Is Vermont Really on the Job?

In Vermont, as across the country, there’s been a lot of talk about jobs and economic development. Bluntly stated, the economy has been lousy for some time now. Yet two months ago, Governor Jim Douglas touted his record in his “State of the State” speech, greatly exaggerating his accomplishments in this regard.

Here are the facts:

In the last 12 months, the number of net new private sector jobs in Vermont was zero — none. For comparison, the median during the 1990s was 5700 per year (see chart). Moreover, this recent weak job performance is not new; private sector job creation in Vermont has been anemic for three years.

In fairness, this is not all the governor’s fault. The forces at work are powerful and largely beyond our control: the federal budget, interest rates, trade agreements, currency exchange rates, etc. Nevertheless, Vermonters should be asking some tough questions: How much do we spend? For what? Are current economic development programs working?

Since Douglas’ first budget took effect in July 2003, the state and federal governments have spent about $100 million each in Vermont for core economic development activities. And that doesn’t include secondary or dual-purpose expenditures such as higher education, affordable housing, energy efficiency, transportation, telecom and childcare. So, what did we get for all that money?

From July 2003 to January 2008, Vermont gained 7000 private-sector jobs — a 2.8 percent increase. That might sound pretty good, until you consider that U.S. job growth was more than twice that — 6.9 percent — during the same period. Apparently Douglas’ old campaign slogan, “Jim = Jobs,” was only a little bit right.

So having invested $200 million, we spent approximately $28,000 per net new job, many of which are low-wage. At this rate, it will take more than 20 years to get that money back in taxes. Not a great return on investment.

So what’s wrong? The administration would have you believe the problem is changing demographics: young people leaving, aging population, etc. But projected demographic trends don’t explain the last five years. Here are some facts the administration hasn’t told you:

According to the Census Bureau, the number of people in Vermont ages 18 to 64 increased by 23,759 from 2000 to 2006. And while many young people are in college, almost half of them are in the workforce — many filling some of the nearly 70,000 part-time jobs in Vermont.

Moreover, concerns about the working-age population don’t take into account the growing percentage of individuals 65 or older who continue to work. So when Secretary of the Agency of Commerce Kevin Dorn told The Burlington Free Press recently, “The working-age cohort in Vermont is now in decline,” he was mistaken. Dorn appears to be confusing population with the “labor market.”

The labor market is defined as employed people — those with jobs, and the self-employed — as well as those who have looked for work in the past month. It excludes anyone who has not looked for work in the previous four weeks. This leaves out a lot of people who want to work, but for a variety of reasons are not currently looking.

People do get out and look for work when they think things are improving. For example, the labor market grew by 7100 between January 2005 and January 2006. (Maybe that feared demographic shift hadn’t started yet.) Unfortunately, there weren’t enough new jobs for all these people, so some of them backed off, and the official “labor market” declined.

The problem is Vermont’s economy is not providing enough jobs at good wages for all those who want and need them, and anyone concerned about the availability of skilled workers ought to address this rather than fret about demographics. If you can earn 30 to 60 percent more in New York or Boston, is it any wonder some people leave? (Click here to see relative salaries [1].) And this so-called exodus can’t be about Vermont’s lack of “affordability,” because housing, energy prices and taxes are all higher in New York and Boston.

Vermont’s Agency of Commerce is currently spending $100,000 on a campaign to lure college grads back to Vermont (for jobs that pay less). Mean-while, thousands of Vermonters here at home need training and education. The administration prefers to look outside the state for saviors — be they businesses or workers. The alternative is to maximize the value of instate resources, i.e., our own people.

Some of these Vermonters need training; some need more education but can’t afford it; and some need subsidized childcare. The state already spends a lot of money on these things, but clearly it’s not enough. A lot of Vermont residents are being left behind.

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Now, to the governor’s other explanation: that Vermont is the highest-taxed state in America and that it impedes job growth. Hogwash. If your family earns $80,000, your state income tax bill will be considerably lower in Vermont than it would be in a number of states, including Connecticut, Maine, Massachusetts, Minnesota, New York, North Carolina, Oregon and Wisconsin, according to the Joint Fiscal Office Tax Study. The reason your income tax bill is lower has to do with Vermont’s graduated income tax. That’s a little complicated, but the bottom line is that the governor has been dissembling.

And even though the Tax Study did not address property taxes, let’s remember that Vermont has an income-sensitive education tax. This unique feature is another reason Vermont’s tax “burden” is actually lower for the majority of filers than in many other states.

So we’re back to the main question: What the heck are Vermonters getting for all the money the Douglas administration is spending on economic development?

Sadly, the state cannot say what the return on investment is for many economic development programs. Last year the legislature asked the administration to provide performance data for its programs. While the resulting report — the Unified Economic Development Budget, or UEDB — discussed the issue at length, it did not include any performance data.

This is not the first time state government has been asked to furnish this information and has failed to do so. In the early ’90s, the legislature called for the governor’s budget to include “a strategic plan for each state agency,” including “a statement of mission and goals” and an indication of how it would measure outcomes. Compliance has been spotty.

In 1995, the legislature told the Agency of Commerce to report company-specific information on all types of economic development assistance provided to Vermont businesses, as well as results such as jobs and wages. This data has never been presented to the legislature. (Why lawmakers have not been tougher about demanding compliance is another story.)

Thus, economic development performance measurement has been required by Vermont statute for more than a decade and has yet to arrive. Last year’s UEDB report itself acknowledged how far we have to go:

Frequently, goals are unstated, unclear, or contradictory. When programs do have goals, they are often not stated in terms that support measurement. Finally, programs often have goals that are stated in terms of inputs or process, rather than outcomes.

Without this information, how can the legislature make informed decisions about how to allocate scarce resources? And how can the legislature hold the administration accountable if the latter refuses to comply with the law? Finally, why does the administration stick with a strategy that isn’t working? There are alternatives, after all.

Doug Hoffer is an independent policy analyst based in Burlington. Click here for a list of citations and resources for this story. [2]