Economic Review

Basically things are OK, but there is much to be concerned about in the near future. Revenues are having a hard time keeping up with expenditures and the state's demographics are not encouraging.

Here's a PDF of the original presentation


There are three large funds from which the state makes expenditures. Each year predictions are made by the JFO and the administration as to how much will come into those funds in the form of taxes, fees and federal resources. But those are just predictions. A lot depends on how the state's economy performs and whether there are unexpected expenditures (something like Irene). At this point the revenues in each fund are tracking close to predictions. Together, the state's revenues are 3% above targets.

  • General Fund - affected by sales, household income etc. : Actual Revenues are 5.7% higher than predicted.
  • Transportation Fund - affected by gas tax etc. : Actual Revenues are 1.5% higher than predicted.
  • Education Fund - affected by property values, sales tax, lottery proceeds etc. : Revenues are 2.5% less than predicted.

The Trump administration tax changes have been beneficial to the state's revenues in the short term. Large lottery jackpots have increased lottery revenues.

The nations economic expansion continues but there is concern that the recent improvements (3% real GDP growth) in the economy and the likely $1 trillion deficit present a risk.

The national unemployment, at 3.7%, is the lowest in nearly 50 years. The result has been some increase in wages. The greatest growth in wages has been at the highest income groups. Vermont's job and wage growth has been slower than the rest of the nation.

For Vermont: "Despite growth in real household income for all income quintiles in 2017, real income for the poorest 20% of households was still below levels reached in 1989; for the next poorest 20%, were below 1999 levels; and for the top 60% of households, reached new record highs, with the top 5% now earning more than $385,000 per year – more than 29 times that of the lowest 20% - an all-time record"

Vermont's unemployment claims are near record lows.

Oil prices have fallen. Retails sales have held steady. Consumer sentiment is good.

Importantly, the E-commerce share of sales continues to increase. The state is now collecting sales tax from online sales, so that can be a source of a continuing growth in revenues.

Real Estate

Though the real estate market can vary greatly within Vermont, overall the market "continues to strengthen."

"The Vermont Education Fund Property Tax base (Grand List) will finally exceed 2009 peak levels this year, and will grow at rates above inflation over the next several years, generating more revenue at the same rates, but also effectively increasing property tax burdens, unless rates are lowered." The amount you pay will go up because the value of your real estate increases.


Each year JFO presents a graph breaking out the population of Vermont by age. There is a bulge for the baby-boomers with ages ranging from 50 to 70 with a peak at about 60. This is important as it means a large chunk of Vermont's population is nearing or entering retirement. Many high wage earning will be earning less and paying less in income taxes when they retire. They will also be spending less and paying less sales tax. Their health care needs will increase. Many may leave Vermont for warmer climes or lower costs of living. JFO also presents a graph showing that Vermont's population is projected to increase slightly (maybe .1 %) . Another line on this graph shows the wonderfully complicated Age Weighted Labor Force percent change for Vermont over time. Comparing the two, we see the population increase slightly but the "size" of the labor force decreasing by about .4% for the next several years. That's not good for state revenues.

Vermont's birth rate has also been declining (consistent with other New England states) . In fact, we have the lowest fertility rate of all the 50 states. This is one of the reasons why school enrollment in Vermont has been going down. The expected enrollment decline between 1997 and 2020 is 20%, though Colchester's school enrollment is expected to remain steady in the near future.


"The share of Vermont’s economy dependent upon exports is nearly twice that of any other state in New England." That means our states economy can be influenced by national issues: tariffs, a stronger dollar, trade wars, and rising interest rates. That makes economic forecasts less reliable.


For right now things don't look so bad in Vermont's economy, but we are feeling labor force pressures for higher wages. Inflation is running at about 2.8% while wage growth is around 3% overall. Income inequality gives much of that wage growth to higher wage earners which does not help reduce the number of those requiring state aid. Real growth in income is about .6%.