More gloomy figures may come today on Vt. budget
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By Louis Porter Vermont Press Bureau - Published: January 13, 2009
MONTPELIER – The cycle of state revenue downgrades and budget cuts is doing little to ease the pain for taxpayers, those using state services or state officials, and yet another round of hurt is expected today as the Emergency Board meets for its January update.
The board, made up of the four legislative money committee chairmen and Gov. James Douglas, has been meeting quarterly in an attempt to deal with dropping state revenue as the economy has gone from faltering to failing.
Monday, as Secretary of Administration Neale Lunderville reported December revenues, he warned that the state will likely see further declines from income taxes.
"We are very concerned with the downward trend, particularly in personal income tax estimated return receipts, which may indicate a further drop in personal income taxes paid during the spring 2009 filing season," Lunderville wrote.
How much expected state revenues will be reduced today is unknown, but it seems likely they will drop, officials said.
"I expect a further downgrade," Commissioner of Finance and Management James Reardon said. Economically the new calendar year will likely be "very difficult" Reardon said. Not only are state revenues for the current budget likely to decline, but those expected for fiscal year 2010 will probably be reduced, as well.
State revenues in the General Fund and Transportation Fund came close to meeting expectations in December. The third major fund, the Education Fund, even came in higher than expected.
However, that is of limited comfort to state budget writers because those revenue expectations had already been revised downward significantly for the fiscal year that began in July."It is good news that the revenues held up in December," said Rep. Martha Heath, a member of the Emergency Board. "The economists have built a significant downgrade into the forecast for the personal income tax. They are trying really hard to build their forecasts so we won't get an April surprise, but of course it is forecasting — it is not an exact science."
The state spends about $1.2 billion from its General Fund annually. The revenues that have come in or are expected for that fund this year have already been lowered by nearly $100 million. The budget has been cut, as well, although with unexpected increases in demand, the budget writers will still have to raise revenues or institute additional cuts to balance the current year's budget – and that is before today's expected reduction in revenue.
The tricky thing for the state economists and those listening to their advice today will be to make sure the declines in revenue are enough to take care of declines in April income tax filings. A further reduction that late in the fiscal year – after the mid-year change in budget adjustment and with only two months left before fiscal year 2010 – would be difficult to deal with, officials said.
"We don't want to take a hit in April," said Sen. Susan Bartlett, chairman of the Senate Appropriations Committee.
Often people and corporations file their expected income taxes based on the year before. Since the bottom did not really fall out of the economy until calendar year 2008 – particularly later in the year – that may mean that too much in income taxes were sent in during 2008, and filers will either receive refunds or at least not send more money come April, Reardon said.
"What I think may have happened was a significant number of people paid their estimated taxes, including probably corporations, based on their previous year's tax liability," he said.
Add to the uncertainty about revenue the fact that a large federal economic stimulus package, probably with a significant amount of money for the states, is expected at some point, making it frustrating to try to work on a state budget right now, Bartlett said.
"We have no idea what is coming, when it is going to come, what strings are going to be attached," she said. "Just the reductions we have made have been hard on people. You don't want to pretend it isn't bad but you don't want to make it worse than it is."
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