by VDC staff

A New England fiscal policy organization is pushing back against Democratic gubernatorial nominee Amanda Janoo’s contention that free-market forces threaten Vermont’s ability to maintain dairy processing and other production capacity.

The Fiscal Alliance Foundation said the recent closure or announced closure of four Vermont dairy processing facilities should instead prompt lawmakers to examine the state’s taxes, regulations, energy costs and overall business climate.

The dispute follows a recent Seven Days report examining the closures of HP Hood’s Barre plant, Perrigo’s infant formula facility in Georgia, Franklin Foods’ Enosburg Falls operation and Dairy Farmers of America’s St. Albans Creamery.

Janoo told Seven Days that the closures demonstrate the need for a more active state economic policy.

“If we do not do something, the forces of ‘the free market’ will just turn us into some tourist playground, and we won’t have any actual production capacity here,” Janoo said.

Janoo, an economist who has worked on international industrial policy, told Seven Days that Vermont should pursue “strategic economic policy planning” to support local industries. She suggested the state could help workers or farmers explore employee-ownership arrangements to purchase and potentially reopen the St. Albans facility, including possible state financing.

The Fiscal Alliance Foundation offered a sharply different diagnosis Monday.

“This is not a free market failure. This is policy failure,” said Elizabeth Brown, the foundation’s Vermont state director. “The free market is doing what it is designed to do: giving businesses the freedom to invest where they have the best opportunity to thrive.”

Brown said years of state policy have made Vermont increasingly expensive and unpredictable for businesses.

She pointed to major dairy investments occurring across the border in New York. Chobani is planning a $1.2 billion, 1.4-million-square-foot processing plant in Rome, N.Y., expected to employ as many as 1,000 people, while Coca-Cola-owned Fairlife recently opened a $650 million processing facility near Rochester, Seven Days reported.

Brown argued that Vermont’s taxes, energy and health care costs, workforce shortages, regulations and housing problems all factor into companies’ decisions about where to invest.

“A company deciding where to make a major capital investment is going to compare Vermont with the alternatives, including our neighboring states, and right now those alternatives are winning,” Brown said.

The foundation also cited Proposition 3, the proposed constitutional amendment concerning collective bargaining rights that Vermont voters will consider in November, as another factor businesses may weigh when considering long-term investments.

Brown made similar arguments in an Aug. 24 VTDigger commentary, contending that Vermont should focus on reducing government spending, taxes and regulatory costs rather than raising additional revenue.

The causes of the dairy closures, however, extend beyond state policy. Seven Days reported that Vermont’s dairy industry has undergone substantial structural changes. The number of dairy farms declined from 838 to 405 during the past decade, while the number of cows has fallen 14 percent and milk production 8 percent since 2016.

One large Vermont dairy farmer told Seven Days that the aging St. Albans plant was operating at reduced capacity and faced competition from much larger and more efficient processing facilities. Dairy Farmers of America said the closure reflected broader changes needed to serve its farmer-owners and customers.

Brown nevertheless said the loss of processing capacity should serve as a warning to Vermont policymakers.

“If Vermont wants to preserve actual production capacity, policymakers need to make Vermont a place where operating a business makes economic sense,” Brown said. “We cannot continue layering higher costs and more uncertainty onto employers and then blame the free market when investment goes somewhere else.”