On June 3, Vermont had its first economic summit meeting of public and private business leaders to discuss how to improve statewide business development. By most objective accounts, the meeting had a lot of back slapping for a few business success stories and a flood of rationalizations for the continued poor ratings that Vermont receives in most national polls on our business environment — predominately caused by our high tax rate and small workforce.
Part of why the state has such a high tax rate is the small population that must share the burden of a government that has a hard time spending in proportion to our small size. We rank sixth nationally in tax burden and dead last in economic outlook, according to the 2013 Alec-Laffer State Economic Competitiveness Index.
We also have a problem of retaining quality workers in the state. As one blog commenter said, “my wife and I would move back (to Vermont) in a second if we could find jobs”. More than one business has complained that it cannot find enough trained or even trainable workers in Vermont.
These two problems combine in a circular manner to reduce businesses that would hire resulting in workers leaving the state. Our state government could efficiently address these problems if they would consider refocusing their views off their feet and look up to the horizon a little more. Not every problem can be solved in the time between political campaigns — sometimes you need to, dare I say it, plan ahead.
To get a little more money and highly skilled workers into the state, we might look to the military. Getting a military base here would be ideal but maybe there’s another way. Many career military put in 20 years and retire in their 40s. These are highly skilled and experienced people ready for their second careers. About 25 percent of the states do not tax the pensions of retired military making those states preferential places for military to retire. These states also receive a great deal of free promotion and advertising in dozens of military magazines and organizations.
A lot of these retirees would see Vermont as a highly desirable place to retire if we offered them a tax break. Why do that? Their median federal pension is around $40,000 and most have considerable asset wealth which they would spend here — including home buying, sales taxes, etc. All the other states that have done this have found that there is a significant net gain to the state despite the loss of their income tax.
The business-employee retention is a chicken-egg problem but it really comes down to education. If we produce high quality graduates, the businesses will come. This relatively simple fix takes politicians with enough courage to face down the teacher’s union. Vermont spent just under $16,000 per student in 2012 — that’s over $8,000 above the national average and is three times higher than the best performing nation in the world — Finland. Despite this, the American Legislative Exchange Council shows 59 percent of Vermont eighth-graders are not proficient in math or reading at their grade level. American students rank 33rd in the world, under Mexico, Russia and Brazil.
Our average performance is most similar to Poland but they spend only $6,000 per student.
ALEC gave Vermont a score of “F” on Teacher Quality and Policies. Specifically, an F for Identifying Effective Teachers, a D for Retaining Effective Teachers and an F for Exiting Ineffective Teachers. In his report titled “International Evidence on the Importance of Education Policy,” Ludger Woessmann noted that in schools where teacher unions had a lot of influence, students performed 32 percent worse in math, 18 percent lower in science.
Clearly, a lot of education issues can be laid at the feet of the teacher’s union and their contract tactics. Vermont would benefit greatly by establishing realistic and enforced standards for student and teacher performance. This could be as simple as allowing good teachers to get the recognition they deserve. We need results that matter for our students to be able to get jobs in the 21st century by teaching them to be critical thinkers, problem solvers and effective communicators who are proficient in both core subjects and new, 21st century content and skills.
My career was in decision analysis and I often found that, for most problems, someone had that problem before me. Statewide business development and employment issues have been problems for every state and all of them have spent time and money studying every possible issue. There are also dozens of highly paid think tanks, experts and professors that have done thousands of related studies. What works and what needs to be changed has been irrefutably established many times. There is no mystery here — just an issue of political will power to stop inefficient strategies and to be smart enough to find those proven strategies and courageous enough to implement them here — even in the face of strong political opposition by special interest groups.
A recurring theme in the speeches at the economic summit was that Vermont is a special place where people would like to stay or they want to come back to, if they can afford it.
We can retain all that makes us special but we need address the challenges of the 21st century.
Tom Watkins is a retired Navy officer and former business consultant. He lives in Montpelier.
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