Vermont’s economic forecast is bleak

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(Host) The state’s economic forecast is bleak. Declining state revenues will force lawmakers to cut about $30 million from next year’s budget.

That was the word today as top state officials gathered to learn how a growing national recession has affected the Vermont economy.

VPR’s John Dillon reports:

(Dillon) The economic forecast for state revenues usually comes in July. But with the economy worsening, lawmakers and Governor Jim Douglas decided to get an early briefing – while the Legislature is still in session.

Economist Jeff Carr did not try to hide the bad news.

(Carr)  “Let’s use the word that everybody in my profession has been scared to use. It’s a recession.”

(Dillon) Carr and fellow economist Tom Kavet looked at a host of economic trends – such as rising oil prices, a weak dollar and a slowdown in construction.

They projected how these changes affect the Vermont economy, and what state government takes in from taxes.

For example, Carr said housing prices are starting to drop in Vermont.

(Carr) “And obviously that’s going to have implications for state property tax revenues and property tax revenues for the people who are re-appraising on the local and community level. So housing still has got a little bit more of the journey to go through, probably another eight to 10 quarters of sluggishness in housing.”

(Dillon) The Douglas administration and budget writers in the Legislature will soon begin whittling down the state budget. They need to cut the general fund – which pays for most government programs – by about $25 million. And they need to trim almost $6 million from transportation spending.

On Wednesday, the Senate Appropriations Committee will start with a list of $60 million in cuts. Lawmakers will then pick and chose from that list.

Lamoille Senator Susan Bartlett chairs the committee.

(Bartlett) “I think the average person on the street is probably going to feel these reductions a little bit more, because we’ve been tightening the belt for a couple of years.”

(Dillon) As lawmakers look at cutting the budget, they are keeping one eye on the economic clouds ahead.

Rockingham Representative Michael Obuchowski chairs the House Ways and Means Committee. He  did not agree with the revenue forecast, because he thinks times will get worse.

(Obuchowski) “I think what’s going to happen when we get to July, we’re going to have another downgrade. And I think we should have taken that into account now. I hope I’m wrong. But we’ll see.”

(Dillon) Legislative economist Tom Kavet agreed that the recession hasn’t hit bottom yet. One major uncertainty is how long oil prices will stay high.

(Kavet) “We haven’t seen anything in those leading indicators that indicates we’re at the bottom. So it’s still a very fluid situation and it’s headed down. So maybe it will stabilize in the next few months. But I think there’s good reason to be concerned that it will not.”

(Dillon) High oil prices have punished the state’s Transportation Fund, which collects revenues from gas and diesel sales. That means the state has less money available for road and bridge repair.

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

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