Vermont Faces 'Staggering' State Budget Shortfall | Off Message

Vermont Faces 'Staggering' State Budget Shortfall


Stephen Klein, at left - FILE: STEFAN HARD
  • File: Stefan Hard
  • Stephen Klein, at left
The Vermont legislature's top economic analyst on Saturday offered lawmakers a sobering assessment of the coronavirus outbreak's impact on state finances.

Speaking by conference call with the Vermont Senate, chief fiscal officer Stephen Klein warned that the resulting economic downturn could rob state coffers of hundreds of millions of dollars in the final three months of the current fiscal year, which ends on June 30.

"A lot of it is the questions we all don't know, which is, is this a medium-term event? Is it a long-term event?" he said. "Nobody really knows how serious this could be."

Noting that the state's Education Fund alone could be shorted $45 million over the next three months, Klein argued that next year's budget could look even more gruesome. "You realize if this goes two quarters or three or four, the numbers get staggering," he said.

The legislature's Joint Fiscal Office, which Klein oversees, has been working with Gov. Phil Scott's economists to project revenue losses, but Klein cautioned that any estimates he could offer were necessarily uncertain, given how much is unknown about the depth and duration of the crisis. "This is a little bit like throwing darts at a dartboard," he said.

Klein's office is working on a web page to provide the public with its latest forecasts, he said, but even that could prove problematic. "The dilemma is that every time we put a number on the web, people use it the next day — and then the next day the number changes by $10 or $15 million," he said.

That uncertainty could prompt lawmakers to reconsider their budgeting process.

Typically, the legislature sends the governor a budget for the next fiscal year before adjourning in May. This year, Senate President Pro Tempore Tim Ashe (D/P-Chittenden) suggested during the call, the legislature may want to pass a "three-month skeleton budget" to get the state through the first quarter of the 2021 fiscal year. It could then stay in session and develop a "more realistic" budget over the summer for the final three quarters of the year.

"At the moment, it seems hard to believe that we'll be able to pass a well-informed budget by mid-May or even early June," Ashe said.

Senators also discussed whether the legislature should delegate new spending authorities to a smaller group of lawmakers in order to provide a more nimble response to the crisis. One option could be to give those powers to the Emergency Board, which includes the chairs of the legislature's four tax and appropriations panels — known as the "money committees" — plus the governor. Another option could be the Joint Fiscal Committee, which includes the money committee chairs and six other legislators.

"The more authority we give, the more we're delegating away from all members of the Senate and House to a small group of people," Ashe said. "So it's that balancing act."

Sen. Dick McCormack (D-Windsor) expressed reservations about ceding too much power to too few legislators. "I understand the logic behind it," he said. "But there is a principle that we can delegate authority; we cannot delegate responsibility. And I would hope that we would be very reluctant to take what are essentially functions of the entire legislature and concentrate them in a committee."

McCormack added, "It's unconstitutional to delegate responsibility."

During his briefing of the Senate, Klein listed several key concerns about the state's tax collections during the current fiscal year:

  • The federal government's decision to delay income tax collections from April to July could shift $145 million in state revenue from this fiscal year to the next. "So we'll have to figure out a way to bridge that gap in the current fiscal year," Klein said.

  • The state's General Fund would be down $40 million due a drop in the state's rooms and meals tax, as well as its income tax, but a "one-time event" — the sale of a major Vermont business — brought in $35 million in unanticipated payments.

  • The Transportation Fund is off $30 to $40 million due to declines in the state's gasoline and purchase and use taxes. "How does that affect our spring, summer road season?" Klein asked, noting that transportation reserves amount to just $13 to $14 million. "There's gonna have to be reductions in activity."

  • The Education Fund is down $35 to $45 million because of reductions in the rooms and meals, purchase and use, and sales taxes. It has a $37 million reserve.
So far, Klein said, the federal government has provided only limited assistance to the state, including $4.9 million for public health measures and $38 million in Medicaid assistance.

At the same time, the state is already considering $40 to $70 million in additional spending related to the outbreak: unemployment assistance, childcare and foster programs, public health initiatives, and support for hospitals. The legislature is also considering assembling a recovery package in the coming weeks or months.

Sen. Randy Brock (R-Franklin), who had requested the briefing, said at its conclusion that he wished he hadn’t heard Klein’s dire forecast. "I know I asked for this information last week, and I think I regret it at this point," he joked.

Disclosure: Tim Ashe is the domestic partner of Seven Days publisher and coeditor Paula Routly. Find our conflict-of-interest policy here:

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