Testimony to House Commerce Committee – 02/11/15
February 11, 2015
Good morning, Mr. Chairman, members of the committee.
My name is Paul Cillo. I’m the president of Public Assets Institute. We’re a Montpelier-based nonprofit, nonpartisan, public policy think tank that was established in 2003.
For those of you who don’t know about Public Assets Institute, we analyze Vermont fiscal policy—tax, budget, and economic policy— with the ordinary Vermonter in mind. We gather the facts, usually from state or federal data bases, and explain what they mean in a way that people can understand.
We do this because we believe that government should be using the people’s money for the people’s well being. And giving Vermonters the facts and information to speak up in the public debate is the best way to make that happen.
We regularly publish reports, fact sheets, and blog posts on our website www.publicassets.org. One of our regular publications is a monthly jobs report—published on the day when Bureau of Labor Statistics releases its monthly employment data. If you’re not on our list to receive notices of our publications and would like to be, please let me know.
I’d like to talk today about our State of Working Vermont 2014 report, which we published at the end of December. State of Working Vermont is an annual report that analyzes the previous year’s data about the Vermont economy, jobs, and employment. We publish it in chartbook format. The 2014 report is based on 2013 US Census data as well as data available from the State of Vermont. I’ve provided an electronic copy to the committee and would like to review it with you briefly.
First of all, Vermont’s economy is recovering. (p.4) In fact, we’ve had the second fastest growing economy in New England since the bottom of the recession in June 2009. In 2013, Vermont’s economic growth was the highest in the entire northeast (11 states and the District of Columbia). That’s the good news.
The bad news is that during the same period real median household income dropped 6 percent. Poverty increased. (p.26) In 2013, nearly 60 percent of single mothers with children under 5 years old lived in poverty. (p.27) Homelessness increased. (p.28) And the number of Vermonters on food stamps increased. (p.29) In 2013, an average of more than 100,000 Vermonters a month needed the 3SquaresVT program to help them feed their families. That’s nearly 1 in 6 Vermonters.
How could both of these be true? Relatively good economic growth and increasing hardship for tens of thousands of Vermonters? Do we have two simultaneous realties, two Vermonts?
An answer is on pages 6, 7, and 8. Our economy is growing, thanks in part to increased worker productivity, but those workers are not seeing the fruits of their labor in higher wages. The gains are going to those at the top, who are receiving more and more of the state’s total income.
So yes, there are two Vermonts.
As the chart on page 8 shows, until 1981 income inequality had been going down in Vermont since before the Great Depression in the 1920s. The percentage of income going to the top 1 percent in Vermont reached a low point of about 6 percent in 1981. Then it began to climb, reaching a peak of more than 20 percent prior to the recession. In 2012—the latest data we have—the percentage of Vermont income going to the top 1 percent was higher than in the 1920s.
High income inequality is a social and economic ill. It dampens economic growth and increases poverty. It’s the biggest economic issue Vermont faces in 2015.
There is concern about the declining number of children in Vermont. On page 22 of the report, you can see that 46 percent of married couples with children in Vermont don’t make enough money to meet basic needs. On page 23, 81 percent of single mothers can’t make ends meet.
If Vermont hopes to keep young people in the state or attract young families, Vermont needs to be attractive and economically viable for families. There are two ways to make the state viable for young families: increase incomes and reduce the cost of essentials.
The focus is often on job creation, but there is little states can do to create jobs. State government can create an environment conducive to job creation and that’s where the effort and resources should be applied. But the real question is not how many jobs have been created; it is: Are Vermonters’ lives better? So public investments that improve Vermonters’ lives and make the state receptive to job creation are the best kind of public investments.
If the goal is to make Vermonters’ live better, the question for elected officials is how do we best spend public funds toward that end? And how do we know we’re making progress?
That’s where the efforts that the Legislature has already started come into play: the Appropriations Committees and the administration are beginning to integrate performance indicators into their budget work, the People’s Budget language approved in 2012 (32 V.S.A. § 306a) focuses the budget on assessing and meeting Vermonters’ needs, and the Genuine Progress Indicator provides a way to assess both positive and negative effects of economic activities rather than consider all economic activity equal.
These are all good first steps. But we urge the legislature to get solidly behind these initiatives so that we can make progress in reducing the number of Vermonters living in poverty, reduce income inequality, and rebuild a vibrant middle class.
As our recommendations on page 30 suggest, the state can increase the share of the state’s economic growth that is going to working families by increasing the state’s minimum wage at least to the level of a livable wage, which is currently $13.00 per hour according to the JFO’s most recent calculation.
But the state can probably do the most for working families on the cost side of their budgets:
- It can increase child care subsidies so that more parents can work while their children receive high-quality care and education.
- It can base funding for education and health care, two essentials for Vermont families, on ability to pay. We do this to some extent now, but we can do more to make Vermont affordable for working families by reforming both education and health care funding so that Vermonters pay based on their incomes.
- The state can ensure that there is adequate affordable housing for working families.
- Finally, the state can invest in infrastructure, like high speed internet in our population centers, so that young entrepreneurs can start businesses in areas of the state that currently have relatively low real estate costs.
While none of this can happen overnight, I think it’s important for this committee to help keep the Legislature’s focus on improving lives for Vermonters. That’s what will stimulate families to want to live and work in Vermont. And that’s what will stimulate the state’s economic growth.
I’d be happy to answer any questions.
