Vermont’s major funds collected almost as much as expected in August and a bit more than the year before, according to the latest monthly revenue report from the Agency of Administration.
Just two months into the 2014 fiscal year, Secretary of Administration Jeb Spaulding says it’s too early to glean any trends from the data. While under-performance in certain areas bears watching, other receipts now trending high could put revenues further in the black as the year unfolds.
Overall, the close proximity to forecast doesn’t leave much buffer for unanticipated circumstances, whose financial repercussions can extend long after catalyzing events. For example, Spaulding speculated, “some specific events, such as employee separations at a few large employers, may influence collections going forward.”
In June and July, 419 positions were dropped from IBM’s payroll in Vermont. About 70 layoffs are yet to come from the Energizer plant in St. Albans Town, and more than 600 are pending at Vermont Yankee when it closes in 2014. Such job losses may compromise both income tax collections and the spending power of any individuals who don’t transition quickly into good-paying jobs in Vermont.
Legislative fiscal officer Steve Klein previewed several budget pressures in a memorandum and presentation to the Joint Fiscal Committee on Sept. 11. Klein said that before the state addresses a potential $55 million funding gap in FY15, some shortfalls this fiscal year likely will need attention, too.
Hover over each bar in the charts below to see the actual dollar figure (in millions) Vermont collected from the major revenue sources in each of the state’s major funds. Compare August’s actual and projected revenues to collections from the same month one year ago. Minor differences from other sources are due to rounding.
General Fund
Overall, the General Fund missed its mark by about one-tenth of 1 percent, weighed down a bit by low receipts from the corporate sector and buoyed by taxes on personal income.
Corporate income taxes netted almost no revenue in August. Corporate tax receipts typically are smaller in August than most other months, but a projected $760,000 instead produced just about $10,000. This follows July collections that totaled just about $200,000, when the state’s economic forecast had predicted $1.86 million.
All this is not to say that businesses made no money during the summer, however. Spaulding said that July refunds and additional other transfers account for at least some of the downward trend.
By far the largest contributor to the General Fund, personal income taxes yield extra impact when they exceed expectations. In August, personal income withholdings, estimated and other taxes averaged 3.27 percentage points above target, bringing in an extra $1.28 million.
In a presentation to the business community Monday night, state economist Jeff Carr said consumer confidence is on the rise nationwide, which can surface through increased discretionary spending on things like dining out, travel and retail consumption.
Indeed, Vermont’s meals & rooms tax receipts in August rose above both the monthly target and the previous year’s performance. Sales & use and insurance premium taxes deposits in the General Fund also beat August expectations, but fell slightly short of their yields from the same month a year ago.
The housing market also is turning around nationwide, Carr said, citing the Federal Housing Finance Authority. In Vermont, which Carr said lost less than 5 percent of its housing value in the “Great Recession,” housing prices and projections are up about 2.4 percent. Illustrating that point, August’s real property and transfer tax brought 20 percent more than anticipated to the General Fund, reflecting a 17 percent increase over the same time last year.
The inheritance and estate tax is harder to predict or draw meaning from, especially on a monthly basis, says Sue Zeller, deputy commissioner of the Department of Finance & Management. Although August’s revenue from this source is far lower in 2013 than 2012, the fiscal year-to-date total so far is almost 21 percent higher due to a remarkable $8.91 million collection in July.
Transportation Fund
The new gasoline and diesel tax increases are paying off for the Transportation Fund, although not quite as much as expected. Gas and diesel now are taxed both per gallon and as a percentage of the dollar price of sales.
At $22.85 million for the month, August revenues are more than 10 percent above last August’s, but 2.14 percent lower than projected. The disappointment is not entirely surprising. State economists downgraded the Transportation Fund’s outlook in July at the biannual meeting of the Emergency Board.
The change in forecast prompted the Vermont Agency of Transportation to trim $4.1 million from its interim transportation budget for the coming fiscal year. Lenny LeBlanc, chief financial officer at VTrans, said the new tax increases are yielding less than expected because people are driving fewer miles in more fuel-efficient cars.
Spaulding attributed the slippage, in part, to the timing of the Labor Day holiday weekend. When months end on weekends or holidays, as August did, some receipts don’t get processed until the following month.
Not all of the Transportation Fund’s revenue sources fell short, though. Motor vehicle purchase and use reached $6.13 million, nearly 10 percent above target. Spaulding said this strong performance is a “positive indicator.”
Education Fund
Some strong revenues from the General and Transportation funds also gave the Education Fund a boost in August.
The sales and use tax stream that gets diverted to education came in just shy of $10 million, or 2.8 percent higher than forecast. A portion of the motor vehicle purchase and use funds also goes toward education. At over $3 million, that source delivered almost 10 percent above target.
The lottery transfer, however, came in 13 percent lower than anticipated, and only about $10,000 was earned through the fund’s investment income.
