Vermont Is the Only State Seeing Bond-Rating Cuts. Blame Grandma

(Bloomberg) -- Vermont’s demographics have cost the Green Mountain State its AAA credit rating.

Fitch Ratings lowered Vermont’s general obligation rating to AA+ on Wednesday, making it the first state the company has downgraded in nearly two years. It lowered Alaska in November 2017. Moody’s Investors Service dropped Vermont from its top-rated rank in October.

Vermont’s downgrade isn’t because of fiscal mismanagement or high debt load or overwhelming pension problems. Rather, the state’s aging population, prospects for sluggish economic growth and a declining labor force gave the rating company concern. The state has the third-oldest population in the country, with the median age of 43 trailing only Maine and neighboring New Hampshire, according to 2016 census data.

“Our view is that the challenges they’re seeing and likely to continue seeing in terms of population growth, their growth in labor force, employment base and their economic potential overall, will limit their ability to generate revenue from their economic base,” Eric Kim, Fitch’s lead analyst on the state, said in an interview.

The AA+ rating places Vermont in line with other New England states like Maine, New Hampshire and Rhode Island that face similar demographic challenges, according to Kim.

Vermont is trying to get younger people to become residents. It launched its Remote Worker Grant Program, paying individuals who work remotely for a company outside of Vermont to move there. Accepted applicants would receive as much as $10,000 over two years. In January 2020, the New Worker Grant Program will offer cash to people who move to Vermont to work full-time in the state.

“They know what they face,” Kim said of the state’s effort. “There’s not as many people coming into the state and spurring new jobs and generating new money and that makes it more difficult for a state to generate more revenue.”

To contact the reporter on this story: Danielle Moran in New York at dmoran21@bloomberg.net

To contact the editors responsible for this story: Elizabeth Campbell at ecampbell14@bloomberg.net, Michael B. Marois

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