Commentary: Recovery Moving Forward (May, 2020)

By John McClaughry

On November 3, 1927 Vermont took a hell of a shellacking. October had been extremely rainy. Then in two days nearly a foot of torrential rain fell on most of Vermont. The soggy mountain forests couldn’t hold it.  Down it came in gushing brooks and wild brown rivers, sweeping away nearly two hundred years of settlement and improvement.

The flood waters made nine thousand people homeless, damaged or destroyed 1,258 bridges, washed out 250 miles of the Central Vermont Railroad; and claimed the lives of 84 people. 

“The low-lying farms suffered the greatest disaster. Where topsoil was not carried away, layers of gravel and sand three feet deep had buried it, and when the flood subsided, fields and pastures were strewn with half-buried cattle and other livestock…In a few hours of violence Vermont had suffered a property loss of some thirty million dollars in farm, industry, highways, private and public buildings,” according to historian W. Storrs Lee. That’s the equivalent of $445 million today.

Bear in mind, in 1927 there was no health or unemployment insurance, no small business loans, no farm disaster payments, no Social Security or welfare checks, and no Federal recovery programs. The only Federal money Vermont got from Washington was $2.5 million for rebuilding major roads and bridges. The Red Cross played a noteworthy role in disaster relief, but “most of the mopping up was done by Vermonters themselves” (Lee).  

Now move forward 93 years. Vermont’s population has grown by 74%, to 623,000. Our state is tied together, and to New England and the world beyond, by a network of major highways, railroads, air freight and internet. The village-based agricultural economy of 1927 has become an economy strongly dependent on trade. 

Now we have been shellacked by another natural disaster, COVID-19. But where in 1927 the unflooded parts of Vermont kept the economy running, and brought relief to the people of the flood damaged areas, this time the whole country has taken the shellacking. Even if our death toll (35 as of 4/16) remains below the 1927 level (84), the shutting down of the economy for fear of virus transmission has produced  still uncalculated  millions of dollars in lost incomes, closed schools and colleges, and tottering businesses. 

Not the least of the catastrophic effects is the disappearance of hundreds of millions of dollars in tax revenues over the next two or three years. The Federal CARES act and its successors will help individuals and businesses stay alive in a way inconceivable in 1927, but Washington will not supply much or any of the lost millions in tax revenues needed to sustain state and municipal governments. 

Just one example: The consumption taxes that provide a third of the Education Fund revenues are expected to shrink by $89 million by the end of the 2020 fiscal year two months from now. After spending all of its reserves, the Education Fund will likely come up $40 million short by that date. Voters have already approved school year 2020-21 elementary and secondary school budgets $73 million larger than this year’s, even as the school population continues to decline. 

Our school finance law makes residential school property taxes the last resource to cover shortfalls. Absent dramatic changes in spending and/or taxes, that fact points to shocking increases in school property tax rates – at a time when many thousands of Vermonters won’t have enough income or savings to pay their property tax bills.

If there is any silver lining to this dark fiscal cloud, it is that it should cause wise policy leaders to reason thus: “We’re already spending $17,873 per K-12 pupil, fifth among the states, 51% above the 50-state average. We can’t possibly increase local education spending when the taxes to finance it are tanking, along with income and other taxes.  We must reexamine what Vermonters are getting for their billion and a half dollars of education spending.”

“This will require knowledge, imagination, and especially courage. Our high-spending K-12 education system got that way by 50 years of decisions heavily influenced by special interest (“stakeholder”) pleading. The economic shock of the pandemic forces us to do things differently. We can maintain today’s educational quality, and probably improve it, but it will have to be done over the fervent resistance of those interests.”

That will require not just wise policy, but a strengthened civil society in our towns and cities where, as after the 1927 flood, citizens  come together to improve the education of our children, the wellness of families, the care of old people, the economic strength of our small businesses, and every other aspect of mutual aid and flourishing community life. 

 – John McClaughry is vice president of the Ethan Allen Institute

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The Ethan Allen Institute is Vermont’s free-market public policy research and education organization. Founded in 1993, we are one of fifty-plus similar but independent state-level, public policy organizations around the country which exchange ideas and information through the State Policy Network.
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