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Education: 1. Vermont’s K-12 Education Outcomes

 

When it comes to government spending and taxation in the State of Vermont, Education is clearly the elephant in the room.

Education accounted for 34.3% of total government expenditures in fiscal year 2016 and consumed 59% of total state tax revenues. The increase in Education expenditures over the last five years was a whopping $256.9 million.

In this section, The Informed Vermonter will examine public education is detail, including education outcomes, key legislation, spending and revenue sources.

Throughout this discussion, Vermont will be compared to other states and the USA as a whole. In particular, comparisons to the neighboring state of New Hampshire will be used frequently, as this will help to make observations regarding costs and benefits.

 

Education Outcomes

Before tackling Vermont’s high cost of public education, it will be useful to determine if current education outcomes are at an acceptable level.

The National Assessment of Education Progress (NAEP), a federally mandated program, has been testing USA students since 1964 to measure academic performance. SAT college entrance exams are also a good indicator of education outcomes.

Below, test scores for Vermont’s students are summarized and compared to the USA and other states, including the neighboring state of New Hampshire.

Measured Education Outcomes 2015

 

  Vermont USA Better States Worse States Equivalent States NH vs. Vermont
NAEP Scores
Science Grade 4 163 153 1 38 7 Equivalent
Science Grade 8 163 153 2 39 5 Equivalent
Math Grade 4 243 240 7 26 18 Better
Math Grade 8 290 281 3 44 4 Better
Reading Grade 4 230 221 2 42 7 Equivalent
Reading Grade 8 274 264 1 47 3 Equivalent
High School Graduation Rate 87.7% 83.2% 9 41 88.1%
Raw SAT Scores (only states with participation rates above 50%) 1541 1490 2 22 1568

Sources: NAEP Scores: Vermont Agency of Education, 2015 National Assessment of Education Progress (NAEP) Snapshot Reports. Graduation Rates: US Department of Education, EDFacts/Consolidated State Performance. Raw SAT Scores: College Board

 

As clearly indicated in the table, Vermont consistently ranks among the best states in the country for education outcomes.

For grade 8 science, math and reading, there are no more than 3 states achieving higher NAEP scores.

SAT scores are highly skewed by state participation rates. Many states only have 3-5% participation rates, and in these states only the students going to top colleges take the test resulting in very high average scores. In the table, The Informed Vermonter looked only at states with 50% or higher participation rates and Vermont, with a 61% participation rate, ranks third among this group.

Note that New Hampshire also ranks very high in the country, a bit better than Vermont in fact.

 

 

Taxes: 2. Who’s Paying Vermont’s State Income Tax?

Like the federal government, Vermont has a progressive personal income tax system. At low levels of taxable income, tax rates are lower and at high levels of personal income tax rates are higher.

The 2016 CAFR reported the precise distribution of individual income tax collections by income level for fiscal year 2015. In 2015, there were 366,504 total income tax filers, $20.0 billion of reported taxable income and $706.2 million of state income tax collected.   The taxes paid by income bracket are outlined below.

 

Distribution of Vermont State Personal Income Tax Collection: Fiscal Year 2015

Income % Total Filers % Total State Income Tax
$300,000 and up 0.95% 24.91%
$150,000-$299,999 2.54% 14.96%
$100,000-$149,999 4.26% 13.10%
$75,000-$99,999 5.28% 10.42%
$50,000-$74,999 9.55% 11.79%
$25,000-49,999 17.35% 11.51%
$10,000-$24,999 15.62% 4.78%
$9,999 and lower 31.32% 1.27%
Out of state 13.15% 7.26%

Source: 2016 Comprehensive Annual Financial Report

 

Key Observations

A Small Number of People Matter: The top 7.75% of tax filers, or about only 28,000 filers, pay 52.97% of total state personal income tax in Vermont. The top 1% pays 25% of total state income tax.

Large Number of People Below $25,000 of Taxable Income: About 47% of Vermont’s tax filers report $25,000 of less of taxable income and pay only 6% of total state personal income tax. Note that taxable income in not equivalent to wages. Taxable income is calculated after the standard deduction (or itemized deductions) and deductions for dependents.

Other State Taxes are Less Progressive: While the state income tax is progressive, other state taxes are less so. To the extent low and moderate- income individuals pay a higher proportion of their income on goods and services, fixed rate taxes such as sales, gas and purchase & use taxes tend to be less progressive. Property taxes are progressive to the extent income levels and home prices are highly correlated, which is not always the case. When incomes decline (say upon retirement), property taxes remain the same and represent a higher proportion of income.

The table above simply shows the percentage of state income tax collected by income bracket. To get a better feel for the distribution of the tax burden based on income, the effective tax rates based on adjusted gross income are a more helpful measurement.

The tax code contains a number of features that greatly impact effective tax rates. First, different types of income are taxed at different rates. Capital gains, dividends and municipal bond interest are all taxed at lower rates than wages and salaries.

Second, there are a large number of deductions that can be taken in determining taxable income, including property taxes, health care expenses, mortgage interest and charitable donations. All of these deductions are worth more to taxpayers in higher income tax brackets (a dollar deduction saves 20 cents for a 20% taxpayer and 35 cents for a 35% tax payer).

Last, there are a large number of tax credits and exemptions that also reduce effective tax rates.

In January 2017, the Vermont Joint Fiscal Office published The Vermont Tax Study 2005-2015. This is a great document for anyone wishing to learn more about Vermont’s overall tax system. Among other things, this report showed the effective state income tax rates as a percent of federal adjusted gross income for fiscal year 2014 after taking account of all the adjustments, deductions, credits and exemptions in the tax code.

Vermont State Income Tax: Effective Rates as a % of Federal Adjusted Gross Income FY 2014

 

Adjusted Gross Income ($) Effective Vermont State Income Tax Rate
$0-$24,999 -1.3% to 0.0%
$25,000-$34,999 0% to 1%
$35,000-$74,999 1.0% to 2.3%
$75,000-$149,999 2.3% to 3.0%
$150,000-$299,999 3.0%-4.0%
$300,000-$499,999 4.0% to 5.0%
$500,000-$999,999 5.0% to 6.4%
$1,000,000 and higher 5.9%

Source: The Vermont Tax Study 2005-2015, Joint Fiscal Office

The negative effective tax rates at low levels of adjusted gross income reflect the impact of tax credits, particularly the Earned Income Tax Credit.

As noted above, Vermont’s tax code has a number of tax credits, exemptions and exclusions that result in lower tax collections each year. The government refers to these lower collections as “tax expenditures”.   In fiscal year 2015, there were $56 million of tax expenditures, as follows:

Vermont State Tax Expenditures Fiscal Year 2015

 

Item % Total Tax Expenditures $ millions
Earned Income Tax Credit 49% 27.4
40% Capital Gains Exclusion 18% 10.1
$5,000 Capital Gains Exclusion 13% 7.3
Municipal Bond Interest 5% 2.8
Higher Education Expense 4% 2.2
All Other 11% 6.2
TOTAL 100% 56.0
Source: The Vermont Tax Study, Joint Fiscal Office

 

The Financial Report of the United States calculates effective federal income tax rates based on adjusted gross income. Date for the 2013 tax year is outlined below.

US Federal Effective Income Tax Rates as % Adjusted Gross Income: 2013

 

Adjusted Gross Income Effective Tax Rate
Under $15,000 2.7%
$15,000-$29,999 2.8%
$30,000-$49,999 5.5%
$50,000-$99,999 8.7%
$100,000-$199,999 12.6%
$200,000-$499,000 19.6%
$500,000 and more 27.4%

Source: Financial Report of the United States, Feb. 25, 2016

The figures above are solely income taxes. They exclude the 6.2% Social Security payroll tax that is payable on all incomes up to $127,000 and the 1.45% Medicare payroll tax (which increases to 2.35% on income above $250,000).   If you add these taxes to the table above, you get a flatter curve, but still progressive.

The other major tax paid by Vermonters, directly by homeowners and indirectly by renters, is Property Tax. Vermont has a statewide education property tax and local municipal property taxes. While there are income sensitivity adjustments made to Vermont’s property taxes, the effective rates as a percentage of income are much less progressive than income taxes.

Education Property Tax Rates as a % of Household Income

 

Household Income Education Property Tax as % Household Income
$20,000-$60,000 2.00% to 2.50%
$60,000-$140,000 2.50% to 2.75%
$140,000-$200,000 2.75%-2.50%
$200,000-$250,000 2.50% to 2.00%
$250,000 and Higher 2.00% t0 1.75%

Source: The Vermont Tax Study, Joint Fiscal Office

 

While education property tax rates are fairly flat when measured as a percent of income, they do place the highest burden on middle class households earning in the $60,000 to $150,000 range. Above this level of income, effective property tax rates tend to decline as home values become less correlated to income levels.  Below this level, income sensitivity provisions act to reduce effective property tax rates.

Vermont also provides a level of income protection with respect to municipal property taxes through the homeowner and rent rebate programs. This protection is only available for those with household incomes of $47,000 or less, as follows:

Vermont Homeowner and Renter Rebate Programs

 

Household Income Property Tax Cap as % Household Income
Up to $9,999 2.00%
$10,000-$24,999 4.50%
$25,000-$47,000 5.00%

Source: The Vermont Tax Study, Joint Fiscal Office

 

Taxes: 1. How High Are Vermont State Taxes?

Vermont has some of the highest tax rates in the country.

The state individual income tax rates range from 3.55% on the first $37,450 of taxable income, then 6.8% on the next bracket and ultimately up to 8.95% on anything over $411,500.

Corporate taxes range from 6% to 8.5%. The sales tax is 6%. Capital gains taxes ratchet quickly up to 9% and there is a punitive capital gains tax on short-term real property gains. Vermont’s inheritance tax ratchets up to 16%, so you should think long and hard before dying there.

Both the Vermont Legislative Joint Fiscal Office and the Federation of Tax Administrators report that Vermont’s per capita state tax burden, $4,917 in fiscal year 2016, is the second highest in the USA.

 The Tax Foundation, a non-profit organization, has been compiling data on state and federal taxes since 1937. It ranks Vermont’s key taxes as follows:

Property Taxes: Vermont is the fifth highest state, with a mean effective property tax rate of 1.70% on owner-occupied homes (The Informed Vermonter pays way more than this in Randolph)

Individual Income Taxes: Vermont is the fifth highest state with a top marginal tax rate of 8.95%

Corporate Taxes: Vermont is the eighth highest state, with a top marginal tax rate of 8.5%

Sales Tax: Vermont is the 36th highest state with a 6% sales tax rate.

Inheritance Tax: Vermont is one of only 19 states with an estate/inheritance tax.

Gasoline Taxes: Vermont is the 19th highest at 30.46 cents/gallon

Cigarette Taxes: Vermont is the 6th highest at $3.08/pack

The Federation of Tax Administrators has similar rankings for tax rates in effect in 2017, with Vermont’s highest individual income tax rate and corporate tax rate ranked as the sixth highest in the country, the sales tax ranked as 12th (with quite a few other states also at 6%), gasoline taxes as 13th and cigarette taxes at 6th.

Calculating the state’s tax burden on a per capita basis paints a similar picture.  The chart below compares Vermont’s total per capita tax burden to the all the other states of the country.

Comparative Per Capita State Tax Burdens, 2015 ($)

 

  Vermont USA Average Highest State Lowest State
Total State Tax Revenues 4,861 2,851 7,583 1,170
Personal Income Tax Revenues 1,133 1,052 2,279 000
Corporate Tax Revenues 180 153 433 000
State & Local Property Tax Revenues 2,342 1,451 3,058 521
Sales Tax Revenues 1,296 1,314 2,550 185

Source: Fiscal Facts 2017, Vermont Legislative Joint Fiscal Office. Note that the Total State Per Capita tax burden reported by Fiscal facts is 1.5% higher than calculated earlier by The Informed Vermonter using CAFR information.

 

Key Observations

Very High Total Tax Burden: As reported in Legislative Joint Fiscal Office, Vermont’s per capita total state tax burden is the second highest in the USA.

Not All State Taxes Are Paid By Residents Of Vermont: A material portion of Vermont’s total tax burden is paid by non-residents. Tourists pay sales, gasoline and meals & room taxes. Non-residents pay property taxes on their Vermont vacation homes, at higher rates than residents.  The Informed Vermonter doesn’t know if Vermont “exports” more of its tax burden than other states.

High Income Tax Rates: Top marginal tax rates for both individuals and corporations are among the highest in the USA and per capita taxes from these sources are higher than the USA average.

Very High Property Taxes: Property taxes in Vermont are particularly high, with Vermont’s per capita state & local property tax burden exceeding the national average by 61%.

 

Revenues and Expenditures: 3. Vermont’s Government Spending and Taxation Profile

How important is state government spending to the economy of Vermont?

How does Vermont’s state government spending compare to the country as a whole?

The chart below shows how Vermont’s state government spending compares to the state’s Gross Domestic Product. It also shows every Vermont citizen’s share of state spending and taxation.

 

 Economic and Demographic Considerations

2016 2015 2011 Source
Vermont GDP ($ mm) 31,092 30,300 27,676 US Bureau of Economic Analysis
Vermont Population 624,594 626,042 626,672 US Census Bureau
Total State Expenditures/GDP 18.2% 18.7% 18.2%
Total Per Capita State Expenditures $9,054 $9,044 $8,048
Total Per Capita State Taxes $4,917 $4,790 $4,088

 

So, the state government accounted for 18.2% of the total GDP in 2016. Note that this excludes the expenditures of the off-balance sheet entities such as the University of Vermont and the Vermont Student Assistance Corporation. Including the $1 billion expended by these entities, the states share of GDP is closer to 21%.

Vermont’s per capita state spending, at $9,044 in fiscal year 2015, is about 57% higher than the national average, which was only $5,777 in 2015 according to the National Association of State Budget Offices.

As our state politicians move forward, they face some major fundamental challenges when it comes to spending and taxation.

Low economic growth, a declining (and aging) population and the risk of reduced federal grants are perhaps the three greatest challenges.

Vermont’s current level of spending is materially higher than most states on a per capita basis. The taxes that support this are discussed in the next section.

 

 

 

Revenue and Expenditures: 2. What Are Vermont Taxpayers Really Paying For?

Given the importance of federal grants and service revenues to Vermont’s fiscal position, it is instructive to determine exactly what costs are funded by state taxes, as follows:

 

 

 

Source of Revenues, Fiscal Year Ended June 30, 2016 ($ mm)

Department Total Expenditures Service Revenues Federal Grants Cost (surplus) to Vermont Taxpayer
Education 1,941.1 2.3 126.9 1,811.9
Human Services 2.411.4 27.9 1,493.6 889.9
Protection to Persons & Property 340.2 168.9 51.1 120.2
General Government 86.5 34.4 1.5 50.6
Transportation 430.2 119.2 281.0 30.0
Commerce & Community Development 53.5 2.7 23.5 27.3
Natural Resources 109.6 37.8 45.6 26.2
Interest Expense 18.4 1.2 17.2
Liquor Control 59.5 60.7 (1.2)
Labor 30.6 22.5 21.2 (13.1)
Lottery 97.7 124.3 (26.2)
Unemployment Compensation 69.4 143.6 1.1 (75.3)
Other 7.4 8.7 (1.3)
Total 5,655.5 753.0 2,046.6 2,855.9

Source: 2016 Comprehensive Annual Financial Report

So, of the total $3.1 billion of taxes raised by the State of Vermont in fiscal year 2016, 59% went to fund Education and 30% to fund Human Services. All the other departments were funded with only 11% of total state taxes.

If you think taxes need to be cut, Education and Human Services expenditures need to be tackled.

Other State Operations

There are some large state-owned operations that are not included in the audited financial statements of the primary government. These operations are separately financed without reliance on state tax revenues (although there are some subsidy payments included in the primary government financial statements).

The largest of these operations are the University of Vermont, Vermont State Colleges, the Vermont Student Assistance Corp. and the Vermont Housing Finance Authority.

In fiscal year 2016, total expenditures of all these “off-balance sheet” entities were just in excess of $ 1 billion.

 

Revenue and Expenditures: 1. Vermont’s Fiscal 2016 Summary

In fiscal year 2016, the government of the State of Vermont spent more than $5.6 billion to run the state.

Where that money was spent and where it came from is outlined below.

Each year, Vermont does a Comprehensive Annual Financial Report (“CAFR”) prepared and audited by KPMG, one of the big four accounting firms.

This report provides an independent and detailed assessment of the state’s expenses, revenues, assets and liabilities using consistent accounting standards. The information below is based on the CAFR for the fiscal year ended June 30, 2016.

Most of the public discussion of spending and taxation focuses on the annual budget hammered out between the governor and the legislature.

Budgets are based on assumptions and estimates, many or which turn out not to be accurate (typically, revenues are overestimated and expenses are underestimated).

The Informed Vermonter strongly prefers the annual independently audited financial report of the state, which is both factual and highly detailed.

 

Revenues Fiscal Year Ended June 30, 2016

Revenue Source Revenue ($ mm) 1-Year Change (%) 5-Year Change (%)
Service Charges 753.1 2.1 20.8
Federal Grants 2,046.5 (3.1) (1.7)
Misc. Revenues 42.8 10.3 4.5
Total Non-Tax Revenues 2,842.4 (1.5) 3.5
Personal Income Tax 748.8 5.6 35.1
Corporate Tax 121.7 (1.1) 29.6
Sales & Use Tax 370.4 1.0 14.5
Education Property Tax 1,209.3 3.0 13.5
-Income Sensitivity Adj. (158.6) 4.8 7.5
Net Education Property Tax 1,050.7 2.8 14.5
Meals & Rooms Tax 158.3 3.9 29.1
Other Taxes 620.5 1.6 19.3
Balancing Adj. 0.7
Total Tax Revenues 3,070.5 2.4 19.9
Total Revenues 5,912.9 0.45 11.4

Source: 2016 Comprehensive Annual Financial Report

Expenditures Fiscal Year Ended June 30, 2016

Department Expenditures ($mm) 1-Year Change (%) 5-Year Change (%)
General Government 86.5 (34.8) (46.3)
Protection to Persons & Property 340.2 (2.1) 4.4
Human Services 2,411.4 (1.4) 22.5
Labor 30.6 (1.6) (5.0)
Education 1,941.1 3.2 16.2
Natural Resources 109.6 5.0 2.5
Commerce & Community Development 53.5 40.8 11.0
Transportation 430.2 (0.8) 10.1
Interest Expense 18.4 7.6 (12.0)
Unemployment Compensation 69.4 (10.1) (63.6)
Lottery 97.7 10.0 31.8
Liquor Control 59.5 4.0 24.2
Other 7.4 4.2 54.2
Total Expenditures 5,655.5 (0.1) 12.1
       
Excess of Revenues Over Expenditures 257.4 14.8 (2.4)

Source: 2016 Comprehensive Annual Financial Report

It would appear that Vermont had a surplus of $257.4 million in 2016, but this is not the case. The chart above is an income statement and a) does not include some major cash items that run through the balance sheet, and b) includes some major non-cash “accounting” expenses.

First, the expenditures above include $164.1 million of depreciation expense, the annual non-cash write down of capital assets (bridges, buildings, highways…) reflecting their shorter remaining useful lives. On a cash basis, expenses are therefore overstated by $164.1 million.

Also, capital expenditures are not included. In 2016, the state spent $257.4 million on new buildings, bridges, equipment and roads. These capital expenditures need to be added to the expenditures of the state.

Debt repayment and new debt issuance is also not included . In 2016, the state’s net debt increased by $40.3 million and this is not included in the Revenues outlined above.

Last, investment in working capital, which is cash in the bank plus short- term receivables less short-term payables, is also not included. These accounts reflect revenues that have been booked but not yet received and expenses incurred but not yet paid. In 2016, the states net working capital increased by $147.9 million.

Taking these cash adjustments into account, the surplus on a cash basis was only $35.9 million before debt, as follows:

Estimated Fiscal-Year 2016 Cash Flow ($ mm)                                                                                              

Excess of Revenues Over Expenses 257.4
Non-Cash Depreciation Expense 164.1
Capital Expenditures (237.7)
Increase in Net Working Capital (147.9)
2016 Operating Cash Flow 35.9
Net Increase in Debt 40.3
2016 Excess Cash 76.2

Source: Calculated from the 2016 Comprehensive Annual Financial Report

 

Clarifications and Observations

Most of the state’s departments make some level of recurring service revenues through various fees, levies and charges. Some of the larger contributors are unemployment insurance premiums ($143.5mm), the lottery ($124.3mm), liquor control ($60.4mm), vehicle registration and license fees ($62.4mm) and a wide variety of fees collected by the Agency for Protection to Persons and Property ($168.9mm).

Federal grants, at just over $2 billion, represent 34.6% of total state revenues. Vermont’s destiny does not really lie in its own hands. Any material reduction in Federal grants would make it very challenging for Vermont to balance its books. Note that the level of federal grants has been declining over the last five years under President Obama. Our new president plans to reduce this much further.

As part of the state’s annual audit process, the Federal Single Audit report is prepared. This report outlines every federal grant received by the state and makes interesting reading.

Other taxes, at $620.5 million, include tobacco, gasoline, diesel, purchase & use, taxes on health care providers under Obamacare, insurance taxes and inheritance tax.

Two departments, Education and Human Services (health care & welfare) account for 77% of total state expenditures.  The growth in their expenditures over the last five years was a staggering $863.8 million. Any real effort to reduce state expenditures and cut taxes must address the cost of these two departments.

After many consecutive years of growing government expenditures, it was encouraging that the state managed to keep expenditures flat in fiscal year 2016. Six departments, including Human Services, cut their annual expense burden.

Key Facts and Figures: 4. Vermont’s Personal Income Profile

 

In 2016, Vermont had total personal income of $31.4 billion.

This is the aggregate of personal net earnings (wages, salaries, business earnings etc.), interest, dividends and rent and personal current transfer receipts.

Transfer receipts include all forms of retirement, health care and welfare assistance, including Social Security, Medicare, Medicaid, food stamps, family assistance and all other welfare programs.

 

 

 

Composition of Personal Income

Vermont USA
Net Earnings 60% 64%
Dividends, Interest & Rent 20% 18%
Personal Current Transfer Receipts 21% 17%

Source: US Bureau of Economic Analysis (note: these are the BEA numbers and The Informed Vermonter doesn’t know why they don’t add up to 100%)

 

Key Observations

Low Wage State: Net earnings are a smaller proportion of total personal income in Vermont compared to the USA as a whole despite a much lower unemployment rate.

High Transfer Payments: Transfer payments are a much higher proportion of personal income relative to the USA as a whole. Much of this difference is a result of the high proportion of Vermont’s population aged 65 and older, driving higher social security and Medicare payments. A more generous welfare system also contributes, which will be discussed by The Informed Vermonter under Human Services: Welfare.

 

 

 

 

 

 

 

Key Facts & Figures: 3. Vermont’s Wage and Employment Profile

Vermont’s wage distribution and employment profile is outlined below.

How much money do Vermonters earn?

How big is the labor force supporting the state’s tax base?

Where do Vermonters earn a living?

 

 

 

Vermont Wage Distribution: Salary/Wage Employment 2016

% Of Workers Earning Less Than:
10% $21,740
25% $27,150
50% $37,920
75% $56,400
90% $80,800
Average Vermont Wage $47,620

Source: Vermont Department of Labor

 

Vermont Total Average Employment: 2016

 

Total Salary/Wage Employment 308,575
Total Self-Employment & Unpaid Family Workers 60,300
Total Vermont Employment 368,875

Source: Vermont Department of Labor

 

Salary/Wage Employment by Occupation and Average Annual Wage, April 2017(data excludes self-employed workers)

 

  % Total Employment Average Annual Wage
Local, State, Federal Government 17.7 $49,520
Health Services 16.3 $44,000
Retail Trade 12.1 $29,067
Leisure & Hospitality 12.0 $21,466
Manufacturing 9.3 $55,600
Professional Services 8.9 $59,066
Other Trade, Transport & Utilities 5.6 $57,394
Construction 5.0 $46,666
Education 4.3 $47,333
Financial Activities 3.7 $73,200
Mining & Logging 0.2 $58,000

Source: Vermont Department of Labor. Note: Average Annual Wages were calculated by annualizing the first three quarters of 2016, as full year data was not available.

 

Key Observations

Low Wage State: 25% of Vermont employees earns less than $27,150/year, mostly in Retail, Leisure and Hospitality.

Importance of Government Employment: 22% of Vermonters work for the local, state or federal government or in education, most of which is publically funded.

Health Care is the Biggest Industry: 16.3% of Vermonters work in Health Services, not surprising given the aging population of the state. Medicaid and Medicare, the two key government health programs, fund a majority of Vermont’s health care industry.

Tax Supported Jobs are Important: About 38% of total salary/wage employment is either fully supported by tax revenues (government jobs, K-12 education) or partially supported (Vermont colleges, health care). Private sector activity under government contracts would add to this.

Key Facts & Figures: 2. Vermont’s Economic Performance

Perhaps the two best indicators of a state’s economic performance are Gross Domestic Product, which is the total value of all goods produced and services provided, and the Unemployment Rate, which measures the portion of the working population who are out of work.

For Vermont, these two key indicators seem to diverge.  Vermont’s GDP growth rate lags the country as a whole.  At the same time, Vermont has one of the lowest unemployment rates in the country.

 

The chart below compares Vermont’s economic performance to the USA as a whole:

Key Economic Indicators

2016 2015 2011 1-Year Growth 5-Year Growth
Vermont GDP ($ millions) 31,092 30,300 27,676 2.6% 2.4%
USA GDP ($ billions) 18,869 18,223 15,785 3.5% 3.6%
Vermont Unemployment Rate 3.1% 3.5% 5.2%
USA Unemployment Rate 4.7% 5.0% 8.5%

Source: GDP data from the US Bureau of Economic Analysis as reported by the Federal Reserve Bank of St. Louis.  Unemployment data from the Vermont Department of Labor and the US Bureau of Labor Statistics

Key Observations

Low Economic Growth: Vermont’s GDP growth rate is about 33% lower than the national average.  The Informed Vermonter has looked at long-term historical data and lower growth has been the norm for a long time.

Low Unemployment Rate:  Vermont’s unemployment rate is very low compared to the national average.  At 3.1%, most economists would classify Vermont at full employment.

More Stable Economy:  Vermont does not seem to suffer the very large swings in unemployment that the US economy, as a whole, experiences.

Key Facts & Figures: 1. Vermont’s Census Bureau Information

As a backdrop to The Informed Vermonter’s discussion of Vermont state programs and policies, fundamental information regarding Vermont’s population, economic performance and employment and wage trends is provided below.

As will be outlined in the next several articles, the underlying trends in Vermont do not paint a robust picture. Demographic and economic trends are decidedly mixed and pose challenges in the years ahead.

In the chart below, key Census Bureau data for Vermont is compared to the USA as a whole.

Key US Census Bureau Data, 2015

Vermont USA
Population, 2016 Estimate 624,594 323,127,513
Population, 2015 626,042 321,418,820
Population Under Age 18, 2015 19.2% 22.9%
Population Over Age 65, 2015 17.6% 14.9%
Population Growth, 2010-2016 -0.2% 4.7%
Median Household Income, 2015 $55,176 $53,889
% In Poverty 10.2% 13.5%
Median Home Value $217,500 $178,600
High School Graduation 91.8% 86.7%
College Graduation or Better 36.0% 29.8%

Source: US Census Bureau

Key Observations

Declining Population: Vermont has a stagnant to declining population.

Aging Population: Vermont has a materially greater proportion of people aged 65 and older and this is growing rapidly, from 14.6% of the population in 2010 to 17.6% in 2015.

Shrinking Student Aged Population:  The portion of the population aged under 18 has declined from 20.7% in 2010 to 19.2% in 2015 and is below the national average.

Low Poverty Rate: Vermont’s poverty rate is 24.4% lower than the USA average.

High Education Achievement: Vermont has a highly educated population with college graduation rates exceeding the USA average by 20.8%.