Category Archives: Budget

State revenues off the mark in January

MONTPELIER — General fund revenues came in more than $1 million lower than expected in January, the Shumlin administration announced Thursday.

Secretary of Administration Justin Johnson said the general fund came up $1.28 million short, or 0.83 percent off of projections. The revenue target is based on the revised forecast that state economists delivered to state officials last month, which included a $10 million downgrade in the current, 2015 fiscal year, and an $18 million downgrade for the 2016 fiscal year.

Total general fund receipts for the 2015 fiscal year reached $797.34 million, which is $1.28 million, or 0.16 percent, below target. Still, the results are $23.84 million, or 3.08 percent, higher than the results from the 2014 fiscal year.

Justin Johnson

Justin Johnson

“Although we are slightly behind the consensus forecast for January, GF revenues remain more than 3 percent ahead of last year. While Personal Income Tax receipts fell behind the monthly target, they were offset by above-target performance in Corporate Income Tax, Insurance receipts and the two consumption taxes (Sales & Use and Rooms & Meals),” Johnson said in a statement.

The transportation fund finished January at $19.01 million, 0.68 percent short of its target. For the fiscal year-to-date, transportation fund revenues are at $147.21 million, which 0.09 percent below target.

The education fund, meanwhile, fell slightly below target in January, finishing the month at $19.30 million, or 1.07 percent short. Fiscal year-to-date revenues are $108.95 million, which is 0.19 percent below the cumulative target.

“Clearly we would have preferred to meet the January targets in all three major funds. However, we are just one month into the revised forecast period and will wait to see how receipts progress, as we enter the busy income tax filing season,” Johnson said.

Senator’s letter to resorts rankles ski industry, fellow lawmakers

MONTPELIER — A state senator has sent a letter to each of the seven ski resorts utilizing state land asking them to renegotiate leases, but the closing paragraph he included has some lawmakers concerned he has issued a thinly-veiled threat to raise their taxes if they do not agree.

Chittenden County Sen. Tim Ashe, a Democrat and the chairman of the powerful Senate Finance Committee, sent the letters on Senate letterhead last week to Bromley, Okemo, Killington, Stowe, Smuggler’s Notch, Burke and Jay Peak. He signed each letter as chairman of Senate Finance.

Ashe’s letters follow the release of a report by State Auditor Doug Hoffer last month that found the resorts’ lease payments to the state have not kept pace with the resorts’ economic growth.

Sen. Tim Ashe

Sen. Tim Ashe

The long-term leases with the resorts range between 50 and 100 years. Bromley was the first resort to strike a deal with the state in 1942.

Over the last 50 years, resorts that once had just a handful of lifts and few facilities have become year-round enterprises. Many are now owned by large out-of-state corporations, according to Hoffer’s report. The resorts now feature new lodges, hotels, condominiums, retail stores, golf courses, waterparks and other amenities that generate significantly more revenue than the fledgling days of Vermont’s ski industry.

Between 2003 and 2013, development at the seven resorts led to increases in sales of goods and services, property values and revenues from excise taxes, all of contributed to more state revenue.

But lease payments for the 8,500 acres of public lands used by resorts have not kept the same pace of growth this decade as other tax revenues generated from the resorts. The leases were designed to capture a percentage of lift tickets, typically 5 percent of lift ticket sales. Lift ticket sales became a secondary source of revenue as the resorts evolved, however, according to the report, and the leases only generate about $3 million a year for the state.

Ashe’s letters ask the resorts to willingly open negotiations, even though most do not expire for several more decades. Bromley’s lease, for example, expires in 2032. Ashe pointed out in his letter, as Hoffer’s report did, that renegotiating makes sense because “the ski world of the lease’s origins would be unrecognizable today.”

“It is for that reason I ask you to renegotiate voluntarily your lease terms or agree to amend your lease to have it expire on December 31, 2016. Either of these options would allow for thoughtful, unhurried negotiations between the State and you to arrive at modern lease terms reflecting the great changes in the ski industry and in the revenue streams it features,” Ashe wrote.

It is the closing paragraph that has drawn the ire of some fellow lawmakers, however.

“From time to time, the Legislature considers various proposals that would have an impact on various classes of taxpayers. In terms of the ski industry, I have heard Legislators propose eliminating the property tax exemption on snowmaking equipment and other assets, and suggest creating a special non-homestead tax rate for ski areas. It seems to me that voluntary renegotiation of your lease with the State is a far superior method of striking the right balance of proceeds for the right to use public land,” Ashe wrote.

Rep. Patti Komline, R-Dorset, whose district includes Bromley Mountain, said Ashe’s letter is a clear threat to try to eliminate tax exemptions currently enjoyed by ski resorts if they refuse to scrap their current leases.

“It is very concerning when those in power look to interfere in contractual agreements using overt threats. This is an overreach and I hope it doesn’t create a precedent that will affect the credibility of our state’s reputation,” she said.

Komline said she learned about the letters Wednesday and planned to reach out to officials at Bromley and work with the Vermont Ski Areas Association to help ease any concerns the resorts have.

Rep. Heidi Scheuermann

Rep. Heidi Scheuermann

Rep. Heidi Scheuermann, R-Stowe, said she, too, found out about the letters on Wednesday after officials at Stowe Mountain Resort sent her a copy. Stowe’s lease is good until 2057, Scheuermann said.

“I think it’s inappropriate. That said, he can do it. I’m sure Stowe will have a response for him. They have a legal lease that is extremely beneficial to the state of Vermont and I expect they are going to maintain that lease,” she said.

Ashe said Wednesday his letters are not a threat and should not be seen as one.

“It’s reading the auditor’s report and saying that even though they are under no obligation to open their leases … it seems to be maybe appropriate that they do so,” he said. “It’s not about a threat. It’s hoping they’ll just do it.”

Making a threat to strip away tax exemptions should the resorts decline to renegotiate leases would be bad policy for the state, according to Ashe.

“I would never threaten a taxpayer, because I don’t think that’s a very good tax policy. But rather, saying, in thinking about the use of public lands, it’s better to voluntarily step up because the proposals that are from time to time directed at them or any other industry are usually sort of inartful,” he said.

Still, lawmakers question the tax exemptions every year, and Ashe said he wanted to point out that some lawmakers could look to use it as leverage to ensure the leases are fair.

“People gravitate to that … and say, ‘Why do we do that?’ It raises this whole issue about why that equipment and stuff is exempt,” Ashe said. “And then, there’s always the discussion about, ‘Well, they do get a pretty sweet deal.’ People articulate it in different ways.”

Senate President Pro Tem John Campbell, D-Windsor, said he was not aware that Ashe was planning to send the letters. He said would discuss the matter with him.

“I have not had an opportunity to discuss this with Sen. Ashe, nor have I seen the letter,” he said Wednesday. “It’s certainly an issue that I will discuss with him.”

Bennington County Democratic Sens. Dick Sears and Brian Campion, whose districts include Bromley, both said they had concerns with Ashe’s approach.

“There has to be a balance here. I don’t want to do anything to jeopardize Bromley’s ability to attract people to Bennington County,” Campion said.

“Right now people are in a desperation mode. They’re looking (for revenue) in every corner,” Sears said. “I don’t think I want to force ski areas. I don’t want to do anything that impacts the tremendous relationship with our ski areas.”

Parker Riehle

Parker Riehle

Parker Riehle, president of the Vermont Ski Areas Association, said Wednesday the ski resorts were still crafting a response to Ashe. However, he said all are comfortable with the lease agreements in place.

“We certainly still stand by the leases and their terms as still a very good deal for both parties and a very favorable deal for the state of Vermont,” he said. “Overall it’s a really strong partnership.”

The federal government only gets 2.5 percent of lift ticket sales, on average, according to Riehle, and neighboring states get about 3 percent of lift ticket revenue.

“Vermont’s actually way ahead of the game and there’s been a couple of reports issue in that regard that back that up. We certainly are very comfortable and confident in the leases,” he said.

Additionally, the ski industry generates an estimated $100 million in various tax payments to the state, and provides about 12,000 jobs during the winter when other industries are typically laying workers off.

“You can’t just focus on the lease payments and think that they look too small,” he said.

Given the what the ski industry provides to the state, Riehle said the resorts should not be facing the threat of higher taxes.

“In light of the numerous revenue benefits to the state, we certainly don’t see a need to look for any additional tax burden on the ski areas. We certainly don’t want to see anything like that hanging over our heads,” he said.

neal.goswami@timesargus.com

Read Ashe’s letter to Bromley Mountain below:

Speaker Smith rallies his troops

MONTPELIER — Lawmakers, one month into the legislative session, will soon be casting tough votes on bills in committee, and then on the House and Senate floors. That fact is not lost on House Speaker Shap Smith, who looked to rally his troops Tuesday at the weekly Democratic caucus.

A state budget with a $112 million gap that must be closed means cuts will be made to programs that constituents likely depend on. And the public is demanding property tax relief, but voters don’t want to see changes to their local school districts.

Smith, now in his fourth term as speaker, knows just how a legislative session plays out. He warned his faction of the pressures that will soon wash over them as they try to address the state’s challenges.

House Speaker Shap Smith address the Democratic House Caucus on Tuesday, Feb. 3.

House Speaker Shap Smith address the Democratic House Caucus on Tuesday, Feb. 3.

“One of the most difficult parts for all of us … is to keep an open mind and not to close ourselves off to possible solutions to the challenges we face as we move forward. We’re going to get over the next couple of months people asking us to promise them that we won’t do X, Y or Z,” he said. “What’s really important, from my perspective, is to the extent possible, acknowledge that you understand where they’re coming from, but you can’t make them promises because you really need to see what the lay of the land is.”

The constituents, Smith declared, placed their trust and faith in those they elected. Now it’s time for those elected to begin crafting solutions. But solutions will leave some displeased.

“We’re here to grapple with those issues and those constituents send you here because they believe that you’re the person that can grapple with those issues. They trust you to make those decisions. And so have those conversations, understand what they’re thinking and feeling, and bring their voice here and tell them, ‘I want you to be part of this conversation and we can’t close this conversation off before it even starts. We can’t give you the answer before we even know what the problem is,’” Smith said.

The address Tuesday wasn’t the result of any particular concern about morale within the caucus, according to Smith aide Dylan Giambatista. Rather, it was an effort to encourage members to remain focused and ready themselves for the work ahead, he said.

Just a few minutes before the Democratic caucus, House Minority Leader Don Turner, R-Milton, delivered his own pep talk to the Republican caucus. He, too, reminded his members that the constituents sent them to Montpelier with a purpose. He urged them to consider all implications — particularly economic impacts — before casting any yes votes, even for bills in committee.

Like any good leader, Smith offered hope to his members.

“We spend some time here wrestling with really difficult issues and it is easy to look at the glass half empty rather than the glass half full,” Smith said to a room full of mostly House Democrats, but also a few lobbyists and reporters.

He recounted recent, positive meetings with tech entrepeneurs, who he said are hiring. “There was a lot of optimism about what can happen, and it wasn’t just big businesses. It was businesses ranging from three to four people to 500 to 600 people,” Smith said.

Tuesday’s pep rally ended, of course, on a high note.

“There is a really good energy going through this building right now. I feel that people are up to the challenge. That’s it’s not partisan driven. That people are looking at these as Vermont’s challenges and Vermont’s problems, not Democrats’ problems, not Republicans’ problems, not Progressives’ problems, not independents’ problems,” the speaker said. “Remember we are still sitting in a Democratic institution that still allows access to its citizens and still values solutions to problems not barriers to solutions. We’re in Montpelier, we’re not in Washington. And thank God for that, right?”

Video: Vermont this Week on Vermont PBS

Vermont Press Bureau reporter Josh O’Gorman joins Terri Hallenbeck of Seven Days, Johnny Herrick of VTDigger and moderater Stewart Ledbetter on this week’s show.

Capitol Beat with the Governor 1-30-15

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Gov. Peter Shumlin sits down Vermont Press Bureau chief Neal Goswami to defend his payroll tax plan and discuss the needs of millennials in Vermont. He also predicts a Super Bowl victory for the New England Patriots on Sunday.

Gov. Peter Shumlin records Capitol Beat with the Governor.

Gov. Peter Shumlin records Capitol Beat with the Governor. (Photo by Jeb Wallace-Brodeur)

House advances annual budget adjustment

MONTPELIER — The Vermont House gave preliminary approval by voice vote Thursday to the annual budget adjustment bill, which will lower state spending in the current fiscal year by $12 million.

The reduction in spending is needed following a revenue forecast delivered by state economists last week that projects lower revenues than initially thought. In fact, the current, 2015 fiscal year budget is has seen a downgrade of more than $41 million since January 2014 — a 2.8 percent reduction in funds available to support government operations.

The budget adjustment, unanimously approved by the House Appropriations Committee Monday, uses $10 million in spending reductions to cover the downgrade and sets aside $2 million for use in balancing the 2016 fiscal year budget. It brings available revenue in line with spending, and sets 2015 fiscal year spending less than 1.5 percent more than the previous year, said House Appropriations Committee Chairwoman Mitzi Johnson, D-South Hero.

“This budget brings general fund growth to under what average growth in the economy is,” she said.

Rep. Mitzi Johnson

Rep. Mitzi Johnson

The plan approved by the Appropriations Committee covers increased costs for Vermont Health Connect, the state’s online health insurance marketplace. Overall spending on the exchange is rising by $28.3 million, including $14.6 million in state funds, according to Finance Commissioner James Reardon. It is the first time state funds are being used for operations related to the exchange.

The budget adjustment also includes $2.15 million in additional funds for the Vermont Veterans Home in Bennington. And, it funds 110 new opiate treatment slots in Bennington County, which will free up space in Rutland County.

“Though overall spending is down, we were able to make some investments,” Johnson said.

There are several large reductions, too, including $ 1 million in the Low-Income Home Energy Assistance Program, $437,000 in mental health housing vouchers and $224,000 in cuts to the Judiciary, which is expected to decrease the availability of judges.

Johnson said a plan to cut $500,000 from the Judiciary presented by Gov. Peter Shumlin was scaled back. Instead, the committee sent a letter to the Judiciary asking officials to find ways to cut costs without diminishing services or slowing justice.

Floor action on the bill came to a grinding halt Thursday afternoon when Rep, Mary Morrissey, R-Bennington, sought to introduce an amendment seeking greater transparency in exchange spending. Republicans said the amendment was triggered because of new state spending on the exchange.

House Speaker Shap Smith called for a recess to allow the Appropriations and Health Care Committees to review the amendment and provide time for the parties to caucus.

Rep. Mary Morrissey

Rep. Mary Morrissey

Morrissey’s amendment called for halting the expenditure of funds included in the budget adjustment for VHC unless Lawrence Miller, the governor’s chief of health care reform, provides lawmakers with:

— A full accounting of the state and federal expenditures through 2014 for development and implementation of the exchange
— Projected remaining development and implementation of the exchange through 2015
— Remaining balance of any federal grants awarded to the state for development and implementation of the exchange
— Projected expenditures for fiscal years 2015 and 2016 for the operation of the exchange by funding source and department

House Minority Leader Don Turner, R-Milton, said the amendment will force the administration to become more transparent and will provide information to lawmakers that so far has not been forthcoming.

“I think it’s a very good one if you believe in transparent government,” he said.

The Appropriations Committee substituted its own version of the amendment, essentially stripping Morrissey’s fingerprints from the process. The Democratic version, which was approved by the House on a voice vote, removed the threat of halting spending.

“We’re prepared to take action should we not receive satisfactory information,” Johnson said in an effort to placate discontent among Republicans.

The House later agreed to add the amendment to the budget adjustment on a 135 to 0 roll call vote. Democrats said they have already asked the administration for the data sought in the amendment and have already received most of it.

Morrissey said she is “appreciative” that the Democratic majority choice “to copy” her amendment.

neal.goswami@timesargus.com

Shumlin says no rush to legalize pot, won’t partake if Vermont acts

MONTPELIER — Gov. Peter Shumlin said Tuesday he has no plans to partake in legal marijuana if the state moves to allow it.

“No,” Shumlin said, when asked during a news conference by Seven Days reporter Terri Hallenbeck if he would smoke legal weed. “Been there, done that.”

Shumlin appeared caught off guard when asked when he last smoked marijuana.

“Oh my God,” he said. It was a while ago. I’m old.”

Shumlin then clarified that he last smoked pot in his late 20s, but gave it up as his responsibilities grew.

“My guess is that a lot of Vermonters of my generation feel like I do about marijuana, which is, it is something that we smoked when we were young,” he said. I found that as I got into my 20s and took on more responsibility, it didn’t have the same desirable effect on me and I stopped smoking it because as I took on more responsibility, or I don’t know what in my late 20s, I just found that it wasn’t much fun anymore.”

“My staff’s going to kill me for this,” he added, glancing at Chief of Staff Liz Miller and spokesman Scott Coriell.

The RAND corp. recently released a report estimating that Vermont could net between $20 million and $75 million annually by legalizing marijuana. The higher end of potential revenue would be possible of surrounding states did not follow suit and out-of-state residents came to Vermont to purchase it.

Shumlin said he is in no rush to beat surrounding states simply for additional revenue.

“I don’t think we should be driven by tax revenue. I think we should be driven by doing the right thing for Vermonters in a way that is better than the current system, which forces an illegal market that isn’t regulated, that isn’t controlled, that anyone can have access to, including kids,” he said. “Kids will tell you that it’s easier to get pot … than it is alcohol. That suggests that the regulatory market works.”

Shumlin said he spoke with Colorado Gov. John Hickenlooper on Monday about the issue. Colorado has legalized marijuana through a ballot initiative and Shumlin said Vermont should take its time and learn from both Colorado and the state of Washington before acting.

“I really think that we can learn a lot from the states that have gone first on this and are learning what works and what doesn’t,” he said. “I’ll continue to evolve and learn from their experiences. I think the report gives us a good road map of choices that we could make should we move to legalization.”

One lesson already learned, Shumlin said, is that Vermont should avoid allowing edible products made with marijuana.

“Edibles are a real challenge for states. I would love to see Vermont avoid those problems if we were to go ahead,” he said.

Release: Sanders introduces infrastructure bill

Sen. Bernie Sanders (I-Vt.) today introduced far-reaching legislation to rebuild America’s crumbling network of roads, bridges and transit systems and other infrastructure projects. The five-year plan would invest $1 trillion and create or maintain at least 13 million decent-paying jobs, said Sanders, the Senate Budget Committee ranking member.

The legislation is co-sponsored by Sen. Barbara Mikulski (D-Md.), the ranking member of the appropriations committee, and it is backed by the American Society of Civil Engineers, the AFL-CIO and others.

“For too many years, we’ve underfunded our nation’s physical infrastructure. We have to change that and that’s what the Rebuild America Act is all about. We must modernize our infrastructure and create millions of new jobs that will put people back to work and help the economy,” Sanders said.

“My legislation puts 13 million people to work repairing the backlog of infrastructure projects all across this country. These projects require equipment, supplies and services, and the hard-earned salaries from these jobs will be spent in countless restaurants, shops and other local businesses. It’s no surprise that groups across the political spectrum – from organized labor to the U.S. Chamber of Commerce – agree that investing in infrastructure will pay dividends for future generations.”

Sanders’ bill makes targeted investments in roads, bridges, transit, passenger and freight rail, water infrastructure, marine ports and inland waterways, national parks, municipal broadband and the electric grid. A short summary of the bill can be found here and the text of the bill itself is here.

Tom Trotter, legislative representative for the AFL-CIO, said Sanders proposal will “raise the profile about the serious needs of our nation’s infrastructure. This proposal provides a stark blueprint of what needs to be accomplished and provides an opportunity to create millions of new jobs.”

Casey Dinges, senior managing director at the society of engineers, said: “Senator Sanders’ initiative to invest $1 trillion over five years through his Rebuild America Act will have a far-reaching impact on restoring and modernizing our nation’s aging infrastructure.”

And Ed Rendell, former governor of Pennsylvania and a leader of the Building America’s Future initiative, said: “America’s infrastructure is falling apart. It is time to get serious about modernizing our infrastructure as the consequences of further inaction are unconscionable.”

Casino bill to benefit the elderly proposed

MONTPELIER — A Republican representative has once again introduced legislation to allow for a casino in Vermont, this time with state revenue benefiting senior citizens.

Rep. Ronald Hubert, R-Milton, has introduced a similar bill each session for the past six years. He said the proposals have varied slightly. With the state facing a significant budget gap in the 2016 fiscal year, Hubert said it could help generate revenue for the state.

“We’re in such desperate need for taxes, how about some voluntary taxes? It’s something that most states have done and the numbers show that we could bring in annually somewhere between $8 million to $15 million to state coffers,” Hubert said.

Rep. Ronald Hubert

Rep. Ronald Hubert

The bill, which has 17 cosponsors, mostly Republicans, would require the Vermont Lottery Commission to issue a license for the operation of one casino in Vermont. The license would be good for six years and require a $6 million license fee that could be paid in full or split over six years.

The Lottery Commission would have the authority to create rules governing the casino, investigate applicants to determine eligibility and supervise casino operations. The bill calls for a $100,000, nonrefundable application fee.

Hubert’s bill would also create a 10 percent tax on the gross receipts of the casino that would go the general fund.

He said there are between 75 and 100 organized bus trips from Vermont to casinos in surrounding states each year.

“A lot of Vermonters are interested in going to a casino, and there’s more to a casino,” Hubert said.

A casino would also generate additional tax revenue for the state through rooms and meals, alcohol and food sales and the state’s sales tax, Hubert said.

This year Hubert’s bill calls for the 10 percent tax on the casino receipts to be used to help elderly Vermonters. The money generated would be divided by the number of people 65 and older that receive income sensitivity on their property taxes. Those people would receive a payment from the state under the legislation.

Hubert said the money would help elderly Vermonters on fixed incomes that are not keeping pace with inflation.

“These are people that no longer have children in schools and are generally on fixed incomes,” he said.

Hubert said he hopes his new plan for the revenue will draw additional support. He said lawmakers could even opt to use the money to help drawdown federal matching funds for the state’s Medicaid program.

“I’m certainly hoping so. With the gov looking to put a $110 million payroll tax out there, I’d certainly be open to using it for the Medicaid drawdown,” he said.

Don’t expect to roll the dice any time soon, though.

Scott Coriell, Gov. Peter Shumlin’s spokesman, said Monday that Shumlin is unequivocally opposed to casino gaming in Vermont.

“The governor is not in favor of building casinos in the state, period. As long as he’s governor, he’ll do everything in his power to stop casino gaming in Vermont,” Coriell said.

House Speaker Shap Smith is also opposed to the idea of allowing a casino in Vermont.

“I think that the experience of casinos shows that there’s an over-saturation and that moving in that direction is a bad idea,” he said. “I’m not a big fan of casinos at all as a way to fund state government.”

Smith was blunt about the legislation’s prospects.

“I don’t think that it’s going anywhere,” he said.

neal.goswami@timesargus.com

Read the proposed legislation below:

Capitol Beat Podcast 1-26-15

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Vermont Press Bureau chief Neal Goswami and VPB reporter Josh O’Gorman talk about sugar, beagles, Vermont Health Connect and a dispute between two Penn State graduate students and the state Agency of Education.

 

Video: Vermont This Week on Vermont PBS

Bureau chief Neal Goswami joins moderator Stewart Ledbetter, Local 22/Local 44 reporter Steph Machado and Tim McQuiston from Vermont Business Magazine on this week’s Vermont This Week panel.

HEADLINES: State Economists Project Major Stimulus From Oil Decline; Gasoline Price Disparities In Spotlight; Bipartisan Group Proposes New Health Exchange; Auditor Questions If Ski Resorts Pay Fair Share; Senate Leaders Introduce Gun Bill; Sugar-Sweetened Beverage Tax Is Back.

Capitol Beat with the Governor 1-23-15

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Gov. Peter Shumlin and Vermont Press Bureau chief Neal Goswami discuss a recent revenue downgrade, the president’s support for paid sick leave, gun legislation introduced in the Senate and legislators’ efforts to scuttle Vermont Health Connect.

 

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Economists: Revenue downgrade for general fund, despite drop in oil prices

MONTPELIER — Gov. Peter Shumlin and lawmakers crafting the 2016 fiscal year budget will have to dig a little deeper after state economists provided a downgrade to the general fund revenue forecast Tuesday, despite positive signs in the economy related to lower oil prices.

The Emergency Board, comprised of the governor and the chairs of the Legislature’s money committees, were told Tuesday that revenues are projected to be $18 million lower than previously expected in the 2016 fiscal year budget. The state was already facing a $94 million projected gap, which Shumlin’s proposed budget would close through a combination of cuts and tax increases.

Jeff Carr, left, and Tom Kavet

Jeff Carr, left, and Tom Kavet

Economists Jeffrey Carr and Tom Kavet, who provide revenue forecasts to the state twice a year, also downgraded revenues for the current fiscal year by $10 million. The Shumlin administration and lawmakers, anticipating that, are working to lower the current budget in the annual budget adjustment process by $17 million. That follows about $31 million in rescissions that took place in August.

The downgrade is projected despite an expected uptick in spending by Vermont residents as oil process drop.

“We’re looking at the economy finally starting to pick up like we haven’t seen in some time. A big part of that is the drop in oil prices,” Kavet told the board. “That’s something that’s very substantial to Vermont and other New England states.”

The Emergency Board receives an updated revenue forecast Tuesday inside Gov. Peter Shumlin's ceremonial State House office.

The Emergency Board receives an updated revenue forecast Tuesday inside Gov. Peter Shumlin’s ceremonial State House office.

Vermonters spend more than $2 billion annually on petroleum-based energy, mostly in transportation and home heating. With the price of oil around $60 per barrel, and projected to drop to around $40 per barrel this year before rising to $70 to $80 per barrel, Vermonters are projected to save about $600 million in 2015, according to Kavet.

“That’s a phenomenal stimulus to the economy and it really hasn’t been felt in full at all,” he said. “The projections right now are coming down not up.”

“To get an additional $2,500 (per family) in spending money … is bigger than any raise that anybody’s gotten for a long, long, time,” Kavet added.

Lower energy costs acts like a tax cut in the economy, without the corresponding decreases in government spending that actual taxes cause.

It also changes the psychology of residents and alters their spending habits, Carr said.

“The critical thing is it will help with psychology. Part of the reason that we really haven’t broken out of our funk is that people have been looking for some reason, there has got to be some catalyst,” Carr said. “I think that there still is kind of a residual hangover in households. Some of us now know what our parents and grandparents went through when we went through the Great Recession that they went through during the Great Depression. It changes you. It fundamentally alters the way that you approach things. You weren’t quite so aggressive in your spending.”

Oil prices in previous forecasts were projected at $103 per barrel. The current forecast projects prices at $63 per barrel, but prices will likely drop lower. As a result, the two economists boosted expected consumption taxes based on expected spending in their latest forecast.

Still, despite the relief in energy prices, unstable corporate income taxes and uncertainty surrounding some high-earning taxpayers has led to the near-term downgrade, according to the economists. Additionally, businesses are expected to hire, but profits will drop as they train and bring new hires up to speed, they said. That will likely lead to larger state refunds for businesses.

The state’s revenue growth should see improvements down the road.

“There is some good news. It’s a little farther out on the horizon than we might like,” Kavet said. “There’s some very good things happening right now.”

Shumlin said Tuesday that his administration anticipated a further downgrade in the current budget and moved to make cuts ahead of the annual budget adjustment in each January. He said a downgrade to the 2016 fiscal year budget was also expected, but the administration did not plan further efforts to patch it without knowing how much it would be.

“We didn’t know what to expect,” the governor said. “Obviously, we don’t guess. We have to actually build a budget based on the facts and we now have to work together with the Legislature to balance the budget, which is what I’ve done every term that I’ve been governor.”

He said he is “heartened” that the downgrade isn’t larger, and noted that the economists said there could even be revenue growth later in the year.

“I just heard a pretty upbeat report in terms of their hopes for their future, so we’re going to manage to the money but this is not an insurmountable challenge,” Shumlin said. “My job as governor is to roll with the punches and deal with the numbers as they come in. My job is to balance the budget and be fiscally responsible when we do it and we’re going to continue to do that.”

House Speaker Shap Smith laid the onus of addressing the $18 million additional gap in the 2016 fiscal year budget directly at Shumlin’s feet on Tuesday.

“Vermont joins other states in continuing to experience slower than expected revenue growth. The data presented today presents challenges for our money committees. I look forward to receiving a proposal from the administration on how they will address the additional shortfall,” Smith said.

Tuesday’s updated revenue forecast projected no changes to the transportation fund for the remained of the 2015 fiscal year, and a 1 percent increase in revenue, amounting to $2.7 million, for the 2016 fiscal year.

The education fund, meanwhile, is projected to see a revenue increase of $1.6 million, or about 0.9 percent, for the remainder of the 2015 fiscal year. In fiscal year 2016, the education fund is expected to see a 1.5 percent growth in revenue, which would amount to $2.8 million.

Video: Capitol Beat on ORCA with Speaker Shap Smith

House Speaker Shap Smith sits down with Vermont Press Bureau chief Neal Goswami and VPB reporter Josh O’Gorman to discuss the first two weeks of the legislative session.

Capitol Beat podcast for 1-19-15

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On this week’s episode, Vermont Press Bureau chief Neal Goswami and VPB reporter Josh O’Gorman discuss Gov. Peter Shumlin’s budget, his education proposals and a study released Friday about legalizing pot in Vermont. Subscribe on the iTunes store to the Vermont Press Bureau’s podcasts.