VEGI program quietly extended without a vote

by Dave Soulia, for FYIVT.com

Most Vermonters have never heard of the Vermont Employment Growth Incentive (VEGI) program. But quietly, over the past two decades, taxpayers have funded nearly $40 million in cash payments to private companies—with another $39 million committed to future payouts if businesses hit certain job and investment targets.

The idea sounds reasonable at first glance: Vermont offers incentives to companies that promise to create new jobs and economic activity that wouldn’t happen “but for” the state’s financial support. But a closer look at the program’s mechanics—and recent warnings from the State Auditor—raise serious questions about whether VEGI is a smart investment or just another costly handout with little real accountability.

The “But For” Myth

At the heart of VEGI lies the “but for” test: businesses must attest that their expansion or hiring would not happen—or would happen elsewhere—without the incentive. If they succeed in making that case, they are eligible for cash awards based on future job creation, payroll increases, and capital investments.

However, there’s a catch: the “but for” test is based almost entirely on self-reporting. Companies simply assert that state funding is critical to their plans, and the Vermont Economic Progress Council (VEPC)—the body that approves applications—largely takes their word for it.

This is not just a Vermont problem. Economist Timothy Bartik of the Upjohn Institute studied corporate incentive programs nationwide and found that between 75% and 98% of companies that receive public subsidies would have expanded anyway without them. In other words, taxpayers often end up subsidizing business decisions that were already happening. The “but for” requirement, designed to safeguard public dollars, often amounts to little more than a polite fiction.

In Vermont’s case, the situation is compounded by a troubling structural flaw: the very agency tasked with promoting VEGI—VEPC—is also the one responsible for regulating and approving the applications.

Money Out the Door

According to the most recent public filings and reports, VEGI has:

• Paid out $38.9 million in cash awards to companies from 2007 through 2022.
• Committed another $39.2 million in approved incentives that could be paid out in future years if companies meet performance targets.
• Forfeited about $9.2 million in previously authorized incentives where companies failed to live up to their promises.

VEGI’s annual cash outlays typically hover between $2 million and $3 million per year. While companies must meet job creation and investment goals before receiving payouts, there is no requirement to refund previously paid incentives if companies later falter. Once a cash incentive is earned for a performance year, it stays with the business even if future targets are missed.

The structure of the program—multiple years of payments over staggered timelines—makes it difficult for ordinary citizens to follow the money or understand which companies are living up to their claims. Meanwhile, everyday Vermonters applying for basic assistance programs like Reach Up or Fuel Assistance must submit far more rigorous financial proof than many companies seeking hundreds of thousands of dollars in VEGI funds.

The State Auditor’s Red Flag

Vermont State Auditor Doug Hoffer has repeatedly warned the Legislature about the dangers of allowing agencies like VEPC to both market and monitor the programs they oversee.

In a letter sent to lawmakers earlier this month, Hoffer made it plain:

“The same State entity should not both promote and regulate a program.“

This conflict of interest isn’t theoretical. Vermont’s disastrous experience with the EB-5 foreign investor scandal showed what happens when promotion and enforcement are commingled. In that case, lax oversight allowed fraud to flourish for years while state officials prioritized marketing the program over protecting investors.

VEGI’s structure leaves Vermont exposed to similar risks, albeit on a different scale. Hoffer has called for independent oversight separate from VEPC’s promotional role, but so far, the Legislature has declined to act on those warnings.

Sunset Extension Passed — Without a Roll Call

Originally scheduled to sunset on January 1, 2025, the VEGI program received a two-year extension through Act 176, signed by Governor Phil Scott on June 13, 2024. Under the current law, VEPC can continue to accept applications through the end of 2026, with the program scheduled to expire on January 1, 2027.

Notably, the extension was passed without a roll call vote in either the House or the Senate. The bill, known as H.10, was taken up, amended, and passed by voice votes. As a result, there is no public record showing which individual legislators supported or opposed the continuation of the program.

In a state where transparency and accountability are often touted as core values, the quiet passage of an extension for a multimillion-dollar corporate subsidy program may raise eyebrows among taxpayers.

Time for a Serious Rethink

Vermont needs economic development. But it needs real growth—not unverified promises propped up by taxpayer checks. Legislators still have time this session to reconsider the structure and oversight of VEGI. If no changes are made, the program will continue disbursing incentives under a system that relies heavily on company self-reporting and internal promotion, with little independent verification.

As taxpayers, Vermonters deserve better. Demand transparency. Demand oversight. Or, perhaps, demand an end to VEGI once and for all.