Vermont Tax Revenues Look Good for Next Two Years
by Timothy McQuiston, Vermont Business Magazine - This had to be the most jovial Emergency Board meeting since at least before the Great Recession began in 2008. Tax revenues were great last year (fiscal year 2018 ending June 30) and are expected to be great this year (FY19) and likely very good next year (FY2020). The E-Board met Friday afternoon in Governor Phil Scott’s Pavilion conference room.
One-time revenue events, such as changes to the federal tax code and the unknown of the “repatriation” of foreign profits, add wild cards into the forecasting mix. But while they're still scratching their heads about what it all means, the bottom line still looks very strong, according to economists Jeff Carr (on behalf of the Scott Administration) and Tom Kavet (on behalf of the Legislature).
“This was a particularly challenging forecast,” Carr said at the outset. But, he said, “Any way you slice it, this was an upgrade.”
The FY19 General Fund revenues were upgrade by $32.7 million and FY20 by $18 million.
The E-Board is comprised of the chairs of the four legislative money committees and the governor. They are scheduled to meet in January and July of each year to review tax revenue projections. Extra meetings are scheduled as needed, when actual revenues are either running behind (the usual scenario) or ahead of projections.
"It's good to be here and have positive news, for a change," Kavet said.
While most of the increases in revenues started in the second half of the just-completed fiscal year (+$65 million above expectations), the positive forecasts for FY 2019 and FY 2020 were attributed largely to one-time events. But the economy, they said, is also very strong. The US economy is expanding at over 4 percent and the Vermont economy is expanding at over 3 percent.
"The economy continues to cooperate," Carr said.
We are, they said, right at the pinnacle of what certainly will be the longest economic expansion ever recorded in the US. Those records go back to the 1850s. It’s also the strongest employment scene in the US since at the least the 1950s. Vermont’s employment situation is near historic highs as well.
The economists cautioned that the economic growth has come with enormous federal stimulus on the back of a trillion-dollar federal budget deficit and that the inevitable cyclical fall into recession could be steep. But, for the foreseeable future, the economy should remain strong.
The governor, Administration Secretary Susanne Young and legislators were noticably relaxed and friendly before the meeting despite the trials of a bitter legislative session that went into overtime and only concluded last month.
The governor said in a statement after the meeting:
“Through sound management of both the State budget and federal tax changes, the revenues expected in the fiscal year beginning July 1, 2018 were increased by nearly $33 million to the General Fund and $17 million to the Education Fund.
“Unlike the last several years, we did not have to make budget rescissions or corrections because the revenue forecast exceeds the appropriations in the FY 2019 budget.
“To help Vermonters get ahead and keep more of what they earn, I have advocated for responsible fiscal management, ensuring the state budget does not grow faster than the rate of growth in Vermonters’ wages.
“After reviewing expected State revenues and spending, I believe the Vermont Legislature, particularly the House and Senate Committees on Appropriations, House Ways and Means and the Senate Finance Committee – as well as our Departments of Finance & Management, and Taxes – have a lot to be proud of in managing the State budget.”