Revenues are up, but it’s all relative

Federal stimulus funds clearly have been a godsend for Vermont and other states. Through the first round of relief—direct payments to state government, supplemental unemployment benefits, or aid to businesses—more than $5 billion flowed into Vermont to help fight the COVID-19 pandemic and to offset some of the economic damage it has caused.

And we learned this week, thanks to all of this federal aid, that Vermont will be collecting hundreds of millions more in tax revenue this year and next. But before we assume the crisis has passed, we need to ask: Hundreds of millions more than what?

The state’s economists presented their latest revenue forecast to the Legislature on Tuesday. It showed that revenue in the state’s main account, the General Fund, will be up about $160 million for the current fiscal year, which ends June 30. But that increase is over the forecast they presented last August, when things were looking very bleak. At that time, Vermont was staring at a $180-million drop in revenues from the January 2020 forecast.

So Tuesday’s presentation was good news. Things today look better than they did just five months ago. But Vermont General Fund revenues will still be about $20 million less than we expected a year ago.

Fiscal 2022 looks better. According to the new forecast, revenues are projected to be about $50 million higher than the pre-pandemic forecast. Again, that’s good news. But there also are more demands on state government and state services than there were before the pandemic. We don’t know yet how long it will take to bring the coronavirus under control, how many more businesses we’ll lose, or how many Vermonters will still be out of work 12 or 18 months from now. It’s prudent to assume that new and existing demands will easily exceed any unexpected revenue at current tax rates.