Revenues & Expenditures: 9. Vermont’s Fiscal-Year 2018 Summary

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In the fiscal year ended June 30, 2018, the government of the State of Vermont had total audited expenditures of $6.1billion, up $156.5 million over 2017. This was a watershed year for Vermont: state revenues and expenses exceeded $6.0 billion for the first time.

This is the third annual update provided by The Informed Vermonter and, like all the others, it is based on Vermont’s Comprehensive Annual Financial Report (“CAFR”). The CAFR provides an independent, audited and accurate overview of the State’s expenses, revenues, assets and liabilities.

For fiscal year 2018, the State changed its auditor from KPMG, a “Big 4” accounting firm, to CliftonLarsonAllen, the number eight firm in the USA.  Changing auditors periodically means there is a fresh set of eyes looking at the state’s financial accounts, which is probably a good thing.  Hopefully, the state also managed to reduce its audit costs with this switch.

The State’s FY 2018 revenues and expenses are outlined below, beginning with revenues.

Revenues Fiscal Year Ended June 30, 2018

Revenue Source Revenue ($mm) 1-Year Change (%) 5-Year Change (%)
Service Fees 813.2 0.6 13.3
Federal Grants 2026.2 0.4 2.8
Misc. Revenues 73.8 65.7 76.6
Total Non-Tax Revenues 2913.6 1.5 6.7%
Income Tax 947.6 14.1 27.4
Sales & Use Tax 397.1 5.5 11.7
Gross Property Tax Education 1231.3 1.0 10.2
-Less Income Sensitivity (172.1) 1.1 20.6
Net Property Tax Education 1059.0 0.9 8.7
Meals & Rooms Tax 175.7 3.9 22.4
Other Taxes 659.5 3.1 5.6
Total Tax Revenues 3,238.9 5.7 13.9
Total Revenues 6,152.5 3.7 10.4

Source: Vermont Comprehensive Annual Financial Report Fiscal Years 2018 and 2014

Expenditures Fiscal Year Ended June 30, 2018

Department Expenditures ($mm) 1-Year Change (%) 5-Year Change (%)
General Government 158.6 15.0 13.4
Protection to Persons & Property 407.3 5.8 18.3
Human Services 2,471.7 (1.5) 8.8
Labor 29.8 (6.3) (2.6)
General Education 2,092.4 4.9 16.1
Natural Resources 135.0 20.3 27.8
Commerce & Community Development 43.4 (10.1) (1.4)
Transportation 462.0 6.7 8.6
Interest 19.0 11.1 68.1
Unemployment Compensation 64.1 (6.8) (27.0)
Lottery Commission 105.5 8.9 32.0
Liquor Control 64.2 5.8 16.3
Other Expenses 4.5 (6.3) (37.5)
Total Expenditures 6057.5 2.7 12.1

Source: Vermont Comprehensive Annual Financial Report Fiscal Year 2018 and 2014

As discussed by The Informed Vermonter in prior articles, the revenues and expenditures outlined above are prepared on an accrual accounting basis and do not reflect the actual cash flowing in and out of the State government.  The charts above include non-cash items such as accrued but unpaid expenses, uncollected revenues, non-cash pension adjustments and non-cash depreciation expense.  Also, major balance sheet items like capital expenditures, changes in debt and changes in working capital are excluded.

The excess of FY 2018 revenues over expenditures suggests a surplus of $95 million. However, after making adjustments for the cash flow items outlined above (and excluding changes in debt), there appears to be an annual deficit of almost $7 million on a cash flow basis.

Estimated Fiscal-Year 2018 Cash Flow

Cash Flow Item Amount ($mm)
Excess of Revenues over Expenditures 95.0
Non-Cash Depreciation Expense 186.7
Other Non-Cash Expenditures, principally pension related 188.1
Increase in Net Debt 57.2
Estimated Cash Inflows After Cash Expenditures 527.0
Capital Expenditures Net of Asset Dispositions (295.5)
Increase in Net Working Capital (180.7)
Estimated Other Cash Outflows (476.6)
Net Cash Flow 50.4

Source: Derived from information in the Vermont Comprehensive Financial Reports for Fiscal Years 2018 and 2017

As clearly illustrated in the above chart, had the State not increased its debt by $57.2 million in fiscal year 2018, the estimated net cash flow of $50.4 million would have been a deficit of ($6.8) million.  In the context of over $6 billion in total expenditures, this represents only a 0.1% cash shortfall.  Given the difficulty of predicting the State’s various expenses and revenue streams in the budget process, this looks to be a fairly well managed outcome.

Key Observations

Total Expenditures Increased with Inflation: Total audited expenditures were up 2.7% in fiscal year 2018 compared to a 2.9% increase in the US Consumer Price Index over the same 12-month period.  However, most of the increase occurred in a single department, as discussed below.

Tax Revenues Were Way Up:  Having declined 1.8% in fiscal year 2017, Vermont’s total tax revenues increased 5.7% in fiscal year 2018.  The largest increase was in Income Taxes, which were up a whopping 14.1% in fiscal year 2018.  The Informed Vermonter will cover the reasons behind this increase in a separate article, including the impact of the federal Tax Cut and Jobs Act of 2017.

A Tale of Two Departments:  Together, Human Services and General Education accounted for 75% of total expenditures in fiscal year 2018.  Following years of rapid growth in Medicaid costs, total Human Services expenditures actually declined by 1.5% in fiscal year 2018, or $36 million. Unfortunately, General Education expenditures increased 4.9%, or $102.5 million.  General Education accounts for over 65% of the total increase in annual expenditures.

Related Articles

  1. Vermont 2017 Fiscal Summary https://theinformedvermonter.com/483-2-fiscal-2017-cafr/
  2. Vermont 2016 Fiscal Summary https://theinformedvermonter.com/revenue-expenditures-vermonts-fiscal-2016-summary/

 

 

 

 

 

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