Vermont’s August 2020 Economic Review and Revenue Forecast report begins with a stark statement:
“This economic review and revenue forecast is like none ever previously performed,” the report begins.
“This is because in the coming two fiscal years, both the Vermont and U.S. economies will not be primarily driven by economic events, but by epidemiological and federal public policy events, with huge potential economic consequences that are all but unknowable at this time.”
The report, which details that the fallout from the coronavirus pandemic and consequential economic downturn was slightly better than expected but still “massive,” was ultimately adopted by the state’s Emergency Board Wednesday afternoon.
The board is composed of the lawmakers who chair the Legislature’s budget and tax committees and Gov. Phil Scott, which meets twice annually to assess the state’s finances.
The governor’s economist, Jeffrey Carr, and the Legislature’s economist, Tom Kavet, told lawmakers that the state’s general fund is projected to see a $182.4 million loss in fiscal year 2021 and a $103.8 million loss in fiscal year 2022.
Additionally, the transportation fund is expected to see a $29.3 million loss for fiscal year 2021 and a $15.5 million loss in fiscal year 2022. The education fund is expected to see a $62.7 million loss in fiscal year 2021 and a $38.8 million loss in fiscal year 2022.
Still, these forecasts are better than what was initially projected. In April, economists warned that fiscal year 2021 could see a loss of up to $430 million.
Carr explained to lawmakers and Scott that this forecast is highly unusual because there are so many uncertain factors that could change the state’s revenue outcomes. Most significantly, Vermont and other states are still waiting to hear if there will be another stimulus package from the federal government to offset their budget losses.
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“The depth and the speed at which the economic circumstances change is really unprecedented in the scheme of things,” Carr said. “Because of what’s happened with the pandemic … we’re in a situation where we’ve, I think, simultaneously had the most significant and the most accelerated economic downturn in our economic history, at least dating back to the Great Depression.”
Carr said because the economic downturn wasn’t driven by imbalances in the market or other economic factors, but rather an external health crisis, the economy will likely rebound once the pandemic is under control and vaccines can be transmitted on a wide scale.
There is some good news for the state’s finances. Due to a strong fiscal year 2019, the state was able to bring in higher than expected income revenue, about $30 million above target. However, the state is likely to see further income tax losses for fiscal year 2020 revenue.
Additionally, because Vermont has led the nation in its coronavirus recovery, many have decided to move to the state, increasing real estate sales and property transfer tax revenues.
The conversation took place in stark contrast to the last emergency board meeting in January, where Carr and Kavet laid out a glowing future for the state’s finances. In January, the general fund revenue was projected to increase by $18.4 million in fiscal year 2020 and by $15.5 million in fiscal year 2021.
At one point during the discussion, Scott longed for those previous projections.
“As I reflect, I think about what could have been if not of the pandemic,” he said. “Can you imagine what we would have had for a surplus?”
“If wishes were horses, you know that saying,” replied Sen. Jane Kitchel, D-Caledonia, who chairs the Senate Appropriations Committee.
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