[W]ith just one month to go in the fiscal year, state revenue is lagging behind projections.
Though general fund revenues came in close to on-target in the month of May, state finances have still not bounced back from lagging tax receipts in April. The latest report, released Wednesday, shows that revenue for the year is down by $15.3 million.
The update on the current year’s finances was issued the same day Gov. Peter Shumlin signed into law the budget for fiscal year 2017, which begins July 1.
Shumlin and other state officials say they expect the budget will be balanced when the state closes the books for FY 2016.
“As long as the revenues continue to do what happened in May, not April, and stay on target, we are convinced that we can deal with the current fiscal year budget problems without tremendous pain,” Shumlin said, shortly after signing H. 875, the budget bill.
He categorized the personal income tax collection shortfall in April as “a one month very odd development that we’re still trying to sort out.”
Sen. Jane Kitchel, D-Caledonia, chair of the Senate Appropriations Committee, said that she and others have been enquiring about what the lackluster collections this year mean for the revenue projections that lawmakers used to build next year’s budget.
“What we were focusing on was what does this look like for the future,” Kitchel said. Economists for the Legislature and the governor “seemed to feel confident that those projections were still good,” she said.
According to the revenue report, the state has collected $1.28 billion for the general fund so far in fiscal year 2016, shy of the nearly $1.3 billion projected by June 30.
Revenues collected in May were $660,000 short of the target for the general fund of $76 million. Although that month was fairly close to projections, it follows a significant shortfall in April.
“We’re not flush with cash — let’s be clear,” Secretary of Administration Justin Johnson said, but he went on to say that he is “optimistic we can finish the year balanced.”
“The fact that we’re off against the forecast is obviously a concern, but it doesn’t mean we won’t have the money to finish out the year,” Johnson said.
According to Johnson, the $15.3 million gap against the year-to-date targets is driven largely by underperformance in personal income taxes. The shortfall in April revenues in part reflected an error in some electronic tax preparation software, including TurboTax, that failed to take into account a change in the state’s deductions policy.
The Tax Department has agreed to waive any fees or interest for Vermonters affected by the glitch who file an amended tax return by the end of June.
Johnson said he expects the state could see $2 million to $3 million in revenue at the end of the fiscal year as those amended tax returns come in, though he does not expect to recoup the total amount before the next fiscal year begins July 1.
Transportation revenues were down in May. The state collected $22 million for that fund, approximately 7 percent, or $1.7 million, short of target. Education fund revenues came in close to projections, off the target by just $130,000.
Stephen Klein, chief fiscal officer of the nonpartisan legislative Joint Fiscal Office, also said that he does not have major concerns about the revenue shortfall. At this point, he said, there is nothing to indicate “that there’s a structural sort of economic downturn.”
“When you’re below 1 percent, you’re in a realm of it may be addressable,” Klein said.
Meanwhile, Shumlin said Wednesday that he believes he will leave Vermont’s state financials in a solid condition for the person who will next hold his office.
“I think it gives the next governor the opportunity to continue to manage the state in a fiscally responsible way,” Shumlin said.
Members of the administration and three legislators who attended the signing said the budget bill does not use one time funds to pay for ongoing expenses.
Reps. Kathy Keenan, D-St. Albans, and Chuck Pearce, R-Richford, both members of the House Appropriations Committee showed up in support of the bill.
The total $5.76 billion budget package represents an increase of 2.4 percent over the FY 2016 budget. The governor has already signed the tax and fee bills for the FY 2017 revenue package.
Kitchel said ongoing budget pressures include health care and the state’s contribution to retirement funds, particularly for teachers.
“We all know that the big problem we have going forward in terms of fiscal responsibility and fiscal discipline is to finally pay for the Medicaid that we love to sign people up for and refuse to find a dedicated fund to support,” Shumlin said.
