The latest ‘Economic Progress’ idea
Is Vermont on the road to becoming a prosperous state with a strong economy and plentiful job openings? Or will its economy -- despite some recent positive indicators -- face a continuing struggle under the weight of too much high-cost government, only selectively alleviated by politically designed subsidy programs?
In a March 27 news release, Gov. Peter Shumlin highlighted the good news. The Opportunity Index, calculated by a broad group of civic organizations, ranked Vermont No. 1 in the nation. Its calculation included unemployment rate, poverty percentage, median income, housing costs, low crime rate, and high school graduation rates. Vermont’s commendably high rates of group membership and volunteerism made the point that we have an active and concerned citizenry. Vermonters can rightly be proud of this.
On the economic side, Shumlin was quick to tout the February unemployment rate (now at 3.4 percent for March), as the second lowest in the nation after booming North Dakota. He also announced a collection of taxpayer financed grants, loans and credits, and one really worthwhile and long overdue regulatory change: A Vermont Small Business Offering Exemption that will allow more Vermonters to invest in the stock of local businesses.
On April 15 Shumlin announced his bold new idea for strengthening the private economy. He proposes to assign $5 million "in surplus money" to a "Vermont Enterprise Incentive Fund." It would allow him, the governor, to distribute cash to "help Vermont compete for businesses looking to relocate and to keep businesses already in the state." The $5 million budget surplus, if it ever materializes, would put this fund in line ahead of the underfunded Rainy Day Fund, which is the final destination of any surviving surplus dollars.
It surely seems strange that a governor, flanked by his legislative leaders, would orchestrate the announcement of a paltry $5 million fund, which might or might not ever appear, to compensate certain business firms enough for their higher costs of doing business in Vermont for them to locate or remain here.
Cynics will observe that the governor wants the discretion to distribute these grants in the way that most accrues to his political advantage. They may recall Gov. Dean, who in 1993 announced a similar "economic progress" program. As proposed by Dean, any company that qualified for state assistance would have to go to the governor -- him -- for final approval.
Fortunately, the legislature wouldn’t buy that "Boss Tweed provision," but Shumlin is trying again.
Shumlin wants the public to believe that dispensing $5 million taken from the taxpayers to a handful of favored businesses selected by him will improve Vermont’s economy. Balance that against these anti-business factors: Vermont has the ninth highest state and local tax burden in the nation; Vermont electricity costs are among the highest in the nation (thanks in no small part to Shumlin’s solar and wind subsidies extracted from helpless ratepayers); the Vermont legislature has just enacted a job-killing minimum wage increase to the highest in the nation; Vermont has a combined $3.3 billion actuarial shortfall in its two retirement funds, and the only way the Treasurer can think of to prevent further teachers’ fund robbing is to "borrow" health benefit costs from the Rainy Day Fund; Vermont has a bonded debt to GDP ratio of 17.1 percent, highest in the nation; Vermont exhibits a mountainous tangle of job-killing state regulations; the legislature has just approved a 7.5 cents per $100 of fair market value school property tax rate increase for businesses and landowners; Vermont’s strongly pro-spending and pro-union legislature shows no signs of curbing its zeal; and, to top it off, the governor’s largest looming problem is how to extract $2 billion in new taxes to finance his Green Mountain Care starting in 2017.
Suddenly that $5 million -- if it ever materializes -- doesn’t look like much, unless your business happens to be a favorite of the governor who will dispense the cash.
John McClaughry is vice president of the Ethan Allen Institute.
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