MONTPELIER: Vermont’s revenue projections for the current fiscal year have been downgraded by $24.6 million, an adjustment driven by poor performance of corporate tax receipts. The new projections from economists for the administration and the Legislature were adopted by the Emergency Board on Thursday. General fund revenues are projected to come in 1.7 percent less than was originally expected for the current year. The revenue forecast for the next fiscal year was also reduced 0.5 percent — a total of $7.7 million. Budget writers were braced for a revenue downgrade. Gov. Phil Scott was told about the soft corporate receipts in November after he was elected to office. His administration had already set aside about $10 million in its proposal for adjusting the current year budget — outlined to the House Appropriations Committee earlier this month — in anticipation of the revenue downgrade. “It’s less revenue than we had a year ago,” Scott said. “We were forewarned about this and we were building this into our budget all along.”
The Scott administration plans to use one-time money to fill the gap for what they described as a one-time problem. An ongoing downgrade of corporate receipts has been built into the fiscal year 2018 forecast. Economists Tom Kavet and Jeff Carr briefed the board, stressing that the downgrade entirely reflects poor performance in the corporate income tax. Kavet, who is the economist for the Vermont Legislature, described the corporate tax as “the most volatile” tax category, following the estate tax, which depends on who dies within a given year. The performance of the corporate tax is highly dependent on the profits earned by businesses operating in the state. All of Vermont’s other tax categories are performing near projections. Excluding the corporate category, revenues are coming in $1.8 million above the previously adopted projections, according to Carr.
The economy continues a long and slow recovery from the Great Recession, the economists said. Both Kavet and Carr addressed the state’s decline in population as a factor in the overall health of the economy. The population dropped two tenths of a percent from 2010 to 2016. Meanwhile, companies have reported an uptick in the total number of workers by 1.8 percent. Scott asked a number of questions during his first Emergency Board presentation and appeared to be particularly struck by the demographic statistics. “We have to do something about the population, we have to grow,” Scott said. “If we don’t, we’re on an unsustainable path. We need to bring young workers to the state.” Andy Pallito, commissioner of the Department of Finance and Management, presented a plan to the House Appropriations Committee for how to accommodate the $24.6 million downgrade in the budget adjustment act. Pallito had already used $10 million from a special Medicaid fund to balance the current year budget in anticipation of the downgrade. On Thursday, he told lawmakers he would draw about $10.7 million from other sources, including about $2 million from the tobacco fund and $8 million from the state health care resources fund. The administration also suggested using $4.1 million from a reserve fund created to accommodate changes in Medicaid caseloads. An additional $100,000 would be found by reducing funding increase requests from the Labor Department, the Department of Fish and Wildlife, and the state’s attorneys.
