State Revenue Projections Are 'Off The Charts' Says Vermont Legislature's Economist
That $275 million figure is the combined drop in revenue to the general, education and transportation funds, compared to what the state’s economists were predicting back in January.
The governor is expected to release his budget proposal this week for the rest of the current fiscal year, and the Legislature will reconvene later this month to grapple with the state spending plan.
VPR’s Henry Epp spoke to Tom Kavet about the latest revenue projections and what they mean for state spending. Their interview below has been edited and condensed for clarity.
Henry Epp: Put these numbers in some context. When was the last time Vermont faced a budget gap of the scale that it may this year?
Tom Kavet: I don't think there's any single year in which it's faced a decline in revenues that have been this precipitous. So this is off the charts in many ways. If you look at some of the data that we presented at the Emergency Board, literally you'll see, you know, lines going off the charts and just being so much more dramatic. [The coronavirus] was a very rapidly unfolding event and was not something that, you know, even eight months ago was much on anybody's radar.
So there's been talk of a federal aid package that could send money to help shore up state and local governments, but those talks in Washington over that aid have more or less come to a standstill at this point. So can the state count on receiving any more federal money, and would that significantly change how lawmakers are looking at putting together a budget?
Yeah I don't think they can count on receiving more money. But for a long time, most people thought it was in everybody's interest to have another tranche of federal support. Understand that there's been a phenomenal flow of federal transfer payments to date, and Vermont has benefitted greatly from those. But it needs to continue, particularly with respect to those that are most impacted.
Most importantly is a provision in the House version of the bill, which they passed back in May, that would provide unrestricted aid to state and local governments. So the money that the states have gotten so far has a lot of restrictions on how it can be spent. You can't just use it to fill a budget hole. In the proposed House legislation, there is significant money that's unrestricted, and that's really what state and local governments need at this point.
Well, given just the tremendous need of residents around the state in different situations, obviously there's a lot of need for state funding, but are budget cuts sort of inevitable in this situation, particularly if the state doesn't receive any more federal money?
Oh, if it doesn't receive additional federal money, I think there's no question there will be budget cuts. But that will be really problematic. You know, I would guess that if all states had to cut back with no additional federal money, we'd probably lose nationwide about another 4 million jobs. So it's really significant.
"If [Vermont] doesn't receive additional federal money, I think there's no question there will be budget cuts." — Tom Kavet, Vermont Legislature's economist
We've heard a lot recently about out-of-staters coming to Vermont and buying houses here in the last few months, as the state's COVID-19 case count has remained relatively low. So could new residents have an impact on the budget this year, in terms of revenue coming into the state, or further out in years to come?
Yeah, absolutely. Again, it's hard to translate right now anecdotal data, which is all over the place. There's a lot of added anecdotal evidence that this is happening, and a lot depends on how the virus plays out. The longer it lasts, the more of that kind of behavioral change you’ll get.
Finally, Tom Kavet, what's your top piece of advice to lawmakers right now as they start the budget process in the coming weeks?
I just think they have to be incredibly flexible, because there is more uncertainty now than any other forecast we've ever done, and it's because it's not really an economic forecast. It's not based on economic fundamentals. It's entirely controlled by the course the pandemic takes, which nobody knows what it's going to be now, and also what the federal government response is.
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