State of Working Vermont 2023

Big challenges confronted Vermont in 2023. Much of the state was inundated by the second “100-year” flood in a dozen years. Meteorologists recorded 2023 as the hottest year on record. New variants of Covid kept arising, and pandemics are predicted to become more frequent. Problems we faced before Covid are still with us: poverty, food insecurity, shortages of affordable housing and childcare. And the pandemic seems to have made some problems worse, such as inadequate mental health services, especially for children.

During the pandemic, billions of dollars poured into Vermont from Washington. Some went directly to Vermonters in the form of supplemental unemployment benefits, food relief, child tax credits, and economic stimulus payments. Billions more flowed through state and local governments, first to fight the pandemic and then to rebuild infrastructure under the American Rescue Plan Act (ARPA).

New problems like climate disasters demand new resources

These funds prevented what could have been a deep, lasting recession and reduced child poverty nationally from 2020 to 2021 by 46 percent. More recently, after the July 2023 flood, Vermonters were able to tap aid from the Federal Emergency Management Agency, or FEMA, to help rebuild their homes and their lives.

But now the federal pandemic aid is drying up—and so, thankfully, have the floodwaters. We learned from the pandemic that government can do a great deal not just to ease the pain of crises but also to prevent the ups and downs of ordinary life from becoming crises. Government help is good for people and for the economy.

It would be a mistake to ignore that lesson and return to the way Vermont raised and spent money before the pandemic. And we don’t have to. Vermont has the resources and know-how to address its problems.

For at least 30 years, Vermont’s revenue policy has been to “manage to the money”—work within whatever amount the state collects at current tax rates. It’s a passive approach that has rarely acknowledged the need for new taxes and ignores the changing demands on government.

Old problems grow more severe and expensive the longer they’re neglected. And new problems that the state didn’t face 10, 20, or 30 years ago, like the damaging effects of climate change and more frequent pandemics, demand new resources. Even after the devastation caused by Tropical Storm Irene, neither the governor nor the Legislature asked Vermonters for anything more in taxes. Instead, they expected government to absorb the cost of responding to the disaster, drawing from funds already allocated for other state services.

The state should raise enough revenue to meet the statutory purpose of the state budget: “to address the needs of the people of Vermont in a way that advances human dignity and equity.” ¹ The statute goes on to say that Vermont’s tax and spending policies are supposed “to promote economic well-being … and a vibrant economy,” advance the state’s policy goals, and “recognize every person’s need for health, housing, dignified work, education, food, social security, and a healthy environment.”

Raise necessary revenue to address needs in a way that advances human dignity and equity

Vermonters can take pride in the state’s history of support for education, health care for low- income families, environmental protection, and other public investments. In its 2023 session, the Vermont Legislature built on the progress made during the pandemic and began to invest robustly in family economic security, childcare, and reducing childhood hunger. It expanded the Child Tax Credit and Earned Income Tax Credit and committed $125 million annually to expand access to high-quality childcare and make it more affordable.

These are encouraging steps. But poverty is still too high, too many Vermonters are homeless, and people and property are increasingly vulnerable to climate disasters. There is more to be done. Raising money fairly and investing it wisely, the state can address Vermonters’ needs and promote dignity and equity.

Moving forward requires setting goals and priorities. And to map where the state wants to go and how to get there, policymakers need to determine first where we are. State of Working Vermont 2023 can help them draw that map.

The Data

As in previous years, this report uses data from the U.S. Census—primarily one-year estimates from the American Community Survey—as indicators of Vermonters’ well-being. It also relies on data from the Vermont Department of Labor, the U.S. Bureau of Labor Statistics, the U.S. Bureau of Economic Analysis, and other sources. With Census indicators, we compare data from 2019, the most recent year unaffected by the Covid pandemic, with 2022 data, the most recent available. Where 2023 data are available from other sources, we have included them.

The American Community Survey did not publish state-level estimates for 2020. And labor market statistics were hard to interpret as businesses closed and reopened. But by 2022 the data appear to reflect real trends rather than short-term, anomalous changes.

This report also looks at how Vermont has been doing relative to other states. Where comparisons are useful, the report provides Vermont’s national rankings. A ranking of 1 is the best, with 50 being the worst.

Vermont’s private employers created jobs at a record pace—the fastest in more than 20 years—between March 2021 and March 2023, after Covid vaccines became available and people returned to work.

The unemployment rate stayed low. It remained below 2 percent through the summer months and at the close of 2023 had risen only to 2.2 percent—about 7,700 people without jobs. Despite the strong job market, by the end of 2023 Vermont’s labor force had not quite returned to pre-pandemic levels. The tight labor market meant that most Vermonters looking for work were able to find it while employers struggled to fill jobs.

Vermont’s workforce remained whiter, older, and more educated than the rest of the nation’s, even as the state has become more racially diverse in the past decade.

Gender made a difference in the trends. A greater share of men than women dropped out of the labor force during Covid, and men stayed out at higher rates. Ranking the states, the proportion of working-age men active in the Vermont workforce dropped from the top half in 2019 to the bottom quarter in 2022. The proportion of women in the labor force rose from 11th place to 7th.

Several Vermont economic indicators were pointing in the right direction:

• Wages were up among the lowest-paid workers.
• The poverty rate dropped.
• The percentage of Vermonters with health insurance inched up, taking Vermont from fourth to third in national ranking.
• 3SquaresVT benefits increased.

One indicator showed slight erosion, although Vermont did well relative to the rest of the country:

• The pay gap between women and men grew slightly. Women earned 89 cents to a man’s dollar in
  2022, compared with 91 cents in 2019. Still, Vermont kept its place as the state with the highest income equality by gender.

Some problems that Vermont faced before the pandemic persisted in 2022 and 2023:

• Poverty came down, but almost 50,000 Vermonters were trying to survive below the poverty level after the pandemic started to subside.
• The state’s rate of homelessness was the second highest in the country in 2023.
• Families still struggled to make ends meet, especially those led by single parents.

Some problems got worse during the pandemic, like the shortage of childcare slots.

The share of income going to the top 1 percent of Vermonters has increased steadily for more than 40 years, creating income inequality that the state hasn’t seen in generations.

State and local taxes have amounted to about the same percentage of Vermonters’ incomes for more than three decades. This is despite new challenges such as climate-related disasters that demand far greater revenue than the state needed in the past.

Vermont’s tax system remains regressive at the top, although it is one of the least regressive in the U.S. The state’s top 5 percent pay a smaller share of their income in taxes than their lower-income counterparts.

It is a state responsibility to ensure that everyone who lives in Vermont has enough to feel secure in their housing, food, healthcare, and transportation. It is the role of the state to maintain and improve roads and bridges, to clean up and protect rivers and lakes, to give all our children the best education, to care for our sick and elderly, and to promote racial and social equity.

Policymakers should raise needed revenue fairly and spend it wisely for the benefit of all the people who live in Vermont.

Vermont has the capacity to address its current challenges and invest for a better future.

State of Working Vermont 2023 was created in conjunction with the Economic Policy Institute in Washington D.C. and was funded in part by the Annie E. Casey Foundation and the J. Warren and Lois McClure Foundation, a supporting organization of the Vermont Community Foundation. We thank them for their support but acknowledge that the findings presented in this report are those of the Public Assets Institute and do not necessarily reflect the opinions of our partners.