Administration proposes spending caps, commission that could close schools

By Anne Galloway
VTDigger.org

As promised, Gov. Phil Scott has proposed significant changes to the state’s education funding system. Most of the proposals, in a memo submitted to lawmakers, focus on caps for per pupil spending rates and cuts to the state’s rebate program.

There are more than a dozen proposals on the table. Two ideas that generated the most consternation from lawmakers include a proposed cap for per pupil spending and an asset test for property tax rebates. The cap would be relatively high — $17,000 per equalized pupil — well above the $15,800 average spending rate. The governor is also proposing an asset test for people under the age of 65 who receive more than $10,000 a year in income from investments and who currently qualify for property tax rebates.

The estimated savings for the Scott administration’s proposed cost containment and education fund changes would be $75 million to $94 million.

Scott has also proposed the creation of a school consolidation commission that would evaluate whether schools with low student enrollments are viable. “Non-viable” schools would be consolidated by the commission.

The governor is fulfilling a campaign promise to lower state spending on K-12 spending which has increased from $1.34 billion in 2010 to $1.62 billion in 2017. Meanwhile, student population has continued to drop. Over the past 20 years, student enrollments have declined by 30,000 pupils.

The cost of funding the state’s schools is anticipated to increase by 7 percent in the coming year. Most of that hike is the result of a $50 million deficit in the K-12 education fund. Because Vermont has a statewide funding system, local districts have to make up the difference. School districts are expected to increase spending by about 3 percent on average, which would increase the gap between spending and current tax rates by another $30 million.

Scott has said he will not accept any increases in property taxes this year and reiterated that pledge in his weekly press conference on Friday.

The governor also emphasized that all options should remain on the table and he said he is willing to work with lawmakers to develop a plan that eliminates the statewide education fund deficit. Scott has also issued a memo to school boards urging districts to keep spending at current levels.

In a letter to the House Ways and Means Committee and the Senate Finance Committee, Susanne Young, the secretary of the Agency of Administration, urged lawmakers to consider the proposals with an open mind and “with a sense of urgency.”

The Scott administration attributes the problem of growing school spending against a backdrop of declining enrollments to a disconnect between increases in local budgets and tax bills. Seventy percent of Vermonters are eligible for income sensitivity rebates when property taxes exceed 2 percent of household income. That means many local residents are voting for budgets without having to pay significantly more in property taxes.

Young sees that as a problem. “The current formula does not adequately connect local budgets to local taxpayers in a way that would constrain statewide property tax growth,” she wrote.

Lawmakers respond
Democratic lawmakers, who are the majority in the Legislature, have long lauded the income sensitivity program as a key mechanism for ensuring tax equity.

The Scott administration’s proposals were not presented as a fully vetted package. Kaj Samsom, the commissioner of the Vermont Department of Taxes, emphasized that the recommendations are ideas that the governor wants to put on the table for legislative consideration.

The laundry list of options could reduce tax rates in the short term and over the long haul, based on an initial review by the administration, Samsom said in testimony before the House Ways and Means Committee on Friday.

The tax writing committee skipped over cost containment proposals that chair Rep. Janet Ancel, D-Calais, said should be taken up by the House Education Committee, and went straight to education funding reform recommendations.

“We invited everyone to come to the committee with ideas,” Ancel said
Dave Sharpe, D-Bristol, chair of the House Education Committee, opposes caps on spending per pupil and doesn’t support most of the other ideas presented by the governor. He does support a block grant funding plan for special education.

“It turns out it’s expensive to deliver quality education,” Sharpe said. “If we want to remain one of the top five states in the country in terms of delivering education to our students, it costs money and local voters actually know that. They vote these budgets and to say that they’re not aware that it’s not going to affect their taxes is a bit disingenuous.”

A 2017 report on pre-K through 12 education from U.S. News & World Report placed Vermont at No. 5 nationally for school quality.

Some key proposals on the table
The administration’s reform proposals include:

  • Setting a cap for the per equalized pupil rate at $17,000. Average spending per pupil is currently $15,800. Thirty-three districts in the state are spending above $17,000 per equalized pupil at this time. Savings: $37 million.
  • Freezing the income sensitivity adjustment at the fiscal year 2018 level. Payments totaled $173 million in the current year. Savings: $3.4 million.
  • Requiring an asset test for homeowners under age 65 with “passive” income from investments exceeding $10,000 a year. Savings: $5 million to $7 million.
  • Changing the Current Use Program value to an 85 percent exemption.
    The biggest proposed base budget change from the Vermont Department of Finance and Management include achieving a student to staff ratio of 1 to 4.45 through attrition – retirements, vacancies and management of positions – across school districts in the current fiscal year. Savings $30 million.
  • Freezing special education rates. Savings: $1.5 million.
  • Memorializing in statute the recommended cost sharing for teacher health care. Savings: $3 million.

The administration also proposes long-term changes to education policy that could generate long-term savings.Chief among these is the proposed formation of a school consolidation commission that would determine whether schools have enough students to remain viable. The commission would evaluate vacancy rates and consider better utilization of space within districts. In addition, the group would consider consolidation of schools in adjacent districts. Five-year attrition plans would be developed for supervisory unions to examine staffing levels.

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