Revenues & Expenditures: 4. Vermont’s Fiscal Year 2017 Summary

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In fiscal year 2017, the government of the State of Vermont had total audited expenditures of $5.9 billion, up $246 million over fiscal year 2016. Where all this money was spent and where it all came from is outlined below.

 

Vermont’s Comprehensive Annual Financial report for the fiscal year ended June 30, 2017 was published in early January, 2018. Audited by KPMG, this report provides an independent and accurate assessment of the states expenses, revenues, assets and liabilities. All the information provided in this article is derived from this report.

Revenues Fiscal Year Ended June 30, 2017

 

Revenue Source Revenue ($mm) 1-Year Change (%) 5-Year Change (%)
Service Charges 808.0 7.3 8.6
Federal Grants 2,018.1 (1.4) 5.6
Misc. Revenues 44.6 5.7 9.0
Total Non-Tax Revenues 2,807.7 0.9 6.4
Personal & Corporate Income Tax 830.8 (4.6) 9.3
Sales & Use Tax 376.4 1.6 8.1
Education Property Tax 1,219.3 0.8 13.7
-Income Sensitivity Adj. (170.2) 7.3 22.1
Net Education Property Tax 1,049.1 (0.2) 12.4
Meals & Room Tax 169.1 6.8 23.8
Other Taxes 639.6 3.1 14.9
Total Taxes 3,065.0 (1.8) 12.8
Total Revenues 5,935.7 0.39 9.3

Source: Vermont Comprehensive Annual Financial Report Fiscal Year 2017 and 2013

Expenditures Fiscal Year Ended June 30, 2017

Department Expenditures ($mm) 1-Year Change (%) 5-Year Change (%)
General Government 137.9 59.4 (21.9)
Protection to Persons & Property 385.0 13.2 10.6
Human Services 2,509.1 4.1 13.5
Labor 31.8 3.9 (8.6)
General Education 1,995.5 2.8 12.7
Natural Resources 112.2 2.4 18.6
Commerce & Community Development 48.3 (9.7) 42.9
Transportation 432.9 0.6 (9.7)
Interest Expense 17.1 (7.1) (18.6)
Unemployment Compensation 68.8 (0.9) (37.6)
Lottery Commission 96.9 (0.8) 22.3
Liquor Commission 60.7 2.0 16.5
Other Expenditures 4.8 35.1 (22.6)
Total Expenditures 5901.0 4.3 10.8
Excess of Revenues Over Expenditures 34.7 (86.5) (30.5)

Source: Vermont Comprehensive Annual Financial report Fiscal Year 2017 and 2013

 

The revenues and expenditures outlined above do not provide a clear indication of the actual cash flows in and out of the state government.

First, there are some material non-cash expenditures, principally relating to depreciation of capital assets and pension liability revaluations. Second, changes in state government debt, annual capital expenditures (for roads, bridges, buildings and equipment) and the change in net working capital are only reflected in the state’s balance sheet.

The Informed Vermonter has estimated the cash flow statement for fiscal year 2017.

Estimated Fiscal-Year 2017 Cash Flow

Cash Flow Item Amount ($mm)
Excess of Revenues Over Expenditures 34.7
Non-Cash Depreciation Expense 173.1
Other Non-Cash Expenditures, Principally Related to Pensions 151.1
Estimated Cash Inflow After Cash Expenditures 358.9
Capital Expenditures Net of Asset Dispositions (285.2)
Reduction in Long Term Debt (51.5)
Increase in Net Working Capital (23.9)
Estimated Other Cash Outflows (360.6)
Net Cash Flow (1.7)

Source: Derived from information in Vermont Comprehensive Annual Financial Report Fiscal Year 2017 and Fiscal Year 2016

Key Observations

Increased Expenditures: Having kept expenditures flat in fiscal year 2016, the state increased expenditures by 4.3% in fiscal year 2017, or $245.5 million. With the exception of Commerce & Community Development, the Lottery Commission and Unemployment Insurance, every other department or audit entity in the state government reported higher expenditures. The largest single increase in expenditures, at just over $100 million, was recorded in Human Services.

Revenues Under Pressure: Revenue growth of only $22.8 million clearly failed to keep up with the growth of expenditures. The state government’s three largest revenue sources, federal grants, income taxes and the education property tax, all registered declines in fiscal year 2017. Income tax revenues were particularly weak owing to a decrease in corporate tax receipts. The largest increase in annual revenues came from Service Charges, with increased by approximately $58 million.

Limited Headroom: The tight estimated cash flow position of the government suggests there was little room for error, emergencies or contingencies in fiscal year 2017. Not surprisingly, the state government elected to issue $106.1 million in new bonds in September 2017.

Federal Grants Remain Important: Federal grants declined again for the third consecutive year in fiscal year 2017, but still represent 34% of the state’s total annual revenues. To the extent the current administration and Congress reduce federal grant programs further, Vermont could face significant fiscal challenges.

 

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