Smith calls economic outlook uncertain, despite surplus

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(Host) The state of Vermont has just ended its fiscal year with a $10 million surplus. Still, Administration Secretary Michael Smith says Vermont’s short term economic outlook is uncertain.

VPR’s Bob Kinzel reports:

(Kinzel) The state officially closed its books for the 2003 fiscal year on June 30. The final accounting shows that the state took in just over $10 million more than was projected. While this would appear to be good news, Administration Secretary Michael Smith is not convinced that the state economy is in a recovery mode.

Personal income tax receipts grew by less than 1%, the sales tax increased by just under 2% and the rooms and meals tax went up by less than 3%. What saved the state this year, according to Smith, is a dramatic increase in revenue from the state’s captive insurance tax:

(Smith) “The insurance premium taxes helped us out a lot. So it wasn’t broad based in terms of how it looks – it was spotty. We had ups and downs through the year and we had spottiness in terms of where we performed well and where we didn’t. As we look forward to 2004, I think we’ve got to be very careful of reading too much into our results for 2003. Although we’re very pleased with the results of 2003, given the position of other states out there.”

(Kinzel) Smith says the immediate outlook for the Vermont economy is very uncertain:

(Smith) “It is an economy that remains more sluggish than anticipated. It’s an economy that seems to bedevil us in terms of how we project here for the future.”

(Kinzel) On a positive note, Smith says he’s pleased that the state’s rainy day budget fund will be replenished using this year’s surplus and some new money from the federal government:

(Smith) “We’re approximately $12 million in the stabilization reserve in the General Fund right now. This $10 million will be added to it and then the second payment of the federal money that we got, we’ll be getting in October, will also be added to the Budget stabilization reserve – the rainy day fund – to bring it up to approximately full capacity at $45 million.”

(Kinzel) The state’s Emergency Board will meet next week to consider revenue projections for the new fiscal year. Smith says it’s too early to tell if these projections will have to be adjusted to reflect the sluggishness of the state economy.

For Vermont Public Radio, I’m Bob Kinzel in Montpelier.

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