Economic Review and Revenue Forecast

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.

Mounting headwinds from higher oil prices, receding federal fiscal stimulus, manufacturing losses associated with the Japanese earthquake and tsunami, festering European sovereign debt crises, and political gridlock in Washington that threatens the nation’s financial integrity, have all conspired to stall the emerging recovery, bringing job growth to a virtual standstill and lowering projections of economic activity in FY12. Despite all this, the Vermont economy has generally outperformed the U.S. as a whole, and closed FY11 with tax revenues slightly above (+2.5%) January projections.

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… Read More »Official Vermont State Economic and Revenue Forecast January 2011

Total Vermont tax revenues in the first half of Fiscal Year 2007 were exceptionally close to July 2006 projections (within about one-tenth of one percent), as the economy decelerated much as expected. This was due in large part to an exceptionally orderly retreat – at least to date – in housing and real estate markets, and offsetting strength in service industries and international trade. Favorable energy price developments and restrained Federal Reserve Board interest rate hikes in the second half… Read More »Official Vermont State Economic and Revenue Forecast January 2007

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.