Thursday marked the semiannual Festival of Numbers that is the consensus economic forecast, prepared as always by Vermont state economists Tom Kavet and Jeffrey Carr. The topline: Happy times will continue for another year and a half or so, but after that there’s tremendous uncertainty and huge downside risk.
Or, to put it in purely political terms, Phil Scott will enjoy smooth financial sailing through fiscal year 2024 (assuming he wins another term, and there’s no reason to think he won’t), but whoever is governor in 2025-26 may have a real mess on their hands.
The very short-term forecast is for even more money to flow into Vermont’s coffers. Carr and Kavet upgraded their revenue forecast for the rest of FY2022 (ends June 30) by $44 million.
The reason: Vermont’s economy and state revenues continue to be buoyed by the flood of federal Covid relief dollars — more than $10 billion in all. “We had a [fiscal] hole and we’re filling it five times over with federal stimulus,” said Kavet. Those dollars will continue to flow for 12-18 more months. Then comes a return to Earth, and a landing that might be soft, or… a splat on the landscape.
“There is no playbook from the last time the feds dropped $10 billion on our economy,” said Carr, meaning that it’s never happened before. When the money dries up, Carr said, “the amount of risk, especially on the downside, escalates… The economy will transition into something new and different.”
And while the short-term outlook is rosy in the aggregate, that doesn’t mean everyone is doing well. “One hand’s in boiling water, one’s in ice water,” said Carr. “On average, you’re okay.”Continue reading