Harmen

Vermont General Fund tax revenues in FY06 ended the year with surprising strength, due to a handful of revenue sources linked to high-income taxpayers: namely, personal income, corporate and estate taxes.  Despite lackluster job growth, declining real wages and stagnant real household income, these three revenue categories realized huge gains in FY06 due to record corporate profits, soaring real estate-related wealth and associated capital gains.  Transportation Fund revenue sources were not so fortunate, as spiraling gasoline prices dampened demand and emptied auto showrooms. 

A slower U.S economic recovery than forecast last July will temper revenue growth over the next two fiscal years. Multiple economic headwinds that developed in 2011 have yet to fully subside, as the European debt crisis continues to fester, oil prices again top $100 per barrel, and domestic political gridlock precludes federal fiscal and other policy measures that could accelerate the recovery. Although the Vermont economy continues to outperform the U.S. as a whole, minor revenue downgrades in all three major State funds are recommended relative to prior July 2011 projections.

FY12 revenues to date have performed very close to projections, with total revenues across all three funds closing the second quarter of the fiscal year within 0.5% of targets. Mounting Corporate refunds, higher gas prices, a tepid start to the winter tourism season and slower projected macroeconomic growth, however, will result in $1.8 million less in FY12 and $9.3 million less in FY13 General Fund revenues, and reductions of $0.3 million in FY12 and $0.8 million in FY13 in both the Transportation and Education Funds, relative to prior July 2011 forecasts.