Vermont’s Economic Climate 6-3-1 Key Indicators How the Scott Administration will Measure Progress • Growing the Economy • Size of the workforce--as a percent of the population (statewide and by county) • Employer growth rate--total size and by employee count • Wage growth--by region • Making Vermont More Affordable • Average percent of household income spent on healthcare, housing (includes utility and heating costs, etc.), and taxes & fees • Protecting the Vulnerable • Percent of the population living below 200% of the Federal Poverty Level (FPL) • Rate of homelessness/housing stability • Kindergarten readiness • Percent of the population with access to comprehensive healthcare 4 Key Factors in Vermont’s Job Market
• The State’s economy appears to be entering a more sluggish period: The May 2017 job statistics show that the Vermont nonfarm payroll job count declined by 2,200 jobs over the four month period since the last month where the number of jobs increased in January 2017.
• Labor market conditions are expected to tighten marginally with Statewide employment growth following a more restrained trajectory than anticipated in the January update.
• According to the household survey of employed and unemployed Vermonters, the unemployment rate in Vermont has hovered around 3.0%, resulting from recent employment trends but also a decline in the civilian labor force.
• The updated consensus economic forecast for Vermont also includes a slightly slower pace of output growth and a somewhat slower pace to personal income growth over the near term forecast horizon. Vermont’s Preparedness for a Recession
Recession Type Total Fiscal Shock1 Fiscal Shock Ratio2 Reserve Shortfall Moderate $ (200.8) million -13.3% -7.1% Severe $ (276.6) million -18.3% N/A
Source: Moody’s 1Total tax revenue shortfall 2Shortfall as a % of revenue • In the event of a recession, Vermont could face severe fiscal consequences • For a moderate recession, the total estimated negative shock to revenues is $200.8 million, or 13.3% of total revenues • For a severe recession, the total estimated negative shock to revenues is $276.8 million, or 18.3% of total revenues • In the case of just a moderate recession, 7.1% of the fiscal shock would not be covered by actual reserves. In other words, Vermont would not be able to make up for the fiscal shock. • Compared to other states, Vermont is ill-prepared for a recession • Our fiscal shock ratios rank us 41st and 34th in the nation in preparedness for moderate and severe recessions, respectively. • Our reserve shortfall is the 12th highest in the nation Credit Ratings Considerations for Vermont
Positives
• Strong financials (i.e. sufficient reserves, liquidity, unrestricted cash flows) • Positive government framework (i.e. use of fiscal best practices, budget management structure, consensus economic forecasts) Making Progress
• This year, we’ve taken steps to get our fiscal house in order and provide relief for Vermonters • $35 million towards affordable housing • 6 new Tax Increment Financing (TIF) districts • $150,000 to Small Business Development Centers • $100,000 to support regional microbusinesses • $250,000 for economic development marketing • $200,000 in new downtown tax credits to support economic growth • $2.5 million towards the Child Care Financial Assistance Program • $3 million to the Vermont State College System to stabilize tuition • A budget with no new taxes or fees for the first time in memory Rating Agencies
• Standard & Poor’s (S&P): AA+ • Moody’s: Aaa • Fitch: AAA Credit Ratings Considerations for Vermont
Negatives
• Slower than average economic growth • Shrinking workforce • Population and demographic considerations • Debt profile (i.e. debt ratios relative to peers) • Pension liabilities Real GDP Growth Compared to Other Triple-A States
Percent Change in Real Per Capita GDP (2011-2016) (Source: Bureau of Economic Analysis) 12.00% 11.25%
10.00%
8.15% 8.00% 7.65%
6.30% 6.13% 6.00% 5.25%
4.40% 4.08% 4.13% 4.00%
2.55% 2.20% 1.91% 2.00%
0.22% 0.00% Delaware Virginia South Vermont Maryland North South Missouri Florida Indiana Georgia Utah Tennessee Iowa Texas -0.20% -0.03% Dakota Carolina Carolina
-2.00% Median Household Income Growth Compared to Other Triple-A States Percent Change in Median Household Income, 2011-2016 (Source: Census/CPS, three-year rolling average) 12.0%
9.9% 10.0% 9.7% 9.1% 8.7% 8.9% 8.3%
8.0% 7.5% 7.1%
6.0% 4.9% 4.4% 4.0%
2.7% 2.9%
1.8% 2.0%
0.0% Virginia Florida Delaware Maryland Vermont Georgia Texas Indiana Tennessee South Utah North Iowa South Dakota Carolina Carolina
-2.0%
-2.5%
-4.0% Workforce Growth Compared to Other Triple-A States
Percent Change in Civilian Labor Force (2011-2016) (Source: BLS) 16.0%
14.0% 13.4%
12.0%
10.0%
7.7% 8.0% 6.8% 7.0% 6.5% 6.1% 5.8% 6.0% 4.9%
4.0% 2.9% 3.0% 1.8% 2.0% 1.1% 1.6% 1.6%
0.0% Vermont Iowa Tennessee Missouri Virginia South Maryland Indiana Georgia South North Delaware Florida Texas Utah Dakota Carolina Carolina -2.0%
-4.0% -4.0%
-6.0% Our Demographic Trends Must Reverse
• Vermont has 25,000 fewer Vermonters aged 20 and under than we did in the year 2000. • Vermont has 60,000 more Vermonters over the age of 65 than we did in that same year. • Vermont has one of the oldest populations—in fact the second oldest population in the country behind only Maine. • This “higher than average percentage of older residents” or “older than average” population status is forecasted to continue through calendar year 2025 as Vermont’s population share over 65 is expected to grow at a significantly faster rate than is the case for the U.S. as a whole. • We must grow our working-age population to grow our workforce and our tax base. Vermont General Obligation Debt Outstanding FY 96-17 (Inflation-Adjusted) Historic and Projected Debt Per Capita Ratio Vermont vs. Triple-A Average $1,200
$1,150
$1,100
$1,050
$1,000
$950
$900 Debt Debt Per Capita(in $)
$850
$800
$750
$700 2013 2014 2015 2016 2017 2018 2019 2020 2021
Triple-A Vermont Projected Vermont Mean Debt Ratios: Vermont vs. Triple-A Average
Debt Per Capita 2013 2014 2015 2016 2017 Net Change Triple-A Average $1,021 $1,027 $980 $904 $901 -$120 Vermont $811 $878 $954 $1,002 $1,068 $257 Debt as a % of Personal Income 2013 2014 2015 2016 2017 Net Change Triple-A Average 2.6% 2.4% 2.3% 2.1% 2.0% -0.6% Vermont 1.9% 2.0% 2.1% 2.1% 2.2% 0.3% Debt as a % of GSP 2013 2014 2015 2016 2017 Net Change Triple-A Average 2.1% 2.0% 1.8% 1.8% 1.7% -0.4% Vermont 2.0% 2.0% 2.0% 2.1% 2.2% 2.2% Pension Liabilities Compared to Other Triple-A States
Adjusted Net Pension Liability Per Capita (Source: Moody's) $9,000
$8,000 $7,624
$7,000
$5,873 $6,000
$5,000 $4,509 $4,615 $4,078 $4,000
$3,000 $2,543
$1,842 $1,859 $1,879 $2,000 $1,706 $1,439 $1,197 $1,016 $1,000 $751 $589
$0 North Florida Tennessee Iowa Utah Missouri South Virginia Georgia Indiana Delaware Texas South Vermont Maryland Carolina Dakota Carolina Moody’s Adjusted Net Pension Liability Metrics, 2017 Vermont vs. Triple-A Average
14.0%
12.3% 12.1% 12.0%
10.0%
8.0%
6.0% 5.6%
4.8%
4.0%
2.0%
0.0% % of Personal Income % of GSP
Vermont Triple-A Average Moving Forward
• By growing the economy, making Vermont more affordable, and protecting the most vulnerable, we CAN reverse these trends • We need pull together and focus on the fiscal fundamentals • Together, we can put Vermont back on the right track