State expects drop in revenue
By Neal P. Goswami
VERMONT PRESS BUREAU | July 25,2014
MONTPELIER — State economists have downgraded Vermont’s projected revenue growth from 4.8 percent to 3 percent, requiring $31 million in cuts to the 2015 fiscal year budget.
Gov. Peter Shumlin and Secretary of Administration Jeb Spaulding announced the revenue downgrade at a Thursday morning news conference. Shumlin, a Democrat, emphasized to reporters that the state’s revenue is still projected to grow by 3 percent.
“Let’s remember that we have seen growth in revenues, pretty substantial growth, $90 million in 2013, and we are seeing growth this year. The difference is between 4.8 and 3 percent,” he said.
But the revenue downgrade will require budget cuts that are likely to impact some Vermonters.
“Instead of projection of 4.8 percent that we based our budgeting on, instead it will be a growth rate of 3 percent. So, obviously, that drop in revenue, which works out to roughly $31 million, will need to be adjusted in our (fiscal year 2015) budget,” Shumlin said.
Vermont and the country have seen growth “coming out of the worst recession in American history,” the governor said. The fiscal year 2014 budget grew by 3.1 percent, or $46 million. The new revenue forecast projects $45 million in growth for the current fiscal year.
Shumlin met with his cabinet Wednesday night and asked for 4 percent reductions in individual department budgets. The 4 percent reduction is needed to meet an overall 2 percent reduction in the state budget because Shumlin said he will not raise taxes. He also pledged not to shift any burden to the property tax, reduce debt reduction obligations or squeeze retirement plans.
“We’re going to make this small adjustment to our $1.4 billion budget by insisting … that we not raise broad based taxes — income taxes, sales taxes and rooms and meals taxes. In other words, we’re not going to ask hardworking Vermonters to make this relatively small adjustment by raising revenue. Vermonters’ taxes are high enough,” he said.
“We balance budgets the old-fashioned way, by making cuts — real cuts,” the governor added.
Spaulding said the administration is required under statute to present a rescission plan to lawmakers when there is a downgrade of more than 1 percent. Department heads were to receive a memo Thursday afternoon outlining the administration’s rescission request. They must respond by Aug. 1 with their plans.
“I’ve given them broad guidelines with which to work, given them as much latitude as we possible can. We’ll wait and see what their recommendations are,” Shumlin said.
The administration has put a freeze on new hiring, but Shumlin said budget cuts will not include cutting the existing work force.
“We do not project having to do any layoffs to meet this small adjustment,” he said. “This is not a big enough rescission to necessitate layoffs.”
Cuts made to the budget may “not necessarily” extend across the board, according to Shumlin. “We’ll make the cuts wherever we feel we can do it with the least hardship for Vermonters,” he said.
The revenue downgrade follows national trends, Shumlin said. Later Thursday state economists Jeff Carr and Tom Kavet briefed the Emergency Board, a fiscal panel that includes the chairs of the Legislature’s money committees, on their latest projection. Their report echoed the governor’s assertion.
According to the report, the national economy retracted by 2.9 percent in the first quarter of the year. It rebounded somewhat in the second quarter by growing at a 2.7 percent rate. But as a result, economists around the country are revising projections for the current fiscal year.