Economists cautiously tell E-Board Vermont’s finances are OK

The two state economists told the Vermont Emergency Board today that state tax revenues were coming in pretty much as expected. While that is relatively good news, Jeff Carr, representing the governor’s office, and Tom Kavet, representing the Legislature, indicated that the budget’s previsouly lowered expectations were more responsible for the results than any expansion in the economy.
"The big change is that there's not a big change (in revenue expectations)," Kavet said. Carr likened the economy to a patient in a hospital who is in stable condition after a traumatic health condition, to which Kavet added that the federal stimulus money the government poured into the US economy earlier this year is like a life-support system.
They also warned that while tax revenues were meeting targets so far this fiscal year (2010), the next two fiscal years could be much more of a challenge. In the end the economists recommeded, and the board accepted, their revenue estimates for fiscal year 2010 of $1,026.2 million in General Fund revenues, $212.3 million in Transportation Fund revenues, and $146.4 million in Education Fund revenues; the 2011 figures are, respectively, $1,081.8 million, $217.8 million and $151.7 million. All these numbers represent very modest increases.
Already, Governor Douglas has stated that the state could be looking at something in the order of a $230 million deficit over those next two years. The economists also said that employment will continue to lag behind a general recovery in the economy. The economy in Vermont should start to recover next spring, but job losses might not bottom out until next summer. The risk, they agreed, would continue to be on the down side, which is typical of a struggling economy.
Having said that, Carr and Kavet went on to say that there has been some good news to report beyond the mere fact that the budget is breaking even. Recent revenue figures indicate that both personal income tax revenue and sales and use tax revenue were both up in October.
Vermont’s unemployment rate, much like the national rate, will also continue to rise, but will likely remain well below the US rate, now 10.2 percent, and stay lower than any other state in New England. Vermont’s September rate was 6.7 percent. The US unemployment rate, they said, will likely get over 11 percent and the Vermont rate might top out in the neighborhood of 8.2 or 8.3 percent.
One public policy initiative the governor and Legislature might want to look at is trying to get more money to companies with 20 or fewer employers. Kavet said that coming out of the last recession, those small companies represented 40 percent of job growth, even though they represent only 25 percent of total employment. Credit to those small businesses, Kavet said, has been very hard to come by and therefore their ability to help lead the state and the nation out of the recession could be stifled. Governor Douglas said he has proposed some initiatives that the Legislature has been reluctant to follow through on. He added that the Vermont Economic Development Authority, which typically finances large endeavors and must, of course, wiegh the risks and rewards of any credit move it may make, is perhaps one entity that could help out those small businesses more. The Emergency Board is made up of Governor Douglas and key legislators. Typically they meet once during the fiscal year to consider adjustments to the state budget based on revenue results. Because of the severe economic downturn, this is the second time they have met since the fiscal year started July 1. They will next meet in January 2010. Source: Vermont Business Magazine. 11.12.2009.