Goals and Challenges for 2021
It goes without saying that 2021 will be a challenging year for families, businesses and the legislature. The first order of business will be to beat down the pandemic, and as we all recognize that will take collective action on multiple fronts. There will be challenges throughout the economy, some that may appear with little warning.
As we emerge from the pandemic our economy will continue to change month by month. Many who began working remotely last spring will continue to work remotely. And with those changes, the structure of the workplace will change along with it. Some want to get into the office because working in close proximity to others enhances output, others because social/workplace interaction is very important to them personally. Still others may not want to return to the office at all.
Our economy is changing
The retail market is being transformed. The trend towards online shopping was clearly evident prior to the pandemic. That trend has mushroomed and crowds may never return to the mall (Upper Valley Plaza) as before. Some shoppers may welcome the shift, but small retail establishments dependent on foot traffic have seen their businesses shrivel. Front line workers of every sort have been impacted, and without enhanced unemployment benefits, both state and federal, these workers would be absolutely destitute. Vermont is highly dependent on the tourist industry, and as lodging and restaurants suffer, so do all the myriad businesses that support them. For that reason, the Governor and the Legislature placed a heavy emphasis on keeping them afloat. As they begin to recover, so will the businesses that support them.
With those changes, tax revenues are changing also. For example, sales taxes from brick and mortar establishments continue to decline, but revenue from online sales are soaring. In June 2018 the US Supreme Court handed down the Quill decision giving States the right to tax internet sales from other states. Anticipating this decision, Vermont was among the first states to enact legislation to implement this form of taxation as the Court acted. As a result, Vermont is seeing healthy growth in sales tax revenue, and remember 100% of sales tax revenue supports the Education Fund. That’s good news for school budgets and property tax payers too.
Regarding manufacturing, how businesses have fared during the pandemic presents a varied picture. It all depends on the type of products produced. Some products have been in high demand while others have struggled. Vermont prides itself on exporting high value products which builds our economy and contributions to state offers. What’s in store for the future will depend on how the national and international economy recovers and also how it changes. Last year, Ways and Means made some modifications to our tax code to make it easier for businesses to do business here. It is likely those changes will be consistent with our economy going forward, and if not, we’ll make further modifications as necessary.
Wither Vermont State Finances?
Regarding State finances overall, there is good news and bad news. The good news is that because Vermont’s fiscal year runs from July 1 to the following June 30, when we adjourned the 2020 legislative session and left Montpelier, we did so with a balanced budget. And we will have a balanced budget through the June 2021. The bad news is that revenues overall for the coming year will be down, and that is a reality we will have to live with. That is to say, balanced budget or not there is less money for many programs that are important to all of us. Without a new influx of federal stimulus money there will be less for economic development, less for affordable housing, less to expand health care, less for human services, less for judicial reform, environmental protection, transportation, and on and on. The recent stimulus bill signed into law by Donald Trump provides much needed funds to extend unemployment benefits, but as of this writing, provides nothing for state or municipal governments.
So what do we do?
As we do every session, we adjust taxes to account for revenue gains and losses. At issue for my committee (Ways and Means) is how to continue to keep abreast with or even anticipate changes in the economy before they affect us in ways that make balancing the budget difficult. It is never our intention to increase taxes on the backs of families, budding entrepreneurs or newly emerging industries sectors. Instead we strive to maintain steady tax revenue – rather than lose it. The economy is changing and we must keep pace.
Many of the priorities from previous years will require further action/effort, and those that have heretofore seemed to be from the liberal wish list should now be recognized as necessary to rebuild Vermont’s economy. Each of the following (which may be expanded upon in later posts) is essential to rebuilding the economy and helping families and businesses thrive. Among them are:
supporting small businesses
expanding child and and making it more affordable
expanding health care
shoring up the tourist industry – hospitality, lodging and restaurants
dramatically increasing support for postsecondary education. That includes workforce development and training and the State College System
environmental protection and climate change
broadband expansion and on and on
I'm looking forward to getting back to work. Life can be difficult, but it’s our job to attend to it.