Report warns of looming financial crisis

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(Host) The Ethan Allen Institute released a report today that says demographic changes will have a big effect on Vermont in the next decade.

The Northeast Kingdom organization warns that an aging population and increases in state spending will result in a financial crisis.

VPR’s John Dillon has more:

(Dillon) The institute based its report on research by University of Vermont Economist Arthur Woolf.

Woolf examined projections prepared by the U.S. Census Bureau. He says there will soon be a steady decline in the number of working Vermonters who pay taxes.

Yet at the same time, Woolf says, the state’s spending obligations for public schools and other services are climbing steadily.

(Woolf) “So we’re essentially on a collision course between the demographics and the spending. And there’s no sign that the spending side is abating.”

(Dillon) Woolf and Ethan Allen President John McClaughry did not make specific policy recommendations.

But they warned against adopting new government programs, such as mandatory publicly funded pre-school. And they said lawmakers should try to slow the growth in state spending. John McClaughry:

(McClaughry) “One of the bright notes in this report is that we do have in our power to make changes that will avert a major problem for the next generation of Vermonters. But we need to start thinking about those changes soon, very soon. Because by 2029 it will be far too late to have any realistic impact on what happens by 2030.”

(Dillon) The Ethan Allen Institute describes itself as a “free market think tank.” It opposes state mandates and it wants Vermont to do more to attract investment and economic growth.

Economist Woolf says the state has the fifth highest tax burden in the country. But a critic of the institute says there’s more to the story. Doug Hoffer is an independent policy analyst in Burlington.

Hoffer says Woolf’s figures are based on a per capita estimate and don’t take into account the wealthy Vermonters who pay proportionately more in taxes.

(Hoffer) “And because we have a lot of wealthy people with unearned income, capital gains, interest and dividends, they’re paying a very significant share of the total. But when you get to per capita, which is simply the total divided by the number of people, it’s a misleading figure because it does not represent the experience of regular families.”

(Dillon) Hoffer says the demographic issues that Vermont faces are real. But he disagrees with the Ethan Allen Institute’s conclusions. He says the state could instead curb state spending by making health care more affordable. Rising health care costs, he says, are driving up both school budgets and spending on social programs.

For Vermont Public Radio, I’m John Dillon in Montpelier.

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