State revenues decline, another sign of slowing economy

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(Host intro) There are new signs that the Vermont economy has slowed even more.

State revenues for August declined more than 10 percent, including drops in the income, sales, and meals and rooms taxes.

Officials say they’ll know in about a month if millions of dollars in additional budget cuts will be needed.

VPR’s Bob Kinzel reports.

(Kinzel) There’s an old saying in state financial circles that it’s a mistake to predict the outcome of a fiscal year based on the first two months of the year.   But even given this reality, the Douglas Administration is definitely concerned about the direction of the Vermont economy.

Overall, General Fund revenues were down just over 11% for the month of August. Every major tax source in the fund showed a decline.

Administration Secretary Neale Lunderville says it’s clear that the slumping national economy is continuing to have an impact in Vermont.

(Lunderville) “People are facing challenges out there, Vermonters are all across the state. And as the price of fuel and gasoline continues to be high, they don’t have money to spend in other areas. So you can see a reduction in some of the consumption type taxes. So we remain cautious on those revenues going forward."

(Kinzel) State economists will meet in November to determine if there needs to be another downward revision in this year’s revenue forecast.

Lunderville says it’s too soon to tell if this action will be needed.

(Lunderville) “We’re hopeful we don’t have to revise our revenue targets. But if the challenges persist in the national economy and they continue to be felt in the state economy, we may have to do that."

(Kinzel) But if the economists conclude that the revenue forecast has to be cut again,  Lunderville says the state will have to implement another round of budget cuts.

Several weeks ago, the Joint Fiscal Committee, working with the Douglas Administration, cut spending in this year’s budget by roughly 22 million dollars.

(Lunderville) “Anytime the economists revise our revenue forecast downward, we have to go back and make sure our budgets match up to that. So it would mean that we’d have to go back and look for ways to reduce the fiscal year ’09 budget."

(Kinzel) An indicator of the condition of the Vermont economy will come in several weeks when a new unemployment report will be released.  Last month’s rate was the highest in the past five years and the question is whether the rate will go even higher.

For VPR News, I’m Bob Kinzel in Montpelier

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