Vermont’s tax revenues are unexpectedly drying up, according to Jeb Spaulding, Shumlin’s Secretary of Administration. From the Vtdigger article:
Financial forecasts predicted more than $115 million would flow into the state’s General Fund during the peak leaf-peeping month. So-called consumption taxes — sales and use, meals and rooms — cleared their targets. But personal income tax receipts fell short by more than $7 million, or 11 percent.
It’s a good idea to think of budgets as a target – you try to hit what you’re aiming at. In other words, if you’re off a little bit, that might not be a big deal. But if there’s a major component of your targeted revenues falling short by over 10%, then that’s a miss. Ask your mortgage company if they’re ok with you “missing” the full payment this month by 10% and see what their reaction is like.
What’s interesting is the revenue component that’s missing its target – personal income tax receipts. Why? How can receipts be underperforming when Vermont’s economy – according to Peter Shumlin, anyway – is a juggernaut, featuring low unemployment and boundless opportunity for those who might be involved in an E5-B project or, if you’re extremely lucky, you’re the state’s largest private employer and you’re able to wrangle out a few ducats from the state on your way out the door.
But revenues are off in the form of personal income. Shumlin’s 2015 budget was based, in large part, on projections of revenue growth from FY2013 data, in July of 2013. Fy2013 hadn’t yet closed, FY2014 hadn’t started yet, but those FY13 numbers were used in Shumlin’s Fy2015 budget – the budget year we are now facing shortfalls in.
What did Shumlin’s own FY2015 budget recommendations show for YOY growth in the General Fund revenues, through FY2013? A 1.9% average YOY growth rate (FY2009A through FY14F).
What did he propose in the FY2015 budget, for an increase in general fund spending? 3.56%, which he describes as “restrained”.
In fact, if you look at the revenue projections from Shumlin’s budget, not just for the General Fund but for other funds, it’s a snapshot of irrational exuberance writ large:
Even allowing for the recession’s effects on general fund revenue receipts, casually tossing aside the most recent history and projecting rosy growth estimates does not comport with the realities of Vermont’s economy. Diminishing median household income, middling to awful rankings for business climate, a low unemployment number relying heavily on an extremely low labor force participation rate, and the state’s own workforce projections showing the bulk of job growth at the low end of the salary spectrum, well, that forecast of revenue grow seems to be based much more on wishful thinking than on real, quantifiable data.
The actual performance of the fund, and its YOY increases, coupled with the rescission work that had to be done one month after the FY15 state budget was
passed, seems to indicate that the 2013 forecasts were wildly optimistic. If you’re trudging back to the statehouse to fix the budget you just spent months finalizing, that means your core assumptions are flawed. The core assumptions, for the biggest revenue component the state has (excluding federal funds, which make up almost 35% of the budget’s revenues – a fact that should startle anyone who thinks Vermont’s budget is solid), will have to be revisited.
Oh. And the state’s unfunded liabilities, the fact that the cost for Vermont’s version of single-payer will range into the $2 billion dollar realm, and the state’s (formerly) largest employer had to pay another company $1.5 billion dollars to take its “asset” off its hands does not seem to paint a rosy growth picture ahead, no matter what color the glasses Shumlin’s wearing while he’s crunching the budget numbers.