An op ed by Bruce Lisman

This financial crisis is a game-changing event that has Darwinian implications. We’ve already seen enough to know that something big has happened. And, it’s not done happening. Events this big are hard to process, but one sure thing is, that changes are under way wherever we look.

Countries we loved to applaud such as Ireland or Spain have been sent to the back of the pack and their citizens given a prescription for a lower standard of living. Countries we never spoke of, such as Peru and Estonia have an act we now applaud. The front side of the crisis brought ruin to countries, businesses, and individuals. The backside of the crisis brings a reversal of cosmic economic themes and a changed order of things.

We face headwinds that are bad for economic growth, bad for certain asset values, bad for personal income growth and bad for public policy that doesn’t grasp the changes afoot. All of this creates fabulous opportunities for those people and institutions that can see the outline of the new order of things. And, the history of America and for much of the world is that things get better over the longer term, no matter the dangers in the near term.

Adjustments are under way just about everywhere. Listen, Spain, Portugal, Greece and others are in the midst of re-structuring themselves and are giving recognition to the simple fact that a decade of spending programs was supported by economic growth built on an overheated financial system, real estate, and debt. Or put differently, it was economic growth that now seems illusionary.

The United Kingdom has promised to eliminate its budget deficit by reducing spending (80 percent) and lifting taxes (20 percent), and it’s being presented to the public in an alarming fashion—with remarkable transparency; Denmark is shrinking its social safety net; so is France; Sweden already has. Each of these countries is risking their citizens’ standard of living now in order to be ready for the next upturn. They are reversing a decade or more of public policy because revenues are lower than expected, deficits are large, and revenue growth may remain below expectations because of the structural damage caused by the recession.

In America the drive to reduce our deficit is setting us on a course to reduce current spending and long term obligations and placing standards of living at risk. Change indeed!

How is all of this different from what our states are experiencing? In some ways, it isn’t different at all. The same pressures exist: Large deficits from the sudden reversal of fortunes, the prospect of a drawn out recovery, a restive and angry citizenry concerned about the economy, jobs, how we got here, and what happens next. There aren’t riots here; instead, our citizens are demanding substantive change and demanding a new and different type of government. Sure, the Tea Party is one version of protest; but, so are the approval ratings of our national government and both political parties, and many incumbents at the state level. It reflects anger at a government that has become distant to its own citizens.

If the decades of the late 1990s and 2000s favored the states as recipients of vast increases in federal funds, higher real estate related taxes, higher income taxes, and capital gains taxes–then the years ahead will be very bad for most states, including ours as those trends are reversed.

Still, in Vermont we aren’t flat-lining like California or Illinois; our government isn’t dysfunctional such as in New York. And, we didn’t suffer the steep economic decline that has hurt other states. That’s good, and not the only thing that’s good in Vermont. We have a very diversified and sophisticated economy, a pair of powerful economic clusters—our hospitals and higher education institutions are outsized in our economy. We have among the best public education systems in America and a brand that is distinctive and well known.

Those are the kinds of things that dreams of becoming a more powerful center for job and income creation can actually be built upon. The states, including our own, and the feds are pursuing short-term remedies for a sluggish economy; simultaneously, our federal government and many states are attempting drag baseline spending back to 2008 or even earlier levels.

We should seize this moment to think bigger and imagine a bolder strategy that moves Vermont on a path toward becoming an economic powerhouse, but one that does not abandon values we hold dear. We can and should marry those essential Vermont characteristics of pragmatism and caring for our neighbors in support of that that essential theme: prosperity.

PROSPERITY NOW

Jobs are good, but economic prosperity not only sounds better, it is better. It requires a thought process that recognizes that things today are different and don’t resemble the recent past, and require public policy that has a different orientation.

Think about the value of economic prosperity; it’s the end product of a vibrant economy. All kind of jobs are created and it means rising incomes for our citizens. Of course we want jobs, but 94 percent of Vermont workers and 91 percent of American workers have jobs. Beneath the current malaise is a far more basic theme: We want a return to the security and insulating cushion that economic prosperity creates; and, the sense that tomorrow will always be better than today.

Economic prosperity is a magnet for workers—in our country, the labor force goes where the jobs are. Economic prosperity creates the ladder for the poor to reach economic health; it can supply jobs for those who want them and with that, we can imagine solving issues around crime, substance abuse and domestic violence, events that take place where jobs are absent. It’s a vibrant economy that provides the means to clean our lakes, train our unemployed and underemployed, protect those who need protection and give help to those that require it. It literally is the fuel for our “Social Contract.” There is overwhelming evidence that the quality of life correlates highly with measures of economic prosperity.

It’s a theme of transcendent importance—it literally towers over everything else that we can imagine. It isn’t equal to a quality education system; it doesn’t share the spotlight with affordable housing or saving dairy farmers, or promoting alternative energy. Without economic prosperity we’ll be hard pressed to afford any of those very good “wants.” But, economic prosperity is a theme that is virtually unknown to states and scary to governors and legislators more comfortable with near term goals and decisions sometimes made without full context or without a way to measure those decisions.

Is it worth pursuing this theme of economic vibrancy? Of gathering a consensus that draws citizens and its government to a common cause? It is if you believe that the consequences of financial crisis can be both great and well, deadly. So, imagine then, our state choosing this moment, at the very edge of an unknown future to embark on a bold path that says with clarity of purpose and mission that we will pursue economic prosperity on behalf of our citizens, but in so doing we will not abandon our values! In doing so, we will also dispense with those arguments from the right that would decry the social benefits created by our economy and the left for decrying the value of the economic machine that produces those social benefits.

Let’s choose a new path that recognizes our strengths and values. And, let’s choose it because we can’t afford the old.

Getting on the path to prosperity:

• Build a strong consensus in our state for pursuing economic prosperity, a transcendent theme central to our long term health. No creaky planning sessions, please. This is the moment that requires gifted leadership and an enlightened and enthused legislative body.

• Support that theme by building a different kind of government. One that offers maximum transparency of its budget. It would show where the money is spent, how it is spent, and what we expect to accomplish. But, it would also tell us how well it is spent and compare goals with results. Move to a budget logic that measures results, puts accountability into the mix, and declares how well we serve our citizens. Transparency and accountability will neutralize the high tax burden that is likely to remain; it would re-enfranchise those who pay the lion’s share of taxes, inevitably it will create efficiencies, and improve the quality of our government. Structure abhors change; accountability undermines structure.

• Let’s focus on the elements of our Social Contract. It’s a capital S and C. We believe in it. It matters to us. It defines us. However, we can’t measure its size, its quality, or its results. If it matters so much, then we should understand it and take pride not in its size, but in the quality of its work. Protecting “vulnerable Vermonters” is a good cause, but a poor defense of spending when we are ignorant of its results.

• Let’s build an economic environment—the platform upon which our businesses operate—that is welcoming to employers of all kind. Give up the notion of choosing favored businesses or attempting to see a future we’ve already proven we can’t predict. Let’s not merge social policy with economic development, nor pursue legislation that has unknown consequences to our economy.

• Let’s focus on the full mosaic of what a strong economic platform includes. Tax structure and affordability matter a lot. So do 15 other items that include predictability of regulation, the quality of transportation systems, access to broadband, access to arts, public education, availability of a well trained workforce, to name some.

• Recast Economic Development as the Department for Economic Prosperity. Recharge it with a higher calling, redevelop it as a consultative service to our businesses and give it goals that support economic prosperity.

• Capital availability marks the limits to growth; make our sponsored capital providers—VEDA and VEGI—more robust and broaden their mandate. Eliminate ‘Corporate Welfare’ from our official vocabulary and replace it with ‘Corporate Accountability.’

• New products created from R&D pack a powerful punch; expand VCET’s capacity and make it Vermont’s incubator by opening in Southern Vermont.

• Move to a principled based regulatory framework that declares what the regulation is attempting accomplish and than provide bright line interpretation so that the purpose is not compromised, even as we provide clear paths for applicants.

• The quality of the workforce is the fuel for economic growth; re-cast job training by consolidating and streamlining the myriad of programs. Offer training to anyone receiving state funds so they can upgrade their skill sets. Get them (and us) ready for the next up cycle.

• If tax structure is so important—it’s not only the plumbing for the government it is the biggest long term influence on its citizens—how can we have a ‘Blue Ribbon Commission on Taxes” without a grand theme underpinning it? Who provided context? Direction? A strategic aim? A purpose? This is a “are you kidding me moment.” This is planning without context; it ignores the interconnected nature of decisions and the importance of … well, purpose. Three very smart and passionate people can’t overcome a bad planning exercise. Recharge that committee with a growth orientation and send them back to focus on property taxes.

• Let’s look at the hospitals and higher education institutions with new perspective—sure, as economic stabilizers, but also economic engines.

Accept these concepts and you accept the notion that we need a strategic calling in our state. It’s a calling that recognizes the interconnected nature of decisions and one that dispenses with shallow arguments that are a call to meetings but little action.

Israel wanted to be an economic powerhouse; it is. Indiana chose to become their version of an economic powerhouse; it is. America chose to rebound from 9/11, a divided country in the 1960s and 1970s, and a Great Depression. It did.

So can Vermont.

Bruce Lisman, retired chairman of the JP Morgan Global Equity Division. He previously served as a senior managing director of Bear Stearns Companies from 1984 to June 2008. He is native of Burlington.

Vermont is a wonderfully unique place; we’re reminded of this every time we step out of our doors and take in a sight of the Green Mountains, of our expansive Lake Champlain, or 30 inches of fresh powder in March. Most of us who have chosen to call Vermont our home understand these things, both in their beauty and in their challenges. But what has become apparent in the past few years is that the people who have chosen to call our unique landscape home have been pushing the demographics of our state higher. In more ways than one, Vermont’s present (and future) workforce is getting older.

Yet while our demographics show an aging population, Vermont has more than 30,000 students enrolled in our 23 institutions of higher education at any given time. Many of the employers state there is a challenge in finding top quality talent to fill vacant or nascent positions, while at the same time, many college and university students see a dearth of opportunity within the state. Very clearly there is both demand for, and supply of, talent in our state. The challenge, then, is to help this labor market reach equilibrium; that is, to pair eager young talent with companies that have immediate and real needs for intelligent, trainable employees.

In an effort to help bridge this gap, the Vermont Technology Council is proud to usher in the start of the second year of their Statewide Internship Program. The program partners with organizations across the state to develop communication and placement between higher education students and employers. Students are presented the opportunity to get in-company training that develops skills and the experience to hit the job market upon graduation, and employers benefit from access to motivated, intelligent students looking to match their education with the needs of Vermont businesses.

The Vermont Technology Council has recognized that pairing current students with future employers gives both parties a competitive advantage in their respective goals. The internships being developed are meant to best simulate the demands and rigors of the post-graduate world. The summer internships are paid positions that create necessary buy-in from businesses, while creating a higher expectation of added value from each student. Developing this pipeline of talent not only provides a framework for future business success within Vermont, but by exposing students to the opportunities already here, there is great potential to retain and develop a higher number of young professionals.

Any business that employs technology in their operations is encouraged to create an internship; positions may focus on any aspect of the operation, including sales, engineering, marketing, etc. The pool of eligible interns includes any student in a Vermont institution, as well as Vermont students in out of state colleges and universities. In an effort to support employers and to make the process as simple as possible, the Vermont Technology Council has appointed Michele Ferland Kupersmith as the Program Director. Ms. Kupersmith can aid in all phases of the internship development and marketing, and acts as a liaison between employers, partner organizations, and economic development organizations.

For more information, the Vermont Technology Council’s Statewide Internship Program can be found online at: http://www.vttechcouncil.org/internships.html.

It’s the start of the New Year, and for most people struggling to wake up from their food induced holiday coma that means one thing: New Year’s Resolutions.  NYRs can be rather tricky; emboldened by everyone else jumping into the same boat we often tend to set the bar a little high for ourselves; am I really going to go to the gym every morning before work and cut out carbs after eight?  An insatiable love of pasta and a number of late-starting football games have pretty much ruined those already, but there’s one resolution we truly hope for: that the new Administration and Legislature will work to solve our state’s challenges with focused and meaningful governance from the statehouse.

You might say that it’s an odd resolution given that as outsiders we have limited control over what is and is not discussed in the chambers and on the floor under the dome.  And yet, it means far more to me than cardio at 6am.  The reason is this: the solutions required to cut my own bloat are multitudinous and of my own design, while those required to handle what has swelled to a $150 million shortfall are complicated by history, connections, interests, economic and social wellbeing, and (of course) cost.

Therein lies the problem: without a strong plan and steadfast leadership, decisions are delayed and agendas become labyrinthine.  The challenge is that we don’t get a chance to set our own goals: either we close the deficit or we accept an unbalanced budget creating further instability next year.  With a new Governor coming into office, there are high hopes that bold steps will be the name of the game; however, as a state we need to realize that solving the $150M nut is not just a matter of cutting large swathes of budget.  There is a significant amount of value for our future in understanding that we must also focus on growing out of our deficit.  Strategically placed reductions will make government leaner, but if we don’t also fuel our economic engine and put it on a focused path, we will find ourselves stagnating.

GBIC is working with a consortium of partners on a HUD Sustainable Communities grant that will include an outreach process and document development for a strategic industry sector analysis and economic plan for Chittenden County.  These reports will have the capacity to drive not just discussions about how and where our economy can and should go, but to encourage and embolden action.  These results will not be immediate, and the development of the projects will likely take some time, however, as these processes and projects develop let me humbly recommend a resolution to employers of all sizes in the greater Burlington area: stay in contact with your legislators.  Let them know to call you if they have a question on a bill that may impact your business, and be sure to pick up the phone when they do.  Be proactive in ensuring that the on-the-ground effects of legislation are understood in the appropriate committees; GBIC and the LCRCC are continually working to message legislators with your voices, but nothing speaks more clearly than hearing it directly from the people who create jobs.

If you have questions regarding contacting your legislators, or would like help in finding the appropriate channels through which to voice your opinion, please don’t hesitate to contact our legislative team of Dawn Francis (dawn@vermont.org) and Cathy Davis (cathy@vermont.org).

Malcolm Gladwell took the concept of “The Tipping Point” out of the realm of epidemiologists and made it a must know phrase with his book by the same title.  Mr. Gladwell sought to describe the underlying factors that can make large impacts on social phenomenon; comparing fashion trends to disease epidemics in their often sudden rate of impact and ubiquitous presence.  The tipping point that Mr. Gladwell is fascinated by is not a new concept, but the depth of analysis presented in back-of-the-napkin format made his bestseller its own cultural epidemic.

In Vermont, employers have been trying to describe our current challenges as their own kind of tipping point.  The challenge is that you’re never quite sure where or when the tipping point will come into play.  For the state, we can see challenges looming: the bankrupting of our unemployment fund clearly shows a broken link in our social support system and our state deficit is currently on the frontlines as a target of concern, but whether or not (or when) one of these or the other will actually lead to a rapid decline in our socioeconomic sustainability is not known.  Within the business community, this discussion can be heard through the quiet comment of “death by a thousand cuts.”  It’s often a challenge to pinpoint that single thing that could cause a company to close its doors, either permanently or to complete a move to another state with perceived higher return on investment, however, we know that for every individual employer that limit exists.

It is often argued that small changes and tweaks to our tax rates, regulatory system, and other associated business costs have not made a dramatic impact on the number of high-wealth individuals in the state or on the overall composition of our economy.  And while this might have some historical validity, it fails to consider any sort of limit on when a slow trickle turns into a broken dam.  Yet these are things that are repeated as challenges on par with healthcare reform, economic competitiveness and power supply quality and rates.  The important thing to remember is that for each of these factors, there is an equal opportunity to effect positive change.  The movement towards a cultural epidemic should ignite a sense of opportunity as much as one of concern.

Part of the challenge is finding those factors, the “agents of change,” that can catalyze rapid restructuring.  The goal is to find and support those factors that can rapidly add value to a system that is otherwise in equilibrium.  We often think of these actions as revitalization of existing resources or in the creation of new assets with broad value.  An example might be the factors behind the expansion and renovation of the Dealer.com technology campus on Pine St.  The 300 person expansion is being heralded as a focal point of a growing technology community in the South End of Burlington that includes other Vermont employers such as Google analytics experts EpikOne.

Critical in the decision making process for that single employer was the value, both real and perceived, of the state’s three premier economic programs: the Vermont Employer Growth Incentive, low finance rate money from the Vermont Economic Development Authority, and the Vermont Training Program.  Dealer.com met their positive tipping point and decided to grow employment in our state 100%.  What we need is to promote a cultural shift that sees strength in retention of employers and increased growth in the addition of new companies, both from Vermont entrepreneurs and from out of state employers looking to be a part of our economy.  Governor-Elect Shumlin has been open about the fact that he has asked every one of his appointees what they will do to create jobs under their purview.  The question is the right one to ask; what we need is the support, vision and strength of implementation to ensure that we tip the scales towards growth of our value-adding employers – without strong action, we stand to tip in the other direction.

As an organization chiefly concerned with aiding in economic development for Chittenden Country, GBIC often speaks with Vermont employers to figure out what helped encourage them to set up their business in our state. Our goal is that if we can find a common denominator to support, it will encourage other potential employers and entrepreneurs to choose to do the same. Yet after hearing of the many positives that make Vermont a great choice, what often comes out is that choosing to do business in Vermont sometimes is in part a decision made with the heart and not with the head (or at least not without rationalizing with your accountant). Every employer understands the cost environment in which they are establishing their business when the decision is made to take the risk of opening their doors. However, as Vermont continues to increase both real taxation rates and new areas of taxation, there is growing concern that little seems to be done to encourage the expansion of Vermont’s tax base, rather than simply drawing more from the same wells.

What is abundantly clear is many Vermont entrepreneurs and employers have such a genuine love for Vermont that initially deters them from seeking locations outside of our borders. The problem, as has been seen with some of the most successful Vermont companies, is that with success comes the pressure for further growth; boards, shareholders and continued competitive strains (that may or may not have ties to our state) force some traditionally Vermont based employers to move aspects of their operations to states or countries with more advantageous tax policies and structures. Competitiveness out-places love of place.

Vermont’s answer has tended to focus on asking more from the same pools of employers. The situation is analogous to sugaring: either extract more from the same trees, or establish an environment in which more saplings can thrive, be tapped and foster the growth of future forests. If you unsustainably overtap the productive trees, eventually they will die; in the case of our successful entrepreneurs, they just pick up their roots and move to Florida and/or other places that aggressively seek investment and job growth.

With the challenge of the aging demographics that our state faces, it would seem to be a prudent moment in time to examine how we can encourage entrepreneurial Vermonters (both native and who come to our expansive college and university system) to stay in the state and generate employment. If we are unable to accomplish this goal, a shrinking tax base will be forced to shoulder the weight of increased state expenditure. No one wants to see a decrease in meaningful and supportive public expenditure, but relying on the same sources for revenue will only lead to a more dramatic budget challenge in the long run. This unsustainable approach to income generation for the state, coupled with other increased cost burdens shouldered by our employers (health care, unemployment insurance etc), will surely force the hands of some Vermonters to move their businesses, and the people they employ, out of Vermont.

The Blue Ribbon Tax Commission has begun its work to look at Vermont’s tax structure and our overall competitiveness. GBIC and LCRCC have organized business people and Vermont entrepreneurs to meet with the Commission and share some concerns and ideas about how to retain our quality of place while we seek to be a place where entrepreneurs can be globally competitive.

Vermont, like much of the country, is at a crossroads.  While the economic conflict that has engulfed many of the world’s economies seems to be ending and the painful process of rebuilding has begun, the need for actively preparing and delivering on actions to further our state has never been more fundamental to success.  At a time when planning appears to be the most difficult and divisive due to conflicts of theory and philosophy, it also holds the potential to unify and galvanize Vermonters’ needs and interests.  Recognizing this potential, GBIC has drafted “Common Ground,” a paper that examines areas of agreement between two of the most valuable and current reports in support of a unified economic plan.  Our hope is that Common Ground can be a part of the conversation that moves comprehensive economic planning in our state forward in a meaningful way.

The first report driving the content of Common Ground began its life at the state level; in 2006 the Vermont legislature set about defining a process for the development of an economic plan, and the Commission on the Future of Economic Development was formed.  With a public outreach process as the backbone of their research, the CFED condensed input from employers, stakeholders and public participants into a series of benchmarks and goals for analysis and action from state economists and legislators.

Nearly concurrently, in late 2007 the Vermont Council on Rural Development came to the realization that Vermonters were expressing concern about a lack of vision on a statewide level and proceeded to construct the Council on the Future of Vermont.  Charged with synthesizing the vision of what Vermont is and should be from the eyes of Vermonters, the CFV ultimately created both a vision for Vermont and a comprehensive analysis of who we are right now (“Vermont in Transition”).

GBIC has long been a proponent for the development of an economic plan that is definitive in its direction without being overbearing in its recommendations; independent in formation yet based on broad public input; measureable in success, but avoids setting goals without a means to reach them.  To this end, we have set about examining these two papers to find the clearest areas of overlap between leadership and public demand.  Rather than assessing the validity of individual recommendations, Common Ground identifies those areas of agreement between these reports; finding the areas where economic reality most clearly aligns with the vision Vermonters see as necessary to maintain the core values of our state.

For too long, we have lacked a successful unified and forward thinking economic vision and, as such, have come up short in developing a comprehensive economic plan. Part of the reason for this stems from disagreement between leaders and stakeholders. Common Ground seeks to avoid those areas of conflict by presenting the unified interests of these two reports.  By focusing not on solving disagreement, but by moving forward through areas of agreement, this document can act as a vital step in moving towards a valid, comprehensive and unified economic plan.

Bill Schubart recently presented to the Champlain Forum on the topic of how Vermont needs to be move forward and, unsurprisingly, Mr. Schubart took the time to underscore the fact that we don’t know where we’re heading.  “Vermont reveres its past,” he began, “but has not been great at learning from it. Like many people and institutions it seems to need to relearn lessons repeatedly.”  However, the real point Mr. Schubart brought to the table is that we have no shortage of these lessons from which to develop an economic plan that will drive progress in our state.

“If the way forward in business is anything like government, the progression is study, plan, execute, measure and correct. Vermont rarely gets out of the study mode, perhaps because of the inherent tension between political durability and the pain and risk associated with actually leading an enterprise [...]The cycle of study, plan, execute, measure and correct in Vermont usually ends with “study” and usually in the summer. The sheer number of printed but unexecuted “summer studies” could probably provide fuel for Vermonters’ woodstoves for next year.”

This year our state (and the rest of the country) faced considerable pressures and constraint on budget income and expenditures.  This led to the Legislature deciding to convene a committee to take a top-down examination of revenue-side budget sources (essentially a review of taxes and fees) within the next two years.  While this appears to be promising, for it to show real value it must do what so many other studies cannot: follow through on the recommendations from the committee.  And while it’s easy to place blame if we’re not satisfied with the results, Mr. Schubart points out that “We’ve become adept at blaming leaders, anyone other than ourselves, but the reality in a democracy is we are led, or not, by the leaders we ourselves choose.  In the end, we are responsible.”

But this is just the beginning of where we need to find opportunity in challenge.  It is not just enough to examine traditional sources of state income, but to generate new ways of broadening our employment/employer base by actively encouraging and supporting those who are driving our economy.  This shouldn’t mean simply throwing money at the problem as states such as South Carolina have done, but it does mean implementing and fully supporting programs designed to be meaningful for employers to grow, stay and possibly relocate to within our borders.  It’s not about picking winners when you make a focused economic plan, it’s about consolidating resources and delivering them through clear, responsible channels that have direct interaction with employers.

In an effort to clearly identify where Vermonters agree our state should develop, GBIC is examining two of the most complete, community driven economic reports our state has seen in recent memory published by the Commission on the Future of Economic Development and the Vermont Council on Rural development, respectively.  By examining where these reports overlap and agree, GBIC hopes to identify immediately actionable recommendations for the short term while laying groundwork to aid in a long term comprehensive economic plan for Vermont.

Dangerous Trends Require Action
By David Coates, KPMG Managing Partner (retired) and
Member, Vermont Business Roundtable

Rising mandatory expenditures in the state of Vermont translates into less discretionary dollars to support important programs for needy Vermonters. Two such expenditures are retirement plans and other post-retirement benefits for state workers and teachers, whose costs are rising at unsustainable levels. It is time to begin talking about changing from the path we’re on.

There are essentially two types of pension plans….a defined contribution, similar to a 401 (K) plan, and a defined benefit plan which guarantees a certain lifetime benefit upon retirement. As of June 30th the state employees defined pension plan covered most of the state’s 8442 workers. Effective July 1st, workers contribute 5.1% of their pay, and the state is responsible for funding the balance of lifetime benefits paid to retirees. In 2008 the state paid approximately $23 million (projected at $40 million in 2015) from the general fund into the retirement fund. The state workers can retire after 30 years of service or age 62, and receive a lifetime benefit of 50%. For workers employed after June 30, 2008 the retirement age is 65 and they receive a lifetime benefit of 60%.

Although the wages for the teachers are determined locally, the state is required to pay their pension costs. As of June 30th there were 10,685 teachers in the plan. Teachers contribute 3.5% of their pay annually and the state is responsible for funding the balance of lifetime benefits. In 2008 the state paid approximately $40 million (projected at $52 million in 2015). Teachers can retire after 30 years of service or age 62 and receive a lifetime benefit of 50%.

As a result of the recent decline in the investment markets and the significant under-funding of the teachers plan, the state has unfunded pension liabilities of over $466 million as of June 30. This is roughly a three-fold increase in just five years. With obvious market declines since June, these liabilities are certain to be much higher; requiring the state to pay even more to assure the financial integrity of the plans.

The situation with other post-retirement benefits (i.e. medical insurance) is more alarming. Retired state workers pay 20% of the cost of the premiums, which covers the retiree and all dependents. Teachers pay 20% as well, but this covers only the retiree.

In 2008 Vermont paid in about $17 million for state workers, but nothing for the teachers. This left a liability, for 2008, of $29 million for state workers and $60 million for teachers. The state actuary has calculated the unfunded liability for both plans at June 30 to be $1.6 billion. This is projected to increase to over $4 billion in thirty years, if we continue to fund these plans as we have in the past.

Clearly, Vermont is currently on a path that is not financially sustainable. The private sector and most not-for-profit institutions have done away with those benefit plans because they are expensive to maintain and the liability will forever remain with the employer, in this case, the state.

So, what are the alternatives to avoid state bankruptcy? There are several: Fully fund the pension and benefits; reduce the work force; cut the benefits to more closely align with the private and not-for-profit sectors; freeze or eliminate some or all of the plans; or, require the local governments to fund the costs for teachers.

Not addressing the issues now will only require future generations of Vermonters (our children) to pay for the promises we have made but failed to fund. We need the leadership of the legislature, the administration and the unions to come together and identify a common solution to these vexing issues now. The current economic climate is precisely the motivation for changing current practice toward a more sustainable system.

On April 7th, GBIC is hosting a workshop on IP Strategy and how it can help your business today.  The event is free, but be sure to register as space is limited!

Good Ideas, Great Ideas, Valuable Information and Technology:
Have you identified and protected them?
Know how to maximize their value?

“IP Strategy and Building Company Value”
A workshop for area businesses on the subject of intellectual property and strategy.
Hosted by Greater Burlington Industrial Corporation (GBIC) for area businesses.

Many companies have a business strategy, fewer companies have an IP strategy, and even fewer companies integrate their IP strategy with their business strategy in a way that builds significant company value.

Agenda:
• The basics of an IP strategy, including consideration of how to develop and protect IP in a cost-effective manner;
• How an IP strategy can be integrated with a business strategy;
• How to make money or create value in your company using an IP strategy;
• Interesting case studies and approaches to implementing an IP strategy to enhance company value.

Presenters:
Larry Meier, Director and Chair of the Intellectual Property Practice at Downs, Rachlin and Martin PLLC;
Nancy Edwards Cronin, Principal Partner, ipCapital Group, Inc.; and
Mark Blanchard, Technology Development & Commercialization Advisor, Vermont Small Business Development Center.

Tuesday, April 7 2:00 to 5:00 PM at the Windjammer Conference Center, South Burlington.

Admission is free but attendance is limited and registration is required.
To register contact Curt Carter at curt@vermont.org or call GBIC at 862-5726.

Tom Friedman has long been a proponent of nascent business and in a recent NY Times article he challenged convention in how we should revitalize the economy.  Whether or not he has the answer, the importance that start-ups play in driving our economy shouldn’t be overlooked.

Start Up the Risk-Takers

Reading the news that General Motors and Chrysler are now lining up for another $20 billion or so in government aid — on top of the billions they’ve already received or requested — leaves me with the sick feeling that we are subsidizing the losers and for only one reason: because they claim that their funerals would cost more than keeping them on life support. Sorry, friends, but this is not the American way. Bailing out the losers is not how we got rich as a country, and it is not how we’ll get out of this crisis.

G.M. has become a giant wealth- destruction machine — possibly the biggest in history — and it is time that it and Chrysler were put into bankruptcy so they can truly start over under new management with new labor agreements and new visions. When it comes to helping companies, precious public money should focus on start-ups, not bailouts.

You want to spend $20 billion of taxpayer money creating jobs? Fine. Call up the top 20 venture capital firms in America, which are short of cash today because their partners — university endowments and pension funds — are tapped out, and make them this offer: The U.S. Treasury will give you each up to $1 billion to fund the best venture capital ideas that have come your way. If they go bust, we all lose. If any of them turns out to be the next Microsoft or Intel, taxpayers will give you 20 percent of the investors’ upside and keep 80 percent for themselves.

If we are going to be spending billions of taxpayer dollars, it can’t only be on office-decorating bankers, over-leveraged home speculators and auto executives who year after year spent more energy resisting changes and lobbying Washington than leading change and beating Toyota.

I’ve been traveling all across the country on a book tour, and every evening I return to my hotel with my pockets full of business cards from inventors in clean energy. Our country is still bursting with innovators looking for capital. So, let’s make sure all the losers clamoring for help don’t drown out the potential winners who could lift us out of this. Some of our best companies, such as Intel, were started in recessions, when necessity makes innovators even more inventive and risk-takers even more daring.

Yes, we have to shore up the banking system, which underpins everything; and finding a fair way to prevent hardworking people, who played by the rules, from losing their homes to foreclosure is both right and essential for stability.

But beyond that, let’s think, talk and plan in more aspirational ways. We’re down, but we’re not out. As we invest taxpayer money, let’s do it with an eye to starting a new generation of biotech, info-tech, nanotech and clean-tech companies, with real innovators, real 21st-century jobs and potentially real profits for taxpayers. Our motto should be, “Start-ups, not bailouts: nurture the next Google, don’t nurse the old G.M.’s.”

To be fair, the stimulus package that the Obama team and the Democrats in Congress recently passed — with virtually no Republican help — goes some way toward doing just that. Hat’s off for that. Now let’s do more.

The renewable-energy business — wind, solar and solar thermal — was almost dead in this country. Most new projects stopped last fall because they depended for their financing on selling their renewable energy tax credits to Wall Street firms. As those Wall Street firms went bust or suffered steep losses, they had no need for tax credits because they had no profits to offset. The stimulus package created a mechanism for renewable energy innovators to bypass Wall Street and monetize their tax credits directly through the U.S. Treasury, for any project that starts between now and the end of 2010.

The wind and solar industries in America “were dead in the fourth quarter,” said John Woolard, chief executive of BrightSource Energy, which builds and operates cutting-edge solar-thermal plants in the Mojave Desert. Almost five gigawatts of new solar-thermal projects — the equivalent of five big nuclear plants — at various stages of permitting were being held up because of a lack of financing.

“All of these projects will now go ahead,” said Woolard. “You are talking about thousands of jobs … We really got something right in this legislation.”

These jobs will be in engineering, constructing and operating huge solar systems and wind farms and manufacturing new photovoltaics. Together they will drive innovation in all these areas — and move wind and solar technology down the cost-volume learning curve so they can compete against fossil fuels and become export industries at the “ChinIndia price,” that is the price at which they can scale in China and India.

That is how taxpayer money should be used to stimulate: limited financing, for a limited time, targeted on an industry bristling with new technology start-ups that, with a little push from Uncle Sam, won’t just survive this crisis but help us thrive when it is over. We need, and the world needs, an America that is thriving not just surviving.