JFO previews Jan. 22 consensus revenue forecast; general fund running about $61 million ahead through December

Christopher Root, an economist with the Joint Fiscal Office, told a legislative committee on Jan. 16 that the Joint Fiscal Office (JFO) will publish the next consensus revenue forecast on Jan. 22 and that the figures in his slides will change when that forecast is released.

The JFO briefing explained that Vermont’s consensus revenue forecast sets the official baseline used by the emergency board and the legislature for budgeting. Root said the forecast focuses on the three major state funds—the General Fund, the Education Fund and the Transportation Fund—and does not capture most special-fund or dedicated-fee revenues.

Root said, “Vermont is the only state that doesn't have a legal requirement to balance its budget, but Vermont balances its budget. And how you do that is through this process called the consensus revenue forecast.” He described the process in which the administration’s economist (identified in the session as Tom Covett) and the legislature’s economist (Jeff Carr) prepare independent analyses, compare notes and arrive at a common set of numbers for the emergency board to adopt.

Why it matters: the forecast provides the binding revenue baseline for the upcoming budget and the Budget Adjustment Act, and credit-rating agencies cite Vermont’s consensus forecasting and fiscal management as positive factors when setting the state’s bond rating. Root told the committee that changes in the forecast can affect borrowing costs and that maintaining a strong rating matters for interest expenses on state debt.

Key figures and near-term schedule - JFO reported year-to-date (through December) cumulative performance about $61,000,000 above the July 2024 forecast for the General Fund. Root cautioned those numbers will be updated in next week’s forecast. - The Education Fund was running about $8,200,000 below the forecast year to date. - The Transportation Fund was about $4,200,000 above forecast cumulatively. - Root said the January forecast (due Jan. 22) is the update the legislature uses to build the upcoming budget and to inform current-year adjustments.

Breakdown by fund and drivers - General Fund: Root said most General Fund revenue comes from personal and corporate income taxes and that April is particularly important because of individual income-tax filing season. - Education Fund: the consensus forecast focuses on non–property-tax revenues that flow to the Education Fund (100% of sales tax, 25% of meals-and-rooms tax, one-third of purchase-and-use tax, lottery proceeds and interest). Property-tax revenues (the majority of the Education Fund total) are set after non-property forecasts are known. - Transportation Fund: Root noted the Transportation Fund (roughly a $300 million fund) is driven by DMV fees, the purchase-and-use tax and gas tax. Purchase-and-use tax receipts have grown since the pandemic and are the most volatile item; gas-tax receipts have been in a long-term decline since about 2005.

Other items discussed in the briefing - Dedicated revenues and special funds: Root urged caution when legislating dedicated revenue streams because those revenues are not captured in the consensus forecast and can underperform, exposing programs to fiscal risk. He used court-related special funds funded by traffic-surveillance surcharges as an example. - New and recent revenue lines: Root said the new EV registration surcharge goes into receipt this month and should appear on next month’s schedule; he estimated it would be a low seven-figure amount in the first year but did not provide a precise projection. - Sports wagering: sports-wagering receipts currently flow to a special fund and the JFO expects about $7 million to the General Fund as an assumption in the budget process; Liquor & Lottery proposed lowering that estimate by roughly $800,000 in light of recent activity. - Purchasing power vs. nominal growth: Root showed JFO tables adjusted to 2013 dollars and warned that nominal revenue growth does not necessarily preserve purchasing power once inflation is considered; a modest 3% annual inflation assumption would erode real purchasing power in the major funds over time. - Federal transportation grants: Root noted Vermont has substantial federal transportation dollars available under recent federal infrastructure laws, but most federal programs require a state match, creating the operational challenge of providing nonfederal matches to draw down federal funds.

Where to find the data Root directed committee members to the JFO website for the monthly revenue trackers, the consensus forecast narrative and underlying tables. He emphasized reading the narrative as well as the tables because the narrative contains context and interpretation used by the economists.

What the committee was told about timing and next steps Root reiterated that a new consensus forecast will be released on Wednesday, Jan. 22. That forecast will be the official baseline for upcoming budget work and the Budget Adjustment Act. Committee members asked for follow-up materials from the treasurer’s office about the estimated dollar effect of a bond-rating downgrade; Root suggested the treasurer and its financial advisers could produce a comparison of borrowing costs between rating levels.

Ending The committee scheduled the joint JFO/legislative economists briefing for Jan. 22; Root said the historical data in his slides will not change but the forecast figures will. Members were advised to consult the updated materials on the JFO website when the Jan. 22 forecast posts.