(Host) Vermont lawmakers got some bad economic news this afternoon. State revenues are slumping and there are new pressures on the state budget.
The combination of factors means that another $60 million will need to be cut from this year’s budget.
VPRs Bob Kinzel reports:
(Kinzel) The bleak economic news affects virtually every aspect of the Vermont economy.
Economist Tom Kavet told members of the Joint Fiscal Committee that all of the state’s consumer taxes are down including: the sales tax, the rooms and meals tax, the purchase and use tax for cars and trucks and the property transfer tax.
Kavet says the situation has gotten considerably worse in the last 3 months:
(Kavet) "Since we last met in July there have been truly seismic shifts in the economy."
Kavet says he believes that the state will face additional revenue shortfalls in the future because he thinks Vermont’s unemployment rate, which is currently 5.2 %, is headed for a sharp increase:
(Kavet) "In Vermont it will probably top 7% those are numbers we have not seen for a very long time and that will impact personal income withholding tax receipts the decline in equity markets and in real estate markets will have a huge impact on capital gains and high end income so we’ll be feeling pressure there. What’s happening in consumer markets is unprecedented."
Kavet says he also expects additional job losses due to a severe downturn in new housing construction:
(Kavet) "In October on a 12 month total basis there were fewer housing starts than at any time on record these are projects that are started so the flow of expenditures would occur in the next 6 to 18 months depending on the project size so when that shuts down that’s a whole lot less activity, jobs building materials things like that over the coming months."
And Kavet says he’s worried that things are going to get even worse before they get better:
(Kavet) "The thing that gives us most concern is that we don’t really see a bottom of any of these just yet it’s not like in the leading indicator areas we’ve seen it bottoming out even if it’s not coming back strong or that it’s sort of flat we’re still seeing declines in all these things that we use as being harbingers of what’s likely to come down the road."
Senate Appropriations chairwoman Susan Bartlett says the combination of less revenue and additional pressure on social service programs means that another $63 million needs to be cut from this year’s budget – this is on top of roughly $25 million that was cut back in August:
(Bartlett) "I think people really just need to begin to think about this to understand the size of the issue and then we need to figure out a process for how we are going to do this."
The revenue downgrade also means that the state will have roughly $100 million less to spend in next year’s budget – this represents almost 10% of the General Fund. Bartlett says this development has enormous consequences:
(Bartlett) "And that we have less to spend in 2010 than we did in 2006 is a staggering piece of information and again it just takes a awhile to figure out wow what does this mean how do we deal with this folks are going to want to talk about rainy day funds how is Washington going to help us putting together revenue packages there’s going to be a lot of conversation happing very rapidly."
Bartlett says she hopes that the Joint Fiscal Committee, working with the Douglas Administration, will be able to agree on at least $30 million in additional cuts in the next few weeks. It’s likely that some public hearings will be held before those cuts are finalized.
For VPR News I’m Bob Kinzel in Montpelier.
Photo: Economist Tom Kavet testifies before the Vermont Emergency Board in Montpelier, Vt., Tuesday, Nov. 18, 2008. (AP Photo/Toby Talbot)