January revenues fell short of new targets set by the state’s economists. Tax receipts were $1.28 million below the monthly estimate for fiscal year 2015.
At the beginning of last month, Jeffrey Carr, the Shumlin administration economist, and Tom Kavet, the Legislature’s economist, downgraded the General Fund revenue forecast for 2015 by $10 million and the forecast for fiscal year 2016 by $18.6 million.
The projections didn’t hold for the first month of the year. Corporate taxes were up by $6 million, while personal income tax revenues, which have consistently been lower than expectations throughout fiscal year 2015, were $6 million less than projected for the first month of the year. Miscellaneous taxes also came in $2 million short.
For the year to date, total receipts for fiscal year 2015 as of Jan. 31 are $797.34 million; total receipts for fiscal year 2014 through January were $773.5 million.
Justin Johnson, the secretary of the Agency of Administration, said General Fund revenues are $23.84 million, or more than 3 percent ahead of fiscal year 2014.
“Clearly we would have preferred to meet the January targets in all three major funds,” Johnson said. “However, we are just one month into the revised forecast period and will wait to see how receipts progress, as we enter the busy income tax filing season.”
Education Fund and Transportation Fund receipts were down very slightly.
The Vermont Legislature and the governor’s office have been closely watching tax revenues in light of the state’s projected budget gap. The difference between anticipated state revenues and state spending for fiscal year 2016 was $94 million on Jan. 15 when the governor gave his budget address; since then, the revenue downgrade combined with mid-year budget adjustments have brought the total up to $110 million.
The 3 percent annual growth in tax receipts has not kept pace with state spending at 5 percent. Gov. Peter Shumlin has said the state must “right-size the ship.”
The governor has requested reductions in state spending of roughly $63 million in fiscal year 2016. In addition, he has asked the Legislature to approve a 0.7 percent payroll tax that would bring in $90 million a year to cover higher Medicaid reimbursements and a $16 million hole in the Medicaid budget. Vermont would be the first state in the nation to institute a payroll tax to cover health care costs. If lawmakers reject the tax, they must come up with a way to pay for the additional Medicaid monies. The overall gap, in that scenario, would be $126 million.
