Vermonts Economic Climate 6-3-1 Key In Indicators How the Scott - - PowerPoint PPT Presentation

Vermont’s Economic Climate

6-3-1

Key In 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

Negatives

• Slower than average economic growth
• Shrinking workforce
• Population and demographic considerations
• Debt profile (i.e. debt ratios relative to peers)
• Pension liabilities

Credit Ratings Considerations for Vermont

• 0.20%
• 0.03%

0.22% 1.91% 2.20% 2.55% 4.08% 4.13% 4.40% 5.25% 6.13% 6.30% 7.65% 8.15% 11.25%

• 2.00%

0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% Delaware Virginia South Dakota Vermont Maryland North Carolina South Carolina Missouri Florida Indiana Georgia Utah Tennessee Iowa Texas

Percent Change in Real Per Capita GDP (2011-2016) (Source: Bureau of Economic Analysis)

Real GDP Growth Compared to Other Triple-A States

• 2.5%

1.8% 2.7% 2.9% 4.4% 4.9% 7.1% 7.5% 8.3% 8.7% 8.9% 9.1% 9.7% 9.9%

• 4.0%
• 2.0%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% Virginia Florida Delaware Maryland Vermont Georgia Texas Indiana Tennessee South Carolina Utah North Carolina Iowa South Dakota

Percent Change in Median Household Income, 2011-2016 (Source: Census/CPS, three-year rolling average)

Median Household Income Growth Compared to Other Triple-A States

Workforce Growth Compared to Other Triple-A States

• 4.0%

1.1% 1.6% 1.6% 1.8% 2.9% 3.0% 4.9% 5.8% 6.1% 6.5% 6.8% 7.0% 7.7% 13.4%

• 6.0%
• 4.0%
• 2.0%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% Vermont Iowa Tennessee Missouri Virginia South Dakota Maryland Indiana Georgia South Carolina North Carolina Delaware Florida Texas Utah

Percent Change in Civilian Labor Force (2011-2016) (Source: BLS)

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

$700 $750 $800 $850 $900 $950 $1,000 $1,050 $1,100 $1,150 $1,200 2013 2014 2015 2016 2017 2018 2019 2020 2021

Debt Per Capita (in $)

Triple-A Vermont Projected Vermont

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%

Mean Debt Ratios: Vermont vs. Triple-A Average

$589 $751 $1,016 $1,197 $1,439 $1,706 $1,842 $1,859 $1,879 $2,543 $4,078 $4,509 $4,615 $5,873 $7,624 $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 North Carolina Florida Tennessee Iowa Utah Missouri South Dakota Virginia Georgia Indiana Delaware Texas South Carolina Vermont Maryland

Adjusted Net Pension Liability Per Capita (Source: Moody's)

Pension Liabilities Compared to Other Triple-A States

Moody’s Adjusted Net Pension Liability Metrics, 2017

Vermont vs. Triple-A Average

12.3% 12.1% 5.6% 4.8% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% % 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