MONTPELIER — Economists for the Shumlin administration and the Legislature have revised projected state revenues downward for the remainder of the current fiscal year and the next fiscal year for the general and education funds.
The new consensus forecast was delivered to the Emergency Board Tuesday by Tom Kavet and Jeff Carr, consulting economists for the administration and lawmakers. The general fund is now expected to see $4.7 million less revenue in the current 2016 fiscal year and $9.1 million less in the 2017 fiscal year. The education fund, meanwhile, is expected to see $1 million less in the current fiscal year and $500,000 less in the 2017 fiscal year.
The transportation fund is now expected to grow by $900,000 more in the current fiscal year and $1.1 million more in the 2017 fiscal year. The new projections were updated from the last consensus projections delivered last July. A consensus forecast is delivered twice each year in January and July.
Total revenue for all three funds is now expected to miss the previous targets by 0.25 percent in the current fiscal year and 0.44 percent in 2017.
Kavet and Carr told Emergency Board members — which includes Gov. Peter Shumlin and the chairs of the Legislature’s four money committees — that the downgrade for the general and education funds is largely due to macroeconomic “headwinds” impacting the whole country.
“There was a very slight downgrade in the macroeconomic forecast. That flows through the state forecast, also,” Kavet said.
“This represents a change that’s miniscule. I don’t want to minimize the effects of any number that has a negative sign to the left of it to the political process and difficulty of trying to prepare budgets year after year after year,” he added.
The revenue forecast considers about 700 variables that are run through a state-based model created by Moody’s Analytics, according to Kavet. He said revenues through the first six months of the current fiscal year were lower than the July forecast by just 19-hundredths of 1 percent.
“You’re not going to get a lot closer with any forecast,” he said.
Still, when considering a state budget over $1 billion, that represents millions of dollars. Lawmakers are currently working on the annual mid-year budget adjustment and must now find a way to patch the additional $4.7 million whole. They will then move on to the 2017 fiscal year budget that already included a projected $70 million gap between revenues and expenditures.
Carr said the state is expected to feel the impact of a warm December that was not kind to the tourism industry that relies on snow.
“We had something going on now with two of our big three winter holiday periods,” he said. “The whole month of December was pretty poor for our winter tourism season.”
Kavet said colder weather and snow could still help offset early winter losses. “It can change with a few storms but it was a terrible start,” he said.
The state has also seen weaker-than-expected revenue from the sales tax. The sales tax exemption for soda and other sugar-sweetened beverages was removed last year but hasn’t met its projected targets. Small grocers have reported difficulty with implementing the new tax, according to Kavet.
“Either we’re getting a little bit more loss than we thought from some of the changes or some of the newer taxes are not generating as much income right off the bat. Sometimes it takes a while before there’s full compliance,” he said.
Shumlin sought to downplay the slight revenue downgrade, noting that state revenues continue to grow each year. The governor, who said he learned of the new projected within the last few days, will deliver his budget address Thursday afternoon. The 2017 fiscal year budget proposal will include the $9.1 million general fund revenue downgrade, he said.
“The economy continues to grow year over year in Vermont. Our tax revenues are up every single year, not down,” he said. “All I can tell you is it makes our job a little harder, but I will present a balanced budget on Thursday that takes into account this small adjustment.”