Editor’s note: This commentary is by Willem Post, a retired engineer, who now writes about energy issues, currently specializing in energy efficiency of buildings and building systems. He is a founding member of the Coalition for Energy Solutions.
[T]he populous, prosperous and politically active Montpelier-Burlington region has exerted much control over the state government since about 2000. This control has decreased inputs to legislative decision-making from many other areas of the state.
As a result, the state government is increasingly involved in managing and overseeing major sectors of the Vermont economy, such as the education, energy and health care sectors. This has resulted in a significant growth of the state government sector relative to the private sector.
To pay for the government sector growth, the private sector has been increasingly burdened with mandates, taxes, fees and surcharges, which have adversely impacted on Vermont’s economic growth rates, as shown in the VTDigger article by Robert Feuerstein and in this commentary.
Excerpt from a VTDigger commentary by Robert Feuerstein: “We can see that from 2000 to 2013, state gross domestic product (GDP) per capita increased from $30,131 to $47,064, a 56.2 percent increase.
However, looking at total Vermont state and local government per capita spending we see that it increased from $6,164 to $11,288, a whopping 84.7 percent increase.
Now since revenues basically equal spending in Vermont, which means revenues and spending grew almost 85 percent while the state economy grew 56 percent.
That sure sounds like a spending problem to me. Imagine if in your own household you increased spending 30 percent more than your income. It wouldn’t be a happy outcome for you. And it won’t be Vermont if this trend continues.”
My below analysis confirms the magnitude of the above percentages. It was found state spending grew 54.25 percent faster than the private sector, which pays for the government sector by means of taxes, fees and surcharges.
Excerpt from a VTDigger article: “Shumlin said that under his tenure, budget growth averaged 3.7 percent while gross state product averaged 3.2 percent.”
Using Feuerstein’s and Shumlin’s numbers, the state government budget has been growing 100 x (3.7/3.2 – 1) = 15.6 percent faster than the GSP during the past six years, which is unsustainable in the long run.
1) Assume the state government sector is 15 percent of GSP and the rest (private sector plus local government sector) is 85 percent of GSP. See chart here.
GSP growth was 3.2 percent per year, of which:
• The state fraction of GSP growth was 0.15 x 1.156 x 3.2 = 0.555 percent per year
• The rest fraction of GSP growth was 3.20 – 0.555 = 2.645 percent per year
2) Assume local government is 9 percent of the rest of GSP and the private sector is 91 percent of the rest of GSP. Assume local government was growing at 3.5 percent per year.
Rest of GSP growth was 2.645 percent per year, of which:
• The local government fraction of GSP growth was 0.09 x 1.035 x 2.645 = 0.246 percent per year
• The private sector fraction of GSP growth was 2.645 – 0.246 = 2.399 percent per year
Using Shumlin’s numbers, the state government has been growing 100 x (3.7/2.399 – 1) = 54.25 percent faster than the private sector, which is completely unsustainable in the long run.
Note how much faster the state government sector has been growing than the private sector. One of the reasons Shumlin’s six-year tenure has been such a flop. Shumlin’s approach was at odds with common sense.
Legislators have been aiding and abetting by annually increasing taxes, fees and surcharges to cover the excessive, out-of-control spending of a too large, too bloated, state government sector.
No wonder the near-zero, real-growth Vermont economy, of which the private sector has been in SHRINKING relative to the government sectors, has not been able to cough up enough taxes, fees and surcharges to keep the government sector spending-spree going during the past six years.
Democratic gubernatorial candidates Matt Dunne, Sue Minter and Peter Galbraith, according to their campaign rhetoric, are proposing more government programs, more government control, and more spending, essentially a continuation of the failed Shumlin approach during the past six years.
Those three candidates are exactly not what Vermont’s households and businesses need for a more prosperous future.
As shown in Table 2, real GSP growth was 0.646 percent per year, which means nominal growth percentages should be multiplied times (0.646, real)/(3.2, nominal) = 0.201875 to obtain real growth percentages. See Table 1.
The below table shows real GSP growth.
Total real GSP growth was 100 x (26.92/25.90 – 1) = 3.938 percent during the past six years.
Annual real GSP growth was 25.90 x (1 + 0.0646) ^6 = 26.92; i.e., 0.646 percent per year during the past six years.
