By Shaun Robinson/VTDigger
Vermont’s economy, and the country’s as a whole, is in “exceptional” shape, the state’s economists told a panel of top fiscal lawmakers Wednesday, Jan. 22 — but cautioned their outlook was tempered by uncertainty over the actions President Donald Trump has pledged to take, or already taken, early on in his second term.
The body of legislative committee chairs and Gov. Phil Scott, known as the state’s Emergency Board, heard the economists’ latest state revenue forecast Wednesday morning. It’s a semiannual affair that provides the lay of the land for the state budget building process and the myriad of policy debates that feed into that process.
Overall, state revenues were slightly higher — by about 4% — over the first half of the 2025 fiscal year, which started in July 2024 and ends in June 2025, than the economists previously predicted. Vermont’s chief operating fund, its general fund, has brought in about 6% more than last year’s projections anticipated, the state economists said.
But looking somewhat longer term, Tom Kavet, economist for the Legislature, and Jeff Carr, economist for the state’s Agency of Administration, said they’re concerned about the possibility of increased inflation as a result of several of Trump’s proposals and recent executive actions, including proposed tariffs on U.S. trading partners including Canada and Mexico, and major new restrictions on immigration, among others.
“Some of the proposed economic policies of the incoming administration could slow growth starting in (the 2027 fiscal year) and beyond,” the economists wrote in a report to lawmakers, which the emergency board formally adopted on Wednesday. Kavet and Carr added, though, that it’s too early to quantify the outcome of those policies, only noting they expected there could be some negative impact.
Specifically, they wrote, “the overwhelming majority of economists and policy analysts believe” tariffs, put in place under the country’s current economic conditions, “will be at least somewhat inflationary — if they don’t result in some chaos.”
Kavet also suggested that a crackdown on immigration could exacerbate Vermont’s demographic challenges. He said for the first time since 1957, the U.S. Census Bureau has projected that Vermont’s population declined year-over-year in 2024, though he noted it’s possible that estimate could later be revised.
“The only way to move the population needle is through migration,” Kavet said, pointing specifically to people entering the U.S. from other countries.
The economists noted, overall, that “challenges to the current U.S. economic trajectory” were unlikely to completely derail Vermont’s strong economic footing, though could result in slower growth than would likely happen otherwise.
Kavet and Carr also acknowledged that even while top-line metrics pointed to a gangbuster economy, its benefits aren’t shared equally by everyone. For instance, they said the stock market brought big returns for investors in 2024, but many people own no stock and so did not benefit.
One of the state’s other major funds — the transportation fund, which pays for roads, bridges and public transit — is also above targets through the first half of the 2025 fiscal year. Transportation fund revenue is up by about 3%, the economists said, bolstered in part by “pent-up demand” for new cars and trucks that led to higher-than-expected vehicle purchase and use tax receipts.
Meanwhile, revenue coming into the third major fund — the education fund — has been about 2% under the economists’ previous target, they said, due to the “sluggish performance” of the state’s sales and use tax and “subdued performance” of the meals and rooms tax.
Wednesday’s forecast also shows the state brought in less — about $18 million versus $23 million — from 2024’s payroll tax to subsidize child care than officials were projecting by last December. It points to possible issues with people’s compliance with paying the tax and with estimations for the number of people who would pay it.
“Actual collections to date have been much lower than expected,” the report states, though adds that efforts are already underway to address those issues.
