More bad news on Vermont’s finances

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(Host) There’s more bad news on the Vermont economy, and for the budget-writers in Montpelier.

Economists say state revenues have fallen sharply, leaving lawmakers with a $50 million dollar hole to fill.

Legislative leaders say they’ll look to a combination of more spending cuts and additional taxes to balance the budget.

VPR’s John Dillon reports:

(Dillon) Economists Jeff Carr and Tom Kavet were a tag team of doom and gloom as they briefed the governor and legislative leaders.

(Kavet) "We see declines in inflation adjusted retail sales .. that are unprecedented, that we haven’t seen since the Great Depression."

(Carr) "Breathtaking."

(Kavet) "Yeah, they really are."

(Carr) "Breathtaking, the last time we had one month in the early ‘80s where we had this inflation adjusted decline in retail sales. In the last six months, we’ve seen four months that have been like that."

(Dillon) Kavet said home construction has ground to a halt and consumer spending has plummeted. State revenues are directly affected.

(Kavet) "We’re forecasting for the first time ever back to back annual declines in the two largest consumption taxes, in meals and rooms and sales and use."

(Dillon) After hearing the forecast, Governor Jim Douglas and legislative leaders said the state will collect about $50 million less than was projected at the start of the year.

For the budget year that ends in June, they’re expecting a $14 million dollar drop in revenue. The decline next year is likely to be $43 million.

The new numbers make it even more difficult for lawmakers and the administration to settle on a final budget in the two weeks before the Legislature is set to adjourn.

House Speaker Shap Smith says the Legislature and the administration will each have to make some concessions.

(Smith) "The difficult choices are going to be on all ends. It’s going to include difficult choices about programs and services that are provided to Vermonters. But it’s also going to be difficult choices about whether we will add revenue to the state budget."

(Host) Governor Douglas says lawmakers have not yet made the hard choices. He opposes new taxes, and says the revenue forecast underscores the need to make additional spending cuts.

(Douglas) "I hope that legislators will understand now how important it is to make some tough decisions. So far, there haven’t been many made. The Senate budget makes a few, whereas the House budget really didn’t. But we have to reduce the level of expenditure to live within our means."

(Dillon) But Senate President Peter Shumlin said lawmakers have cut $110 million in state spending over the past year.

(Shumlin) "If you look at the growth rate of the budget and you remove the federal funds, it’s really important to know that the budget last year was cut so much after we passed it, that it was 3.1 percent lower than the spending the year before."

(Dillon) The governor and legislative leaders plan to meet early next week to come up with a spending plan.

For VPR News, I’m John Dillon in Montpelier.

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