Recession continues, costs state government another $28 million

07/16/09 5:50PM By John Dillon
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AP Photo/Toby Talbot
Administration economist Jeff Carr, left, and legislative economist Tom Kavet in a 2008 photo.
(Host) The economy has yet to reach bottom. Unemployment will continue to rise and state revenues are shrinking drastically.

That was the bleak news delivered by a pair of economists on Thursday. As a result, legislative leaders agreed to lower their budget estimates for next year.

VPR's John Dillon reports:

(Dillon) Legislative economist Tom Kavet said the current recession is unprecedented for its length and depth.  One stunning statistic is that in just 19 months, the country lost 6.5 million jobs.

(Kavet) "That's entirely wiped out nine years of job growth. So from the time this expansion started to now, we're at zero. That's never happened before since the Great Depression."

(Dillon) Kavet and state economist Jeff Carr say state revenues will be down $28 million this fiscal year, and $23 million next year.

The reason is that the economy has yet to recover. And all the major revenue sources - such as income, sales and rooms and meal taxes - are declining. Jeff Carr:

(Carr) "This is a whole other order of magnitude in terms of what's happening to the economy. And that in turn is creating a whole other order of magnitude in what's happening with revenues. We've never seen year to year, back to back declines in our major income and consumption taxes like we're experiencing now."

(Dillon) Governor Douglas said the revenue forecast makes an already difficult budget process much worse. He said the state may need to cut its work force through additional layoffs.

(Douglas) "The projected shortfall for 2011 was $67 million. What we heard today was that it was $23 million more than that. So it's $90 million now for 2011. Added with what we're looking at for fiscal '10 and '12, we're looking at a quarter of a billion dollar problem for these three years."

(Dillon) The latest fiscal problems follow a contentious legislative budget debate. Lawmakers overrode the governor's veto to pass their own spending plan that included new revenue.

Senate President Peter Shumlin and other Democratic leaders asked the governor to set aside that dispute and work with them on next year's budget.

(Shumlin) "I think that what we have to continue to do is reach our hand out to the governor and tell him that in fiscal crisis unprecedented for Vermonters when they're feeling so much pain it's time to move on from the battles of the past and work together in the best interests of Vermonters."

(Dillon) Douglas promised to work with Democrats. But he didn't seem ready to forget the bruising budget debate.

(Douglas) "We have to move forward. But the questions that have been presented to me are in the context of, ‘Gosh, let's forget all that and have a Kumbaya moment and work together on a process that we can all agree to.' And I need to have some level of confidence that's possible, based on my experiences of the last year. And I'm not certain of that."

(Dillon) Both sides agree that the state faces unparalleled budget problems. It was summed up in one fact provided by economists. The state will have less money to spend this year than it had five years ago.

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

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