ST. ALBANS — Lawmakers will struggle with a $70 million gap between anticipated expenditures and revenues when they sit down to begin crafting a state budget in January for 2015.

The annual budget adjustment act, which the House Appropriations Committee will begin writing in December, must reckon with $12 million in excess spending.

In October, Secretary of Administration Jeb Spaulding sent a memo to department and agency heads asking them to craft budgets with no increase in spending where possible.

Although the state is anticipating a modest increase in revenues, according to Spaulding it anticipate those revenues will be offset by typical increases in compensation, pensions and debt service, along with cuts in federal funds.

Federal funds are currently 35.4 percent of the state’s overall budget revenues and the uncertainty in Congress over the federal budget is creating uncertainty for Vermont.

Even with the final federal budget still a question mark, the state has already committed more funds to LIHEAP, the program providing subsidies for heat to the poor, to replace lost federal funds. For several years now, the state has had to step in to cover missing federal heating funds.

It’s a source of frustration for Rep. Kathleen Keenan, D-St. Albans City, a longtime member of the Vermont House Appropriations Committee. “I think they just cut and they don’t even think about what they’re doing,” she said of Congress.

“If the U.S. House has their way, we’ll be in worse situation than we are now,” said Keenan.

Teacher pensions and health care are another ongoing challenge for the state. “That’s the big elephant in the room,” said Keenan.

State Treasurer Beth Pearce has asked for $20 million more this year to commit to the teacher retirement and health funds. For several years, the state has been borrowing from the teacher’s pension fund to cover health care costs for retired teachers. The effect has been to increase the amount owed to the pension fund by the state.

Teacher retirement obligations have increased 16.4 percent over the last five years to $72 million in fiscal year 2014, according to the Joint Fiscal Office.

One of the challenges in the state budget is that much of it is beyond the scope of the Legislature. The general fund is only 26 percent of the state’s overall budget. Within the general fund budget the Agency of Human Services, including the Dept. of Corrections consumes a large portion of the funding.

“We’d like to start looking at the untouchables,” said Keenan.

The state has begun a pilot program of performance based budgeting. Thirteen departments will be asked to create three separate measures for determining their performance next year. The goal is to spend money for effectively by tying funding to clear goals and measures.

One of the largest budget overages in the current fiscal year has been the emergency shelter program in which the state houses people in hotels. The Dept. of Children and Families is trending at $3.3 million over budget, and the emergency shelter program is the main source of the overage, according to a budget adjustment summary provided to the legislature by Jim Reardon, the Commissioner of Finance and Management.

“We’re really disappointed in the amount that’s been spent on homelessness, the hotel bills,” said Keenan.

The Legislature had tried to rein in the spending on hotel rooms for homeless Vermonters. Greater restrictions were placed on access to hotels, but they were relaxed after vocal opposition from advocates for the homeless.

“Now we’re right back where we were before,” said Keenan.

Clearly, there are less expensive ways to house people than hotel rooms, but the challenge is creating those alternatives while simultaneously reducing expenditures. “I don’t know how you get around it without putting people at risk of freezing to death,” said Keenan.

The absence of housing in the state also increases costs at the Dept. of Corrections where there are inmates who have completed their sentences but haven’t been released because they don’t have a place to live.

The budget gap in the Bennington veteran’s home of $2.1 million and roughly $900,000 in Medicaid payments to the home created another $3 million in budget overages.

Irene continues to cost the state in rent for the Agency of Natural Resources, which is $1.7 million over budget. Also exceeding projections is Dept. of Corrections, which is $1.6 million over.

Medicaid expenditures are trending at $4.1 million over budget.