Next year doesn’t look too bad for Vermont’s economy, according to the state’s economists.
Jeff Carr and Tom Kavet delivered an optimistic revenue forecast for fiscal year 2015, which starts July 1.
Carr, who serves Gov. Peter Shumlin, and Kavet, who reports to the joint fiscal committees of the Legislature, together maintain a projection of tax revenues the state can expect each year. The consensus revenue forecast, as adopted by the Emergency Board, is the projected income on which the state budget is based.
Because revenues leading up to Thursday’s meeting had come in very close to projections, very little was changed in the existing forecast for FY15 and beyond.
The biggest change in the forecast is a reduction in revenues as a result of the anticipated closure of Vermont Yankee at the end of 2014. The nuclear power plant in Vernon was projected to pay about $12 million annually in electricity generation taxes.
The two economists also said wealth continues to be concentrated in the upper rungs of Vermont tax filers. That’s where income tends to fluctuate the most, and it’s where an increasingly high proportion of the state’s incomes taxes come from. In the future, this overreliance on taxes from upper-income Vermonters may translate into less predictable revenues for the state’s major funds, Kavet warned.
Shumlin agreed with Kavet that this volatility is even more reason to build up Vermont’s reserve fund with any surpluses.
Carr and Kavet appeared to be relieved that their forecast this year is based more on evidence than conjecture.
Cause for their current optimism comes largely in the form of “preconditions” for economic growth, Carr and Kavet said.
Prominent on the horizon are labor market indicators, which Carr and Kavet agree could mean an expansion of Vermont’s labor force.
An alternative forecast from the Vermont Economy Newsletter on Monday was much less enthusiastic. UVM Professor Art Woolf predicted that statistical revisions in 2014 will reveal a continued lag in the labor force, rather than the slow gains data are showing now.