But experts say those challenges also might be the catalyst that helps the state focus on its strengths and build stronger communities.

VPR's Jane Lindholm reports.

(Lindholm) Change has been a constant throughout Vermont's history.

And people have often debated at critical stages whether the state is prepared for it.

With demographic shifts, environmental challenges and a recession under way, many observers say Vermont has reached a turning point.

Longtime Vermont Life Editor Tom Slayton says Vermont has no choice but to adapt.

(Slayton) "The question in my mind is not can we stop change, because we can't. But can we shape change, can we influence the rate of change? Those are the key questions for me.''

(Lindholm) Slayton says nearly every state thinks of itself as unique. He says what makes Vermont stand out is its small communities. Because they're small, people tend to work together.

University of Vermont political scientist Frank Bryan says that history can be a key to the state's future.

(Bryan) "If we can somehow figure out a way to live small on a humane scale in little communities, we can continue what I think is a wonderful, enviable lifestyle that's recognized as special and different.''

(Lindholm) But accomplishing that goal is not without obstacles.

Vermont's reputation is closely linked to the environment and to its working landscape.

But dairy farms are disappearing and pollution is still a problem.

Pat Parenteau of Vermont Law School says the state's strong environmental ethic has begun to fade.

(Parenteau) "You can't wait until you're hungry to plant a garden. If you're going to realize energy efficiency, land-use efficiency, you have to make investments. And we're not currently making those investments.''

(Lindholm) Farming may also be in the midst of a transformation. For years, farmers have focused on dairy. But Hardwick businessman Andrew Meyer says they need to diversify.

(Meyer) "We strongly believe that there's tremendous potential for diversification in agriculture in Vermont. Part of that, in order for the farmer to benefit, we need to create an infrastructure for that raw product to be processed in Vermont.''

(Lindholm) The experts say Vermont will have to continue to borrow from its history if it is to prosper in the future.

They say the state's political heritage fosters cooperation and communication - and that's what will be needed in the years to come.

For VPR News, I'm Jane Lindholm