Wishful Thinking

The legislature is having more than a difficult time coming up with a balanced budget for FY10.   Let me repeat myself.  The House Appropriations Committee lists the difficulties here.  The basic problem is that

The FY2010 budget challenge has been to resolve a $230 to $240 million shortfall.
    FY 2010 represents a $128 million revenue decline from FY 2008....
This budget is built on a $57 million of base cuts and revenues.

and concludes

The budget makes inroads toward addressing FY 2011, however there will be difficult decisions to face next year.

Translation:   

We have no idea how we're going to get through 2011 so we'll leave it to next year's legislature instead of making painful choices and alienating key constituencies.

Here are some problems.   Given the legislature's own forecast of expected expenditure growth, they'd need an 11% increase in tax revenues in FY11 to balance the budget.    And they'd need another 12% increase in FY12.  Neither of those are going to happen.  Or they're hoping the economy is in such bad shape that there will be another federal stimulus bailout plan.  But if the economy is that bad, state tax revenues will be even worse than forecasted.

This means very large deficits.  They may be able to squeak out a balanced budget in FY10, but if the legislature does not raise any new taxes (or whatever they choose to call them), the deficit would be over $100 million in FY11 and $200 million in FY12.  Remember that in FY10, the current budget year, the legislature has managed to cut about $30 million in spending.  They'll have to cut three times as much next year and six times as much (on top of all previous budget cuts) in FY12 to get to a balanced budget. 

Even if they pass their proposed income tax increase, and governor does not veto it, they're still talking about cuts on the order of  $80 million for FY11 and $170 million the following year.  If the legislature wanted to eliminate the deficit and finance the entire amount through income tax revenues, they would have to increase the income tax by more than 30% in FY12. 

Are there any members of the legislature who really think that's a viable option?  If not, then they're going to have to look at the spending side of the budget and the longer they wait, the more difficult it gets. 

Comments

[Chris Campion]

In all of this, you won't hear a peep from the legislature about creating incentives for businesses to grow or site here in Vermont. Their only answer to a shortfall in tax revenue (let's just leave alone spending for now) is to raise taxes - *not* to *expand* the tax base so you won't have to raise tax rates in the first place. Why do they need to raise taxes? Because so many Vermonters are under-employed, or lack access to opportunity, that they need state services in one form or another. More people need services = raise taxes. Raise taxes and businesses leave or don't site here.

It's that simple. Stop creating a tax environment that is anathema to business and you'll see tax revenues grow. But I think we might be beyond the tipping point for this, since (as the Tiger noted a couple of days ago) Vermont is number one in individual taxes paid. No business and fewer people are going to move to a state that penalizes you for working for a living.

[Paul]

When the people stark flocking into the state for gay marriages the economy will boom and the economic problems will be solved.

[Karen Kerin]

Paul is dreaming and the forcast is likely even worse as many towns now face a growing need for money to repair local roads and culverts.

[Hunter Melville]

Let 'em know where you stand:

http://VermontTeaParty.com

Talking's fine but it's time to act.

We Need You! April 15th