On January 27, 2021

Legislative update: the $$ forecast

By Rep. Jim Harrison

Last week, state economists presented revised state revenue forecasts that will be the basis of next year’s budget. The good news is that the forecast was adjusted significantly upward from the one done last August. Total revenues in all funds are now expected to be only $20 million below pre-pandemic FY21 (July ’20 – June ’21) estimates and $77 million above FY22 estimates.

The new forecasts are the combined effort of the Legislature’s own economist, Tom Kavet of Kavet, Rockler & Associates LLC and the administration’s economist, Jeff Carr of Economic & Policy Resources. Given that the economists represent two different branches of government, getting an agreed upon forecast from the two independent firms gives a level of credibility to the numbers.

However, it can be and often is like weather forecasting. What exactly does a chance of snow or rain today really mean? We will have a better idea the day after and so is the case with moving financial targets. It’s not an exact science by any means.

But wait…why all the extra $$?

Carr and Kavet both attribute the turnaround of state revenues to the massive influx of federal dollars. In Kavet’s report he indicates, “Revenue….appears to indicate that if federal deficit spending is sufficiently massive, it can offset almost any recessionary event – including a pandemic. With nearly $7 billion in federal transfer payments to Vermont already in progress and as much as $3 billion more likely to come, economic ‘winners’ are now more than offsetting ‘losers’ and tax revenue expectations for both FY21 and FY22 have been radically upgraded from prior August projections.”

Carr, in his comments to the governor and the emergency board, cautioned that this period of unprecedented borrowing by the federal government, could lead to inflationary pressures in a couple of years. And eventually the borrowed funds will need to be paid back.

It was also acknowledged that while some sectors have done well (car sales and real estate for example), there are others that have been hit hard (hospitality, certain retail, etc.). The rooms and meals tax revenue is one area where there is a significant decline. Additionally, there are 20,000 more people out of work from a year ago. Given that unemployment insurance payments, including the extra $600/week that Washington provided last spring, are taxable, it should be no surprise that the Dept. of Labor (which makes the unemployment payments) has become the state’s largest income tax withholder.

We will know more what this all means to next year’s budget when the governor presents his plan to a joint session of the Legislature Tuesday afternoon, Jan. 26. The improved revenue forecast will help but by no means changes making the budget easier given the pressures of the growing pension liability and the financial challenges of the Vermont State Colleges.

Other items of interest:

The second bill of the session on its way to the governor is S.9, which extends workers compensation coverage for Covid-19 illness until 30 days following the lifting of the governor’s state of emergency order.

Many committees have begun the process of listening to various bill sponsors for a short introduction of what their legislation intends to fix. Committees will then decide what issues are their priorities for the rest of the session, especially given the overriding concerns of dealing with Covid related measures first, along with the limitations of remote legislating.

The governor’s executive orders surrounding changes to Act 250 reviews and combining of some law enforcement under the Agency of Public Service are under review by several committees. The executive orders will go forward unless the Legislature, acts to reject them.

As the result of new options for the 2021 town meeting, such as allowing towns to send ballots to all voters, the secretary of state issued rules giving municipalities the flexibility and safe voting options to hold their annual meeting and other local elections safely. The SOS office can also provide funds to reimburse municipal expenses for all-mail balloting if a town selects that option.

Phase II of Vermont’s Covid-19 vaccine distribution effort began on Jan. 25 with the opening of registration for those 75 or older. The best way to make an appointment is through the Health Department’s website: healthvermont.gov/MyVaccine. There is also a call center option, 855-722-7878, although Vermonters are strongly urged to use the online system to avoid the heavy call volume and the expected delays. Once everyone 75 and over has had access, the state will move to 70-74, then 65-69, then people of any age with certain high-risk conditions and then followed by the general population. If many more doses of vaccine become available, the state may modify this age-banded vaccination strategy.

According to at least one media report, the focus on the pandemic may have taken a toll on certain legislation initiatives. A Vermont Green New Deal funded by an income tax surcharge garnered 14 co-sponsors out of the 30-member Senate last year, but it has three co-sponsors this year. The lead sponsor is Sen. Pollina, P/D-Washington.

Jim Harrison is a house representative for the towns of Bridgewater, Chittenden, Killington and Mendon. Contact him at JHarrison@leg.state.vt.us or facebook.com/harrisonforvermont.

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