Everybody has a vice and handbags are mine. In fact, I can easily justify a new purchase at the expense of other priorities, including my retirement fund. And recently, as I was admiring the latest addition to my collection, I thought about the parallels with state spending priorities and their impacts on business outlook.
Last month, 74 percent of Roundtable members participated in our quarterly Business Conditions Survey. Results showed that a majority of CEOs have a neutral outlook toward the current business climate and, since the prior survey, have shifted from ‘neutral’ to ‘mildly pessimistic’ regarding the business climate in the coming three months.
Since Q3 2012, when members expressed the greatest optimism about Vermont’s business climate, there’s been a steady downward slide in outlook. These latest results that dipped into negative territory led me to investigate what’s been happening in Vermont since 2012, or more importantly, what was happening prior to Q3 2012.
A look back at the Governor’s press releases since winning election in 2010 shows that, after taking office in January 2011, there was an immediate upswing in communications and planning for expenditures in organization, staffing and infrastructure, public expectations and, funding for health care reform. So by the time Vermont’s health care bill was enacted in May 2011, the business community was beginning to finger its worry beads.
A review of the 5-year appropriations summary from the Joint Fiscal Office shows that government spending grew from FY11 through FY16 at rates exceeding growth in the economy. During this time, the state’s Total General Fund budget grew by 27%, contrasted to a decline in state GDP of 1% between 2011 and 2014, before it started to grow again at 0.6% in 2015 and 1.5% in 2016.
Without a doubt, broader national and international economic and political dynamics have contributed to businesses’ outlook. But, Vermont’s voluntary and unsustainable growth in general fund spending, particularly in the area of health care reform, has undermined a multitude of other important investments such as appropriations to higher education, which contributes to a more educated workforce, and the Department of Economic Development, which is charged with supporting growth strategies in our state.
What’s needed is fiscal discipline and a balance of spending priorities that try to both improve the lives of the truly needy, and invest in those factors that sustain a strong economy for the future. To invest in one of these priorities at the expense of another, will only in the end undermine both.