The Emergency Board met this week to review the Consensus Economic Forecast, which showcased Vermont’s strong but shifting economic landscape. Productivity remains high, supported by record-breaking stock market performance and 48 consecutive months of job growth. Workforce mobility continues to shape the labor market, with approximately 10,000 workers moving into and out of the state annually. While this activity brings opportunities, it also presents challenges for labor market stability.

State revenues are slightly above expectations, with Fiscal Year 2025 estimates showing overall collections 3.7% higher than projected. However, performance varies across major funding streams:

• General Fund: Revenues exceeded expectations by 6.0%, driven by strong personal income and corporate tax collections.
• Education Fund: A 2.1% shortfall stems from weaker sales and use taxes, meals and rooms taxes, and declining lottery revenues.
• Transportation Fund: Revenues were 2.7% above estimates, bolstered by strong vehicle purchase activity.

Certain tax streams produced mixed results. The Childcare Payroll Tax fell behind expectations, while the Property Transfer Tax exceeded projections. Revenue from cigarette and e-cigarette sales declined but was partially offset by growth in nicotine pouches.

Adjustments to Vermont’s tax system also revealed uneven outcomes:

• Sales & Use Tax: Expanding the tax to include sectors like cloud-based services underperformed expectations.
• Short-Term Rental Surcharge: Marginally below projections.
• Motor Vehicle Purchase & Use Tax: Surpassed targets due to pent-up demand and tariff concerns.

National trends add further complexity. A reliance on federal stimulus funds has temporarily supported Vermont’s economy, but as those funds taper off, pressure mounts for sustainable fiscal solutions. Additionally, uncertainty surrounding potential inflation, interest rates, and tax reforms under the incoming federal administration could impact the state’s economic trajectory.

The ongoing legislative session provides a critical opportunity to adjust fiscal priorities and prepare for these challenges. Vermont businesses should stay engaged in policy discussions to ensure their voices are heard. The next revenue update, scheduled for July, will offer further insight into the state’s fiscal outlook.

This forecast highlights both opportunities and uncertainties for Vermont’s business community, reinforcing the importance of adaptability and collaboration in navigating the state’s economic future.