Vt.’s current year revenue projection drops $28 million

By Elizabeth Hewitt, VTDigger.org

Economists lowered estimates of how much revenue the state is expected to net in the current fiscal year by $28 million, Thursday, July 21.

However, the Shumlin administration says the state can make up for the drop without cutting the budget, by using money unspent in the previous fiscal year and from other sources.

The General Fund is expected to bring in $21 million less than was projected in January. Economists also reduced projections for revenue into the Education Fund by $3.4 million and into the Transportation Fund by $3.5 million.

A downgrade had been predicted in light of low revenue receipts in the final months of fiscal year 2016, which ended June 30.

Economists said that in their latest projections, the underperformance of certain taxes in fiscal 2016 was balanced by increases lawmakers made to fees and taxes in the fiscal 2017 budget.

The administration reported that revenues in fiscal 2016 came in 2.3 percent over the previous year’s. The new forecast pegs growth in fiscal 2017 at 4.8 percent — less than economists had projected in January.

“It’s hard to say it’s a forecast downgrade when you say receipts are actually going to be increasing,” said Jeffrey Carr, the administration’s economist.

Underperformance in certain volatile taxes, such as the estate tax, contributed to the lower-than-expected revenue receipts in the last fiscal year, according to the analysts. Another factor was the warm winter, which led to a very low year for tourism related to the ski industry.

Meanwhile, the economic backdrop shows continued slow growth. Tom Kavet, the Legislature’s economist, said the recovery has “never really gotten takeoff velocity. It just keeps going and going and going.”

Members of the emergency board unanimously adopted the new revenue estimates Thursday at a meeting on the Fifth Floor.

Gov. Peter Shumlin signed off the meeting by reviewing rates of growth during his tenure in office.

“The fact that we can deal with this adjustment … without having to make any cuts or dip into our reserves is all good news,” Shumlin said.

The administration will present a plan to adjust the fiscal 2017 budget next week to the Joint Fiscal Committee, a panel of lawmakers that meets outside the legislative session. The committee was set to vote Monday, July 25, on whether to adopt the proposal.

The administration’s plan involves using $9.9 million of savings from the Medicaid program. According to the administration, Medicaid spending in the latter part of fiscal 2016 ended up being much lower than expected.

An analysis by the Joint Fiscal Office found that pharmacy rebates were higher than expected. That could relate to a new contractor for managing rebates, as well as the resolution of national litigation with one pharmaceutical manufacturer.

The administration’s plan also would use $7 million that was budgeted into the Medicaid program related to paying off the 53rd week, a one-time expense akin to a leap day. The administration says that expense actually was paid off last year.

An additional $3.6 million would come from the state health care resources fund, which experienced a one-time bump.

Rep. Mitzi Johnson, D-South Hero, chair of the House Appropriations Committee, said the savings within the Medicaid program is “particularly good news.”

However, Johnson emphasized that the Medicaid budget is complex and several aspects are in flux — such as the ongoing process to redetermine recipients’ eligibility.

“We have one data point,” Johnson said. “One data point does not make a trend.”

Earlier in the meeting, the governor addressed critics of budgeting under his administration who have called for lower state spending. Shumlin said some critics have incorrectly claimed that spending under his leadership has grown at a rate of 5 percent.

Shumlin said that under his tenure, budget growth averaged 3.7 percent while gross state product averaged 3.2 percent.

Republican Lt. Gov. Phil Scott, who is running to replace Shumlin when he leaves office, released a statement that the revenue forecast is “unwelcome news, but not unexpected.” Scott said lawmakers passed the fiscal 2017 budget that included new taxes and fees “knowing full well” the state would face a deficit.

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