Published July 28, 2026 at 4:14 PM EDT

Vermont state revenues continue to withstand “chaos” and “uncertainty” in the global economy, according to the latest forecast from state economists.

Key lawmakers had been bracing for a revenue downgrade this week, but the outlook is largely unchanged from estimates that elected officials got in January. Tom Kavet, an economist for the Legislature, said spiking stock valuations have sent capital gains “through the roof.”

Jeff Carr, economist for the Gov. Phil Scott administration, said the corresponding impact on personal income and consumption tax revenues has been enough to offset downside pressures elsewhere in the economy.

“The big question is if, and if so when, will the capacity of the economy to absorb what’s going on run out,” Carr told Scott and lawmakers Tuesday, “But it’s so far, so good.”

The U.S. war on Iran, tariffs on countries including Canada, and “the ham-handed execution” of federal deportation policies, according to Carr, “all by themselves might have been enough to substantially derail forward momentum of the economy and state revenue receipts.”

“Instead, over the past 18 months, both the economy and state revenues have managed to power through those shocks in an impressive fashion,” he wrote in the latest revenue forecast.

General fund revenues are forecast to increase by 2.4% this current fiscal year and 3.2% in the next. Middlebury Rep. Robin Scheu said that’s better news than she anticipated, but she noted that revenues still aren’t expected to keep pace with the rate of inflation, which will sap the buying power of next year’s state budget.

Brian Stevenson

/

Vermont Public

Middlebury Rep. Robin Scheu said she's happy to see state revenues hold steady, but she noted they still aren't on track to keep pace with the rate of inflation.

“So we’re going to have to be careful at a time when we have many Vermonters who need our help,” Scheu said.

Gov. Scott called the latest forecast “good news.”

“Even with all the disruptions around the world, around the country, we’re still able to pay our bills,” he said.

Scott said he continues to worry, however, about Vermont’s vulnerability to economic forces beyond its control. Those concerns include artificial intelligence, which Kavet said accounts for 75% of equity market valuation increases since 2022.

“It’s exciting in some respects, terrifying in others,” Scott said of the AI industry.

Kavet said that not since the construction of railroads in the 1800s has one sector accounted for such a high share of the nation’s gross domestic product.

“There’s all this promise of AI, and that’s a big thing that’s driving it,” he said. “But there’s tremendous risk associated with that, and it’s kind of one pillar that’s holding up the economy in a big way.”

If that pillar collapses, Kavet said, market devaluations will quickly erode the revenue sources that provide the bulk of state funding for Vermont’s $9.3 billion annual budget.

“The placid surface of what we’re forecasting doesn’t really reflect all the things that are happening underneath and all the clouds that are on the horizon,” he said.