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Shumlin orders spending cuts as Vt. sees revenue forecast downgr - WCAX.COM Local Vermont News, Weather and Sports-

Shumlin orders spending cuts as Vt. sees revenue forecast downgrade

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MONTPELIER, Vt. -

Vermont's economy is showing signs of weakness. And a poorer than expected financial forecast has the governor looking at budget cuts. Just over a month ago the governor signed the Legislature's spending plan into law. And now, less than a full month into the new fiscal year, that budget is shrinking.

New projections indicate the state's income should increase by 3 percent this fiscal year, but in January, economists told the governor and lawmakers to bank on a 5 percent revenue hike. The difference between the two estimates creates a $31 million gap in the $1.4 billion general fund budget passed this June.

"This really is no different than when a family that's known they have a raise coming, they get a raise, but the raise is a little smaller than they had projected. The good news is it's July not January; it gives us almost the entire fiscal year to make the adjustment," said Gov. Peter Shumlin, D-Vermont.

Thursday, the governor said he'll institute a hiring freeze and ask all agencies heads to cut their budgets by 4 percent. He says that will be enough to avoid tapping reserves, layoffs or instituting tax hikes.

State Economist Tom Kavet says the state can't rely on continuing good returns from volatile sources like estate and corporate taxes, which allowed the state to reach its budget last fiscal year.

"We would have preferred to have that strength in something like personal income and sales and use, which are our two biggest tax sources, and those we're behind the balls," Kavet said.

Economists say gas-- and the recent move tying taxes to price-- isn't pumping as much cash into state coffers as expected. Jobs are growing, but aren't paying, limiting the state's cut. Home prices dipped recently, and the construction industry is crumbling.

Economists say they believe the future is brighter than many national forecasters do though. That's because they say the recent national dip in total output is likely a flawed figure.

Republican Scott Milne, who's challenging Shumlin's re-election, sat in on the forecast discussions and had a gloomier take on Vermont's economic outlook.

"There's clearly a lot of work to do to get the economy going in the right direction. I think Vermonters are seeing that more and more, and this is just really a validation that there's a lot of work to be done and what we've been doing for the last four years is not working," Milne said.

Shumlin said he expects plans to cut budgets from all of his agency heads in one week. A small committee of legislators will still need to sign off on budget changes before they take effect.

Click here to read the July 2014 Economic Review and Revenue Forecast Update.
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