June 11, 2018

by Chris Campion

Vermont, fresh off the news that the state’s idea of fixing its legacy of opposition to business and economic growth is to pay people to stay there, now has at its disposal other states’ models for economic growth that actually seem to work.

And maybe those models correlate to the political leanings of the individual states.  In a recent CNBC article, they built a chart that shows one-year change in employment (in aggregate and by industry), and the Trump vote margin.  In what can only be a surprise to Vermont’s political leadership, states with low or negative Trump margins (meaning they didn’t vote for Trump) tend to show weaker job growth compared to the states that voted for Trump.

Now a host of reasons exist for why and how jobs get created, and correlation does not equal causation, but when you see some consistent patterns, it just might be an indication that something is consistently wrong with the direction Vermont’s been going in, for decades, in terms of its economy.

Overall, Vermont is at the worst part of the 4 quadrants.  The voting results are obvious, but the economic gains in total job growth are almost the worst in the country.  Only one or two states have worse economic results, but Vermont is in there, vying for the lead in the worst of the worst.

Vermont leads the way! To an economic backwater.

But if you look at specific industries, Vermont does manage to become the leader.  The last placeleader, mind you, but the leader.  To wit:  Manufacturing – Vermont, in dead last.

Best of the worst!

Construction:  Nearly the worst.  But don’t worry, Vermont is striving to lead the way in negative job growth in this category!

We’re constructing the worst economy in the country. In that, we’re #1!

But take heart, taxpayers.  There’s some good news for Vermonters amidst all the bad.  Government jobs are increasing!

Nowhere to go but up for taxpayer-supported jobs!

And if you’re interested in a high-paying, lucrative career waiting tables or manning chair lifts at the ski resorts, the sky’s the limit!

Vermont almost leads the way in tip-related employment.

This is the type of data that Vermont’s Department of Labor carries, but doesn’t publicize much, other than the unemployment number as a stand-alone.  Why?  Because Vermont’s unemployment rate is low, primarily due to Vermont’s decreasing labor participation rate, a rate that’s ticked up a bit in the last year or two.  But it went on a steep dive from 2009-2016, which seems to inexplicably coincide with a prior administration’s term.  It’s almost as if incentives were put in place for a specific number of years that encouraged people to drop out of the labor force, and now those incentives are gone.

It may be that the state doesn’t need to pay people to participate in Vermont’s economy.  It could be that, absent the 8-year overhang of higher taxes, a higher regulatory burden, and a demonization of the profit motive, Vermont’s animal spirits rise again.

Now if Vermonters could only keep the politicians from trying to help them, maybe there is a path forward, out of the economic quagmire.

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June 8, 2018

By John J. Metzler

UNITED NATIONS—In the midst of an expanding American economy, record low unemployment rates, and buoyant consumer confidence, the Trump Administration has inadvertently planted the seeds of a global commercial slowdown and political showdown.  The steel and aluminum tariffs slapped on imports from our key Transatlantic trading partners, not to mention neighbors Canada and Mexico, have created a looming danger.

Free Trade must be Fair Trade as the President always stresses.  He’s right.  America has indeed been taken advantage of by an uneven playing field and fast and loose rules.  Trade deficits, as this writer has always stated, pose not just an economic danger but a national security risk as well.  I’m totally on board here.

Tariffs offer a feel good solution to a far deeper commercial malaise. The tariff taxes pose  another unseen tax on consumers which will raise prices in the name of protection for our domestic industries and workers.

Though the original intent of the tariffs were aimed at the People’s Republic of China, as it turns out, the brunt of the trade showdown will affect America’s key political allies in Western Europe and North America.  And this is OK?

The European Union’s Jean-Claude Junker characterized the tariffs as “protectionism, pure and simple.”  Given that the Europeans wrote the book on protectionism centuries ago, I take this comment with a wry smile.  But not to digress.

When the whole showdown started in March, the feeling was that our closest trading partners in Europe and Canada would gain a reprise.  There appeared there would be a “cut out deal” for NAFTA partners Canada and Mexico.  But the policy pendulum swung back with the recent announcements that Canada, Mexico and the Europeans would indeed be slapped with tariffs.

Happily Argentina, Brazil, and South Korea have been spared from the steel sanctions.

Canada whose steel and aluminum exports to the USA last year reached $12.8 billion will soon slap tariffs on a corresponding sum of American trade.  Canadian Foreign Minister Chrystia Freeland lamented, “This is the strongest trade action Canada has taken in the post-war era…this is a very strong Canadian action in response to a very bad U.S. decision.”

France’s Finance Minister Bruno Le Maire was less gentle, “Global trade is not a gunfight at the OK Coral.”

Washington’s tough approach to its closest friends and trade partners comes at a curious time.  The brinksmanship may be a tactic in turbulent  U.S. trade negotiations with Beijing. President Trump has rightly focused on the totally imbalanced and unfair China trade but has veered into side disputes with just about everybody else.  Is such posturing with Europe part of a grand strategy dealing with the bigger issue of the U.S./China trade deficit of $375 billion in 2017?

Put in less arithmetical terms, China sells the USA four times as much as Americans buy from the People’s Republic.

American trade teams negotiating in Beijing played commercial hardball regarding the deficit;  Commerce Secretary Wilber Ross visited to present planned tariffs on $50 billion in Chinese exports unless China would buy more American products.  Beijing’s state-run media blustered back, “Let them prepare for an epic trade war.”

Uncertainty and unease will pervade markets for American exporters too as we tip toe round the tariff issue hoping to avoid the minefield of a trade war.  American consumers and companies would naturally be affected and not in particularly positive ways.  For consumers the lack of choice would likely lead to higher prices.  No question that there’s a price to pay to protect American jobs, many people are willing to share the burden to do so, but I’m not so certain these people actually realize the depth of the dilemma and the hollowing out of our industrial base.

For business the challenge is compounded.  What will the tariffs be?  Will Washington switch policy in six months?  Shall American agricultural produce exports be blocked from the China  market?

The sanctions have faced stiff criticism from many U.S. exporters and Republican lawmakers.

Facing a “trade war” the United States will make a stand at the upcoming G-7 Summit in Canada.  Here amidst the splendid St. Lawrence River in the Quebec’s Charlevoix region, the leaders of Canada, Japan and the European power economies France, Germany, Italy and the United Kingdom shall come together with the U. S. at a particularly awkward time.

We are not just talking about trade and markets here, but political relationships and shared partnerships, and enduring friendships with each of the Summit participants.  Let’s not endanger that.

John J. Metzler is a United Nations correspondent covering diplomatic and defense issues. He is the author of Divided Dynamism The Diplomacy of Separated Nations: Germany, Korea, China.

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by John McClaughry

Last week the US Supreme Court gave a partial victory to Colorado baker Jack Phillips, who had  declined to make an artistic cake for a gay wedding based on his strongly held Christian beliefs. Apparently Phillips was perfectly willing to sell cakes off the shelf, but wouldn’t employ his artistic talents to make a cake glorifying a union that he believed to anti-Christian. Instead of choosing another cake artist, the gay couple ran to the Colorado Civil Rights Commission, who found that Phillips had unlawfully discriminated against them.

The Court found not that Phillips had a right to refuse based on his Biblical beliefs, but that the Civil Rights Commission exhibited religious bias in issuing its order, exemplified by a member who likened Phillips beliefs to supporting human slavery and Holocaust genocide.  That left open the  Phillips’ persecution by a commission that kept its collective mouth shut and just issued the order.

Justice Clarence Thomas, concurring, argued that Phillips had a right not to be an active participant in the gay marriage celebration. He invoked Court precedents that tolerated white supremacist expression, and concluded that the Court should have held that “States cannot punish protected speech because some group finds it offensive, hurtful, stigmatic, unreasonable, or undignified.”

You don’t have to share Jack Phillips’ religious views to believe that the state should just leave him alone, and the couple should engage a baker who supports their preferences, or doesn’t care either way.

John McClaughry is vice president of the Ethan Allen Institute.

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by John McClaughry

Gov. Phil Scott and the Democratic-controlled legislature are well into crunch time over the FY2019 state general fund budget and the related education finance bill.

The governor obviously takes very seriously his 2016 campaign pledge to hold state General Fund spending to a growth of 2.36% a year, and to oppose – and veto – any increase in tax rates. However the actual homestead school property tax rates are not set each year by the legislature and the governor. They are determined district by district based on each district’s spending per equalized pupil. The total tax dollars thus raised, when added to other specified revenue sources, must add up to the sum of all the voter-approved school budgets.

Last year the governor (enthusiastically) and legislature (unhappily) agreed to grab more than $40 million from various accounts and reserves, and put that into the Education Fund to produce a slight reduction in homestead school property tax rates. That was effectively an internal loan that has to be repaid this year.

On May 1, two weeks before adjournment, the governor unveiled a sweeping new plan for curbing education spending and keeping homestead property tax rates flat.

His plan promises to deal with a financing gap of $236 million over the next five years. It proposes to appropriate between $44 and $58 million in one-time funds to replenish the now-depleted reserve funds and keep the homestead property tax rates flat for the coming year. The governor has apparently forgotten (again), that in his 2016 campaign he promised “We need to stop using one-time money to plug reoccurring budget holes.”

The administration’s plan promises “nearly $300 million in savings” over the five year period. Reviewing the governor’s projections, the respected, nonpartisan Joint Fiscal Office fairly concluded that “the administration’s 5-year outlook is a mathematical exercise only: their analysis does not indicate specifically how this ‘gap’ will be closed.”

The big ticket in the administration’s proposal to save the $262 million is “increasing student to staff ratios” in Vermont schools, ultimately (and supposedly by attrition). This is mathematically attractive but not credibly achievable unless the state seizes control of the schools.

When the administration floated the idea of imposing fines on school districts that didn’t meet its 5.75 to 1 ratio test, it vanished within about two days. In truth, nobody can accurately predict just how districts would react to the mandate and associated penalties, and thus how much spending would be saved.

A special education law enacted earlier this year could – possibly – produce some savings, but no one knows how much, because no one knows how the school districts will choose to make use of new flexibility, and how often service reductions will be challenged by plaintiff lawsuits.

Establishing a statewide teachers’ health insurance program could, depending on its terms, produce savings, but no one knows what the terms of such a program would be. The governor also plans to spend some of those savings, if any, on preschool, state colleges, and technical education.

What this comes down to is whether to put $34 million (or $58 million) from available one-time revenues into the Education Fund to keep homestead school property tax rates flat, and rely mainly on mandated student to staff ratio increases to produce enough “savings” to keep them flat for five years (Scott’s proposal); or letting the homestead property tax rates rise by maybe two cents to reflect increased school budget spending, while using much of the one-time revenues to pay down the enormous long-term liabilities ($2.4 billion) of the teachers’ retirement and health benefit funds (the Democratic proposal).

To their credit, the Democrats have worked conscientiously to be fiscally responsible. They rightly believe that the governor’s projection of marvelous “savings” over five years, essential to holding the line on homestead school property taxes, is speculative at best. They also responsibly oppose, as Scott himself did two short years ago, using the one-time funds to hold down tax rates for one more year. Their recommendation for using those funds is to slightly but symbolically reduce the liabilities of the teacher retirement funds.

The problem the Democrats face is that most homeowners badly want property tax relief, and are not very receptive to appeals for sound fiscal practice. It is after all election year, and if Scott’s proposal prevails, his strong suit in November will be that “he stopped rising school property taxes.”

At this writing, the resolution of the school finance issue, and thus the vetoed budget, has not taken shape. What does seem almost certain is that the terms of any resolution this month will produce exactly the same problem next year, when there’s no reason to believe that  significant  one-time funds will appear to cover another Education Fund shortfall.

John McClaughry is vice president of the Ethan Allen Institute (www.ethanallen.org).

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June 4, 2018

by Rob Roper

There is a phenomenon in behavioral economics called the “diner’s dilemma” which tracks how people act when evenly splitting a dinner check versus paying individually. The conclusion of these experiments shows that when people pay for their own consumption they spend less than when sharing the cost with others. As several studies show, roughly 30 percent less.

Vermont’s education financing system is built on a dynamic very similar to splitting the check. Local districts order what they want for their “meal”, the state collects the money in one large pool and redistributes it to cover the total bill. The psychological incentive is for districts to spend more so that other districts will end up subsidizing their portion of the bill and not the other way around. The result is a bigger total bill, much to the NEA’s delight, which is why the system is designed as it is.

Adding to the problem (and also by design), under our current system there is no real accountability. The legislators who set the tax rates blame the local voters for passing high school budgets, local officials blame the legislators for the funding system that leads to high property tax bills. So, whom do you vote out of office if you don’t like the results? Who’s really accountable? Hard to say.

This is the dynamic that must be broken, but Act 60, which guarantees students have equal access to education funding, makes “separate checks” illegal. So, what do we do?

Governor Scott is proposing to increase mandates from Montpelier for, specifically, things like staff/student ratios. The legislature is implementing mandated mergers under Act 46. All of these solutions are serious infringements on local control, a concept that since Act 60 has become largely a myth.

Here is a proposal to reign in costs, reinstate some measure of local control, and inject accountability into the process: have the legislature set a uniform per-pupil spending level (with some allowances for special needs students), but allow local school boards full reign over how to best spend the money, free from state-level interference.

Under this system, a school’s budget would be determined by the number of students in the school times the set tuition rate. There would be some loss of local control as to how much to spend, but far more local control over how to spend. (Would you prefer a thirteen dollar meal I choose for you, or ten dollars to spend on whatever you like?) If you don’t like your tax bill under this system, fire your state Representatives and Senators; they are responsibly for how much or how little is being spent. If you don’t like how the local school is being run, fire the local school board; they’re the ones calling the shots. Accountability.

This is pretty much the model under which Vermont’s independent schools that accept tuitioning students operate, and they, for the most part, get tremendous results for fewer taxpayer dollars. We know this works as the model has a century-and-a-half long track record in Vermont. Moreover, it would be a much fairer model, complying with and even exceeding the equal access to funding Act 60 demands. Whereas now students only have equal access to funds but extremely unequal per-pupil funding from school to school across the state, under the proposed system they would have equal funding.

Rob Roper is president of the Ethan Allen Institute

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H.911 – AN ACT RELATING TO CHANGES IN VERMONT’S PERSONAL INCOME TAX AND EDUCATION FINANCING SYSTEM

PASSED
in the State Senate on May 4th, 2018 by a vote of
26-3 

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Purpose: The Senate version of H.911 attempts to plug a $58 million shortfall in the state Education Fund by increasing property taxes while giving Vermonters an income tax break.
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Analysis: The version of H.911 that passed the Senate has 3 components:
1) Increased property taxes, decreased income taxes, 2) Making charitable contributions more tax friendly, 3) Removing the education-reform school measures from the House bill passed in March.
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The bill increases property taxes 5% for residential homes and 7% for non-residential property. On the other hand, it lowers income taxes by $30 million by reducing the rates the lower-income tax brackets by 0.2% and the higher income-tax brackets by 0.1%, to compensate for unintended increases resulting from changes in federal tax law. The bill also ends the tax on social security for Vermonters with incomes less than $55,000, allows for a 5 percent tax credit for charitable donations and removes a $10,000 cap on deductions for charitable donations.
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Those voting YES support this tax package.
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Those voting NO do not support this tax package.
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Senate Journal, Thursday, May 4th, 2018. “Shall the Senate propose to the House to
amend the bill as recommended by the Committee on Finance?, was agreed to
on a roll call, Yeas 26, Nays 3.” (Read the Journal, p. 983)
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How They Voted

(Click on Your Senator’s Name to Send an Email)

Timothy Ashe (D/P-Chittenden) – YES
Claire Ayer (D-Addison) – YES
Becca Balint (D-Windham) – YES
Philip Baruth (D-Chittenden) – YES
Joseph Benning (R-Caledonia) – NO
Carolyn Branagan (R-Franklin) – YES
Christopher Bray (D-Addison) – YES
Randy Brock (R-Franklin) – YES
Francis Brooks (D-Washington) – YES
Brian Campion (D-Bennington) – YES
Alison Clarkson (D-Windsor) – YES
Brian Collamore (R-Rutland) – NO
Ann Cummings (D-Washington) – YES
Margaret Flory (R-Rutland) – NO
Debbie Ingram (D-Chittendent) -YES
M. Jane Kitchel (D-Caledonia) – YES
Virginia Lyons (D-Chittenden) – YES
Mark MacDonald (D-Orange) – YES
Richard Mazza (D-Chittenden-Grand Isle) – YES
Richard McCormack (D-Windsor) – YES
Alice Nitka (D-Windsor District) – YES
Chris Pearson (P-Chittenden) – YES
Anthony Pollina (P/D/W-Washington) – YES
John Rodgers (D-Essex-Orleans) – YES
Richard Sears (D-Bennington) – YES
Michael Sirotkin (D-Chittenden) – YES
David Soucy (R-Rutland) – YES
Robert Starr (D-Essex-Orleans) – YES
Richard Westman (R-Lamoille) – ABSENT
Jeanette White (D-Windham) – YES

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..
PASSED
in the State Senate on May 9th, 2018 by a vote of
25-4

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Purpose: To apply efficiency standards to over a dozen appliances, including showerheads, computers and telephones.
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Analysis: This bill would increase the number of appliances that are subject to Vermont’s energy efficiency standards.
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Those voting YES believe that some appliances are too energy-intensive, and that Vermonters should not be allowed to purchase them.
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Those voting NO believe that Vermonters should be allowed to decide for themselves the costs and benefits of a variety of appliances. The ones who will be most hurt by this legislation are poor Vermonters who may have to forgo purchasing much needed appliances because the up-front cost of the high-efficiency models is greater than the models that do not meet efficiency standards.
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Vermont’s energy efficiency standards have been in place since 2005.
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Senate Journal, Thursday, May 9th, 2018. “Thereupon, the bill was read the third time and passed in concurrence with proposal of amendment on a roll call, Yeas 25, Nays 4.” (Read the Journal, p. 1419-1420)
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How They Voted

(Click on Your Senator’s Name to Send an Email)

Timothy Ashe (D/P-Chittenden) – NOT VOTING
Claire Ayer (D-Addison) – YES
Becca Balint (D-Windham) – YES
Philip Baruth (D-Chittenden) – YES
Joseph Benning (R-Caledonia) – YES
Carolyn Branagan (R-Franklin) – YES
Christopher Bray (D-Addison) – YES
Randy Brock (R-Franklin) – NO
Francis Brooks (D-Washington) – YES
Brian Campion (D-Bennington) – YES
Alison Clarkson (D-Windsor) – YES
Brian Collamore (R-Rutland) – NO
Ann Cummings (D-Washington) – YES
Margaret Flory (R-Rutland) – NO
Debbie Ingram (D-Chittendent) – YES
M. Jane Kitchel (D-Caledonia) – YES
Virginia Lyons (D-Chittenden) – YES
Mark MacDonald (D-Orange) – YES
Richard Mazza (D-Chittenden-Grand Isle) – YES
Richard McCormack (D-Windsor) – YES
Alice Nitka (D-Windsor District) – YES
Chris Pearson (P-Chittenden) – YES
Anthony Pollina (P/D/W-Washington) – YES
John Rodgers (D-Essex-Orleans) – YES
Richard Sears (D-Bennington) – YES
Michael Sirotkin (D-Chittenden) – YES
David Soucy (R-Rutland) – NO
Robert Starr (D-Essex-Orleans) – YES
Richard Westman (R-Lamoille) – YES
Jeanette White (D-Windham) – YES

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By Rob RoperRob Roper

After watching the debate in the State House over the $15 minimum wage it is hard to see how any rational or compassionate person could have, at the end of the day, supported the policy. The potential good that it may have done for a small minority of people was far outweighed by the potential damage it would have done to many, especially Vermont’s poor.

One of the facts presented to lawmakers that did not get much play in the media is that a majority of Vermont households living in poverty, particularly the elderly, do not have any wage income. So, while there is no chance that these people’s situations could benefit at all from an artificial increase in salaries, they would certainly be stuck paying higher prices for goods and services artificially inflated by the $15 minimum wage. Fixed incomes, already stretched, would not stretch as far.

The cost for in home care and other services that help the elderly would also become more expensive. Senator Richard Westman (R-Lamoille) noted that, for example, Lamoille Home Health and Hospice would have to raise or charge an extra $80,000 to cover wage increases for their visiting nurses.

Similarly, families with young children would take a substantial hit. Parents who earn minimum or low wage salaries might see a bump in their take home pay (assuming their hours aren’t cut), but due to the “benefits cliff” that bump would be offset by a greater loss in childcare subsidies. The Joint Fiscal Office calculated that a couple working full time in minimum wage jobs with one school-aged child would see an annual income increase by $1,155 in the first year of proposed minimum wage increases, but they would lose $1,334 in benefits.

Adding to that dilemma is the fact that a $15 minimum wage would undoubtedly increase substantially the cost of childcare, which is dependent upon low wage workers, and force some providers to close their doors. So, the couple mentioned above would be left with fewer resources to pay for a more expensive service that is at the same time harder to find. Even the child advocacy group Let’s Grow Kids warned that the wage increase “might even exacerbate the [childcare] situation…”, which they already see as a “crisis.”

The Joint Fiscal Office (JFO) also concluded that the wage increase would result in a net annual long term “disemployment” rate of 2250 jobs from 2028-2050. As a share of total jobs in Vermont this amounts to 0.5%, but as a share of minimum wage jobs, it is 3.3%. In other words, the negative impact of the $15 minimum wage on low wage workers is substantial and disproportionate.

One objective of the $15 minimum wage for its proponents is to help bridge the income inequality gap (even though JFO testified that there is no evidence that the policy would do this). But if some people get a raise from $10.50 to $15 while others lose their jobs and go from $10.50 to zero, wouldn’t that increase income inequality? Especially if the number of minimum wage workers losing their jobs is far greater than the number of higher-wage earners losing their jobs?

The state boasts it will net about $20 million in 2024 (the year the $15 minimum would be in full force) from increased tax revenue plus decreased benefit payments, but remember, this would ironically be money taken away from the same low-income workers the increased wage was supposed to help. On the federal side of the ledger, however, the state would lose an estimate $54 million in lost federal benefits and higher federal taxes. Again, a significant net loss.

Overall, JFO estimated that the impact on state GDP would be negative 0.3 percent. That may seem like a small number, but, in 2017 Vermont real GDP grew by only 1.1 percent. Stifling economic growth isn’t helpful to anyone, particularly the poor. As Rep. Cynthia Browning (D-Arlington), who has a PhD in Economics, warned her colleagues before the vote, “Good intentions and wanting to help won’t suspend the laws of economics.” The majority either didn’t listen or they didn’t care.

Governor Scott was absolutely right to veto the $15 minimum wage bill. Let’s hope he doesn’t have to do so again a year from now, and, if he does, he has the votes to sustain that veto.

– Rob Roper is president of the Ethan Allen Institute. He lives in Stowe

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May 25, 2018

By David Flemming

The stakes are high. Vermont’s special session has the potential to steer our state in the right fiscal direction for years to come, or it could leave us with a disastrous government shutdown. Governor Scott’s “no new taxes” pledge is on a collision course with the legislative leadership’s desire to pay down Vermont’s underfunded pension accounts. But this doesn’t have to be an either/or scenario. In fact, it should be “both.” First, the Governor’s “no new taxes” pledge. A governor that vocally opposes higher property and income taxes is better than having a governor who is ambivalent about the subject. We can be thankful for that.

However, Leadership has a point about the use of one-time funds to prevent property taxes from increasing not being ideal. Vermont can’t count on receiving a $35 million settlement from the tobacco industry and $44 million from unexpected tax revenue every year.

Vermont is not an island. If the second longest US economic expansion on record suddenly turns into a recession, spending will have to decrease or else taxes will increase. The more sound approach would be to figure out a way to structurally lower education spending overall.

Scott’s does do this over the long term, presenting a plan to restructure Vermont’s education system, with potential net savings of around $300 million over five years. The proposal has its detractors, but if his $60 million annual reduction in education spending is a good estimate, that is a starting place.

Acknowledging Scott’s leadership does not have to detract from our legislative leaders’ proposal to pay down the pension fund. House and Senate leadership have advocated using $34 million of the revenue windfall to pay down our unfunded employee and teacher pension liabilities. That proposal is a good conversation starter with taxpayers as to how we might pay our retiring teachers and other employees. According to Vermont’s Joint Fiscal Office (JFO), Vermont has not planned on how to pay for the nearly $4 billion in pensions and retirement benefits, as of June 2016. This number is larger now, and will only continue to grow so long as Vermont fails to cut government spending and keeps taxes where they are.

If Vermont’s pensions and benefits increase to the point that creditors doubt Vermont taxpayers will ever be able to foot the bill, interest rates on our bonds will skyrocket and Vermont would be forced out of necessity to increase taxes and dramatically cut public services, something that neither Republicans or Democrats would enjoy. We need only to look at the situation in Illinois. After the state’s powerful unions prevented Illinois from decreasing its pensions and benefits, the state’s bonds have become next to worthless.

And for the progressives who say “we can just raise taxes” if this worst-case scenario for pensions comes to pass, our “service level solvency” ranks 48 out of 50 states. This means that, in the event of a drop in revenue from a recession, Vermont’s economy would be hard pressed to remain afloat after tax increases, leading to more incomes leaving Vermont, with even higher taxes for those who remain.

If we were to assume the best of Gov. Scott and legislative leadership, both sides would use this special session to work together to pay down Vermont’s pension accounts, lowering property taxes permanently, and finding ways to cut out non-essential government programs, thus avoiding a government shutdown.

While neither side likes the shutdown scenario, the hard lines put forward by both sides leave this open as a distinct possibility. If Scott and the legislature fail to reach a compromise by June, no emergency funds can be taken from the state treasury without legislation, as stipulated by the Vermont Constitution. This being the case, we could see a shutdown sometime in July. While some fiscal libertarians might rejoice, even the most basic of government services could be affected, such as law enforcement and nursing, leaving thousands without the care they need.

Worse still, a shutdown could exacerbate the pension crisis. Interest rates on state bonds would rise, making it more difficult for Vermont to borrow money for our unfunded pension, thus raising the specter of higher taxes and reduced government services in the years to come.

Vermont is in a precarious position. For years, Vermont’s government leaders have chosen to look the other way in regards to our uncompetitive tax rates are and unfunded pensions. Voters haven’t held them accountable because the the long term consequences of these policies haven’t been felt in the context of a strong national economy.

If we do nothing, our high tax rates and underfunded liabilities will slowly siphon enough capital away from Vermont that we will begin to look upon the past couple of decades as the glory years. Not a pretty thought if you look at the lack of development in the more rural parts of our state.

So, here’s hoping that in this special session two rights don’t make a wrong, and that both sides get what they want.

David Flemming is a policy analyst for the Ethan Allen Institute.

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May 25, 2018

by John McClaughry

The state of California, always eager to lead the green parade, has now decreed a solar PV requirement for new homes.

Under the new requirements, decreed by the California energy commission , builders must take one of two steps: make individual homes available with solar panels, or build a shared solar-power system serving a group of homes. In the case of rooftop panels, they can either be owned outright and rolled into the home price, or made available for lease on a monthly basis.

The requirement is expected to add $8,000 to $12,000 to the cost of a home.

The spokesman for the building industry trade group said “Our druthers would have been to have this delayed another two or three years,” But he was not surprised. “We’ve known this was coming,” he said.

For residential homeowners, based on a 30-year mortgage, the Energy Commission estimates that the standards will add about $40 to an average monthly payment, but save consumers $80 on monthly heating, cooling and lighting bills.

Now most homeowners persuaded that installing solar PV panels on their new home would cost them $40 a month, but save them $80 a month and increase the value of the home, would likely say yes to that deal. But that’s not good enough for the Golden Nanny State. It has to force them to take the deal if they want a new home. How long before this bad idea turns up in Montpelier?

John McClaughry is vice president of the Ethan Allen Institute.

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Refuses to call it that July 17, 2018 by Rob Roper In a July 9th interview on WDEV’s Dave Gram show, Democratic gubernatorial candidate Christine Hallquist came out...

Judge Kavanaugh and the Constitution

July 12, 2018 by John McClaughry President Trump has nominated Judge Brett Kavanaugh of the D.C. Circuit Court of Appeals, to serve on the Supreme Court. The President...

Brattleboro Bans Plastic Bags

July 10, 2018 By Rob Roper As of July first, it is illegal in the town of Brattleboro to give out “single use” plastic bags; the flimsy, shapeless...

WalletHub Ranks Vermont 4th Worst State to Start a Business

June 9, 2018 by Rob Roper The personal finance website, WalletHub, just published an analysis of the best and worst states to start business. As the site points out, one...

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