MONTPELIER, Vt. – Vermont tax revenues are down by nearly two percent from their original projection according to state economists. Thursday Governor Peter Shumlin announced that budget cuts, not tax hikes, will be forthcoming to bridge the $31 million gap in the general fund.
State economists Jeffrey Carr and Tom Kavet told the Emergency Board why revenues were lower than predicted. They listed three main reasons.
- Lower income tax revenues than predicted. Especially from income withholdings.
- Lower sales and use tax revenues than predicted.
- A $6 million accounting error in their original prediction. Money that was pledged to the Secretary of State’s office but was counted to the general fund in their original prediction.
- An economy that’s still struggling to reach its capacity.
“It reminds you as someone who's been doing this for 30 years just how many hundreds and thousands of assumptions that go into producing these statistics,” Carr said
In January Carr and Kavet predicted that tax revenues in FY 2015 would grow by 4.8%. Instead the likely revenue looks to have grown by only 3%.
Governor Shumlin says the difference means cuts around $31 million are necessary in the general fund that was budgeted for higher revenues.
“If we move quickly we can do this as painlessly as possible,” Governor Shumlin said.
“I’m not suggesting there isn’t pain there always is some but this is a doable challenge.”
He has pledged that no tax hikes and several other revenue sources are out of the question.
- No tax increase
- No property tax increases
- No rainy day fund uses
- No pension raiding
Shumlin announced he is enlisting the help of Secretaries and Commissioners across state government. His administration sent out a letter to them asking them to come up with four percent worth of cuts so that the general fund as a whole could save two percent.
Governor Shumlin said the timing of the unfortunate news actually works to their beneit.
“I think we’re fortunate to have a system in Vermont where we actually are able to learn about exactly what’s happening with our revenue in a way that allows us to make these adjustments in July instead of January,” Shumlin said.
Looking toward the future, when asked about whether this will impact the plan for single payer he said “it has absolutely no relevance.”
The Education and Transportation funds are also short on money because of the tax revenue shortfall by $2.5 million and $2.4 million respectively.