Officials project huge budget shortfall
By LOUIS PORTER Vermont Press Bureau | April 16,2008
MONTPELIER — It's not pretty. After weeks of wondering how much will have to be trimmed from next year's state budget, officials got word Tuesday it will be at least $24.5 million in General Fund spending alone.
That is more than 2 percent of the state's main spending plan of roughly $1.2 billion.
Meanwhile, the chronically underperforming Transportation Fund will get $1.8 million less than expected this fiscal year and $4 million less in the next fiscal year, which begins in July.
The Education Fund will get $4.5 million less than expected next year under the new revenue projections, perhaps more if home values in the state start to decline.
Making matters tighter is the fact that the state has already begun some cost-cutting measures, such as eliminating 400 empty positions in state government and not fully funding the pay act — the appropriations bill that pays for midyear wage increases for state workers.
And Tuesday's reduction in projected state revenue for fiscal year 2009 follows an earlier cut of $14 million released in January and already included in the budget that passed the House and is now being considered in the Senate.
"Let's use the word my profession has been afraid to use. It's a recession," said Jeff Carr, the economist who works with the administration of Gov. James Douglas, speaking to the state Emergency Board on Tuesday. That is the fiscal panel made up of the heads of the Legislature's four money committees and Douglas.
"I have been through five or six of these," Carr said. "This has all the feel of a downturn."
Virtually all of the major economic indicators have been heading in the wrong direction since January, Carr and Tom Kavet, the Legislature's economist, agreed Tuesday.
There are some good signs. For instance, exports may grow with a weaker dollar, and mortgage delinquencies are lower in Vermont than other states. As they did in January, the economists said the economic slump seems likely to be "short and shallow."
But they also hedged their bets, saying it is more likely that state revenue will be weaker than the new projections rather than stronger.
"We are not in a position right now to say things have bottomed out," Kavet said.
Rep. Michael Obuchowski, D-Rockingham, chairman of the House Ways and Means Committee, voted against accepting the consensus revenue forecast reached by the administration and legislative economists because it was too optimistic.
"The forecast did not take into account the downside probabilities," he said. "When we get to July (the next Emergency Board meeting) we will be faced with another downgrade. That is just me and my antennae."
Douglas said he believes the economic downturn will be short lived.
"There are some positive indicators," he said. "Everybody in Vermont is tightening their belts. They expect government to do the same thing."
In all, state General Fund revenue for the next fiscal year is projected to be down nearly $30 million as things stand.
For several reasons Vermont remains in better shape than many states, some of which are facing large deficits in their current fiscal year, added Bartlett, who chairs the Senate Appropriations Committee.
The four lawmakers and two state officials now working toward a consensus of possible cuts — sometimes called the gang of six in the Statehouse — are expected to make that list public today. The list will likely be $50 million or more, but will be winnowed down to the least unpalatable choices over the next couple weeks.
Although what will be on the chopping block has not been made public, it is not too tough to guess. Some of the reductions proposed by Douglas in his budget but restored by the House — for instance, Vermont Housing and Conservation Board funding — could be under consideration, some said.
Still state officials remained somewhat optimistic.
"It could have been worse" Bartlett said at the end of the Emergency Board meeting.
"It has been worse," Douglas responded.