable experience [or Gov. Howard Dean, who is running for his second full term in the statehouse. Dean, a Democrat elected as lieutenant governor in 1986, became governor in 1991 when then-Gov. Richard Snelling, a Republican, died unexpectedly.

Since that time, Dean has been responsible for seeing the state and its sturdy credit rating through the difficult recession that until recently plagued all of the Northeast.

The state is rated double-A by both Moody's Investors Service and Fitch Investors Service and AA-minus by Standard & Poor's Corp. Under Dean's leadership the state budget has grown only minimally. He has also moved to the forefront in the national picture, being named president of the National Governors' Association for 1994.

One of the most important reasons for Dean's national prominence was the increasing involvement of the governors group in the national health care debate.

Dean, a graduate of Yale University and the Albert Einstein School of Medicine, practiced internal medicine in Shelburne, Vt., from 1981 through 1991, when he became governor. His wife still practices medicine in Shelburne.

In an interview with Boston bureau chief Patrick M. Fitzgibbons, Dean discussed his new tax plan, the state's economic picture, and what life in the statehouse will be like without one of his closest political allies, state Treasurer Paul Ruse.

Q: I saw your new tax proposal in the Burlington Free Press. Can you give us an idea of what it says?

A: Sure. Instead of reducing our sales tax from 5% to 4%, I want to have a personal income tax cut and a property tax cut, and that will be effected by cutting the percent that we pay of the federal tax levy to 24% from 25% across the board, and having an extra tax break for low-income working people. On the property tax side, we will limit expenditure growth so that whatever extra we put into state aid to education will be used to reduce property taxes.

Q: What is the reason for doing this now?

A: The legislative session is coming up in January and if I'm reelected, I intend to have a property tax proposal. There was a lot of debate about property taxes last year, but the left and the right could never get together. This is pretty much a straight-down-the-middle proposal which does not raise any new taxes, so I think it will work well.

Q: What will the proposal do for state revenues?

A: The income tax cut is not neutral for the state. We need to reduce spending, and we will do that. Everybody says they're going to reduce spending, but what we're going to do is reduce the growth of spending.

Q: In the last couple of years, the economic picture of the entire region of New England seems to have been lumped together in the recession, or now, in a recovery. Has that been unfair to states like Vermont?

A: No. I think that inside a region there are always those who do better and those who do worse. We did better. Our unemployment rate is very low. The depth of the recession was not as bad for us as it was, for example, for New Hampshire. But on the other hand, our recovery is not as robust as New Hampshire's, which has the most robust recovery in New England.

Q: Are there ways of stimulating the economy that are different for a state like Vermont?

A: The politics in Vermont are different than they are in Massachusetts. I think people are closer to their government. Although there is a lot of dissatisfaction, I don't think it's nearly to the extent that there was in 1990, for example. But there's a limited arsenal that you've got to move the economy along, and frankly the New England economy really follows several key sectors. The biggest are defense, real estate, and manufacturing. All those were under attack at the same time. So we obviously suffered greatly. There was no way that any one governor in the New England region is going to prime their own economy.

Of course, in an election year I'd love to take credit for the fact that we're in recovery, but the only credit that I deserve is to make sure that the budget didn't go up and to make sure that taxes got cut on time. We did do some things to stimulate the economy. We built a number of state buildings, and that's helped some local construction in a variety of areas. And we do have some special programs in terms of making lending easier to small businesses. We also have some unique tax credits which have helped us compete with places like North Carolina and upstate New York.

Q: Which tax credits?

A: We have two tax credits that we think are remarkable. The first is a jobs tax credit: For every company that creates more than 15 jobs that pay on average more than $20,000 a year, there's a tax credit over a period of 10 years against your corporate tax. The bigger and more spectacular tax credit is that anybody who invests $4 million in Vermont can write off the whole amount 6vet a 10-year period against incremental corporate tax. So if you're paying $200,000 in corporate tax now, anything above that is essentially written off.

Q: One of the big industries for Vermont is tourism. Are you looking to diversify away from that?

A: No. Tourism's terrific and we promote it. We just put a lot more money into the promotion of tourism to keep up with the efforts of the other states. Higher education, which is an important industry for us, has to be healthy and manufacturing has to be healthy. And we want all of those to succeed, so I'm not worried that we're spending too much money on tourism. Our object is to promote all of those. The fourth piece of this is agriculture, and that really is a serious problem. The New England states have done a great job, but the federal government has really hurt us, Congress in particular.

Q: It seems like Bernie Sanders, the congressman from your state, has been an active voice in Washington for Vermont's agricultural concerns.

A: It's true, but unfortunately he only has one vote and we're having a little trouble with some of the other 434 representatives.

Q: As a physician, what's your perspective on the national health care debate?

A: I think the interest groups, like the Health Insurance Association of America, have essentially scared the daylights out of the public. The recovery has made health care less of a problem for the 85% of the people who have insurance, and there is no consensus on how to reform the system, so I think it's really an effort that's not going to succeed at this point.

Q: Is the country ready for it?

A: The country needs it. They're not ready for it, but they need it.

Q: How can it be done? Will it be done?

A: Last year we tried to do this here in Vermont and it didn't succeed for the same reasons it's not succeeding in Congress, essentially. We will try again, we will scale down the program, we will concentrate on the uninsured, we will leave for a year or two to see if the private sector will improve on what they're doing. The private sector has done a lot more than I ever expected them to do in the last year. If that continues, they may do a lot of the things that we were going to put in the bill to regulate them.

Q: Do you think the private sector in Vermont is more prepared for health care reform than the rest of the country?

A: Not necessarily. I think it's been debated a little longer here. But certainly, in New England in general, I think there's been a lot of work in the private sector. The private sector's working very hard to bring costs down and introduce some sort of competition. I think that's a very healthy thing.

Q: Is there one plan or another that you've seen proposed that looks better than another?

A: I think you could combine Clinton's plan and the mainstream proposal and get a good plan. The mainstream proposal is very good. It's very friendly to states, for the most part. But it does not provide full insurance. You need to do that. So there is something that could happen in the next session.

Q: Standard & Poor's Corp. did a report on how states are dealing with Medicaid. How is Vermont handling that?

A: We've looked at managed care for Medicaid, which a lot of states are doing. We're going to institute that on a voluntary basis. Our Medicaid costs are fairly low. Our reimbursement level is very low, which is not entirely a good thing. We're principally going to look at managed care.

Q: Do you think that's the answer?

A: That's part of the answer. I think the long-term answer is to get rid of Medicaid and put everybody in one system. Preferably one principally run by the private sector.

Q: How do you see the Vermont economy growing over the next few years?

A: I think it's going to perk along slowly. We've still got average wages that are significantly higher than the rest of the country, although we've got better skills in our work force and a higher education level. We're not going to grow nearly in the way we did in the '80s. I think we will grow. The people here are very industrious and our unemployment numbers never got above the national average, even during the worst part of the recession in Vermont.

Q: What's your opinion on the recent ban placed on campaign contributions from municipal participants?

A: It makes it harder to raise money. But I think it's a great idea.

Q: Is it a lot harder to raise money?

A: Oh sure, I'm sure I could have raised $50,000 or $100,000 from the brokerage community. I certainly have a lot of friends there who have helped me over the years. But I think it's the right thing to do.

Q: Do you think the ban ought to be applied consistently to other corporations?

A: In the long run, I'd rather have public financing of campaigns. The problem is I'm not sure the taxpayers would be used to it, or would be ready to do it. They have it in New Jersey; we're going to try to institute it here next year. We'll have a go at the public financing of campaigns. That obviates the whole problem. The basic outlines would be something like you'd get $200 as a maximum in individual contributions.

Q: In Rhode Island this year, the governor is running for the first time for a four-year term. Is it too much to run every two years?

A: It's a lot of work, but I really think the legislature might want a four-year term if I got one. I think that would be fatal to the citizen legislature, so I will be happy to put up with two-year terms for the duration.

Q: Lastly, the state's credit rating seems pretty strong right now.

A: We worked very hard on that.

Q: I know that, with Treasurer Ruse, you've been working on the rating.

A: He's been wonderful.

Q: I'm sure that's one ally that you will miss.

A: I'll miss him a lot. There's a few local politicians that are trying to boost their reputation at his expense. But if the truth is told, he's been a wonderful asset to the state. He's honest and he's been extremely helpful both in retiring the deficit and in running the treasurer's office in a fiscally careful way. He'll never get any credit for that from the Vermont press, but he deserves it. He's a local Vermont boy who just has done a great deal for the state.

Q: I'm sure it will be difficult for this office to find someone who is willing to work that closely with your office.

A: We'll see. The new person coming in is going to be a Republican almost certainly; I know him. I'll have to build that relationship. It's a very important relationship.

In some ways I think the treasurer ought to be appointed by the governor, as they are in New Jersey. But on the other hand, maybe not. Because maybe it's useful to have that check and balance. People will always say the lieutenant governor and governor should run together in this state. I don't think it's a big problem. I think it's good for the lieutenant governor to be elected separately even if it's a different party and they don't work well together.

But it is essential for the treasurer and the governor to work together, and hopefully that will continue to work the way it has in the past. Emory Hebard, Paul's predecessor, was very nonpartisan and extremely good at what he did. Paul's been that way and I hope Jim [Douglass, the Republican candidate for treasurer] is able to be that way too.

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