The two economists charged with projecting state revenues told the Vermont Emergency Board today that barely more than two weeks into the new fiscal year revenue projections are already down $28 million. They agreed that this recession is the worst since the Great Depression nearly 80 years ago.
Not surprisingly, the biggest culprits are the state income tax and the various consumption taxes, especially the general sales tax. If retail spending is down, then consumption taxes are down; if total wages are down, then income taxes are down. The reason for the bad news followed similar downward projections nationally in regards to employment and housing. The unemployment rate, the economists said, will likely peak in Vermont in the middle of next year at around 9 percent, from its current 7.3 percent, while the national rate will go over 10 percent by the end of this calendar year. Given those gloomy numbers, the economists said, income tax withholding is down and consumer confidence, and thus spending, is also down. The 2010 fiscal year began July 1.
"The data is unmistakenly negative," said Jeff Carr, economist for the Douglas Administration. What has caught the federal government off guard as well is that numbers from April and May implied that the recession had perhaps bottomed out. But Carr said that is not the case and that at best we are nearing the bottom of the recession. Tom Kavet, economist for the Legislature, was a bit more pessimistic than Carr and suggested that a turnaround could be another quarter or two further on. That escalates the budgetary problems, he said, because it means that for each quarter the recovery is put off the state is another $18 million to $20 million deeper in a hole. He said leading indicators suggest this historically bad recession will continue for some time. At 19 months, this recession is already three months longer than any since the 1930s.
"By any measure," Kavet said, "this is the worst downturn since the Great Depression."
Perhaps the most telling moment of the meeting was an exchange at the end of the revenue discussion between House Ways & Means chair Michael Obuchowski and Governor Douglas (WATCH); two soft-spoken men who first served in the Legislature together in the early 1970s. Obuchowski asked if this were the appropriate time to discuss how the Legislature and governor were going to address this as far as the budget was concerned. The governor said it was not the time. Obuchowski said he was holding out his hand (metaphorically) to the administration. Douglas said he had welcomed a bi-partisan approach during the contentious budget-writing process in the spring but was turned down. Obuchowski pressed him further on working together. Douglas said his door was always open and that he would be in touch. At a later press conference, Douglas said he would call Obie to get the process moving.
The Emergency Board is comprised of Governor Douglas and the chairs of the four legislative money committees: Appropriations Chair Senator Susan Bartlett (D-Lamoille), Finance Chair Senator Ann Cummings (D-Washington), Appropriations Chair Representative Martha Heath (D-Westford), Ways & Means Chair Representative Michael Obuchowski (D-Rockingham).
Source of Charts: Legislative Joint Fiscal Committee. http://www.leg.state.vt.us/jfo/State%20Forecasts/2009-07%20July%20Foreca...