The new state fiscal year started July 1. It is always interesting to see how the new year begins because there is often a pattern that continues throughout the year.
Sure enough, July revenues showed continuation of the trend we have been seeing for more than 5 years. Tax revenues are coming in below estimates in each of three major funds. Let’s take a look…
The General Fund was down in tax revenue compared to a year ago, but Fees were up. In fact more than double the amount of Fees were collected over last year at this time. Fees may be higher than predicted because Vermonters are paying them off early in the fiscal year, and the amount of Fee revenue should level off as the year progresses. Let’s hope.
In the Transportation Fund there is an increase over last year because of a huge purchase of diesel fuel. But gasoline purchase was down, the purchase and use tax was down (that means people bought or leased fewer new cars) and most of the other smaller tax revenue sources were down.
In the Education Fund, revenues in July were down over $700,000 when compared to estimates. That appears to be due to the Purchase and Use tax slowdown. Regular readers will remember that the coming months are important for the Education Fund, because many communities bill school taxes in the late summer and fall. The dates for payment of taxes for the most part is sometime in the fall. A few communities collect their school taxes in the spring. Watch this fund as we get closer to the end of the calendar year, the deficit should go away.
So, what is really happening with our economy?
Tom Kavet, the legislative economist, recently reminded me that nationwide a post recession economic expansion is entering its 85th month, the fourth longest of the 34 U.S. business cycles since 1857. The expansion is slow but steady and shows up in the modest 14 million new jobs created throughout the nation over the last 69 months. Vermont has a consistently low unemployment rate. The national economy and the Vermont economy preform below estimates because the recovery from the last recession is slow. The good sign is there is no hint of catastrophic trouble coming, growth is simply very slow.
Vermont is plodding along and so is every other state. Vermont plods at a slower rate than most other states. Real economic growth in Vermont is now expected to total 1.9% in 2016, almost a full percentage point below prior estimates. Growth in 2017 is estimated at 2.3% and in 2018 the estimate for growth is 1.7%. For state budget purposes these low estimates for growth mean officials should not anticipate huge revenue increases. Increases will not be there and budget growth should not exceed overall economic growth.I guess the good news is that risks of another recession remain low, all the estimates are for forward growth, not backwards. There are no major imbalances in the economy that point towards decline in the near future. Slow but steady improvement in labor, real estate and capital markets all suggest further economic plodding along.
Stay tuned. If the news gets better, you’ll hear me shouting for joy. In the meantime, I want to hear from you. Contact Me!
Franklin District Senate Candidate