Projected revenue drop means more cuts this year, and next

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(Host) There are new indications today that Vermont is experiencing its longest economic recession since 1929. A projected drop in state revenues means there will be further cuts in this year’s budget – and next year’s as well.

Economists say the quick passage of a federal economic stimulus package could help turn things around by the summer.

VPRs Bob Kinzel reports:

(Kinzel) The economic news that was delivered to the state’s Emergency Board was sobering – state revenues aren’t meeting projections and the situation is expected to get worse over the next 6 months.

Tom Kavet is an economic consultant for the Legislature. He says Vermont’s economic picture has gotten worse in the past 3 months as the state’s unemployment rate approaches 6%.

The bottom line, according to Kavet, is that the state needs to cut another $10 million from this year’s budget and another $35 million from next year’s budget.

To put this in perspective, this means that in the last 12 months, revenue projections for this year have been cut back by $80 million and the forecast for next year has been reduced by $150 million:

(Kavet) "So that’s why we’re shifting the whole forecast has been shifted down it’s both deeper and a bit longer than we had seen before and the fact that we don’t see a clear bottom means that this may still get lower yet."

State economist Jeffery Carr says Vermont is in better shape than most of the other New England states but he’s predicting the longest economic downturn since the Great Depression:

(Carr) "It’s hard to get excited about where we are right now because we are in a downturn and it’s a downturn that’s lasted for longer than they usually do and it’s one that’s likely to continue for a while longer."

Carr says the holiday season was very disappointing for many retailers in Vermont and he’s concerned that a number of stores will go out of business in the coming months because consumers are being very cautious:

(Carr) "They’re taking certainly a wait and see they’re not buying things and buying things and services is what drives the economy face it and businesses buying things through investment or buying supplies drives the economy and I think people are very very very conservative now with how it is that they’re spending."

Is there any good news about Vermont’s economic situation? Maybe. According to new estimates, Vermont could receive as much as $350 million over the next two years as part of the federal stimulus package. Most of the money will be allocated for transportation projects and the Medicaid program. Economist Tom Kavet:

(Kavet) "The best that could happen is that the package gets passed very quickly is that finally we get some confidence back that oil prices stay low…that’s kind of the hope that this kind of intervention really makes a difference."

Governor Douglas will outline his solution to Vermont’s budget problem in a special address to lawmakers next week.

For VPR News I’m Bob Kinzel in Montpelier.

Photo:  State Economist Jeffery Carr (left) & Legislative economist Tom Kavet (right) at the Emergency Board

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