Needed: Courage and Common Sense

If the legislature is truly intent on constraining education spending to lower property taxes, there is a simple and direct way to do it.

Vermont’s education funding system is like the House of Mirrors at the carnival. In the House of Mirrors, one’s reflection betrays reality, causing tall people to look squashed, short people to look lanky, and everyone in between warped and distorted.

Similarly, our education funding system betrays common sense. It turns a simple student head count into “equalized pupils” and voter approved school budgets into “education spending”. These terms, established and defined by the legislature, are used to set local education tax rates. The “equalized pupil” process reallocates the student count among districts, creating winners and losers, and the “education spending” process recalculates voter approved budgets by excluding certain types of spending. Such exclusions result in district’s “education spending” as a percent of voter approved budgets to be wide ranging, from the low 50 percentiles to the high 90 percentiles. Bottom line, tax rates associated with voter approved school budgets are highly unpredictable.

Our education funding system has become a House of Mirrors for most citizens and many school board members.  A school district where voters reduce spending might see higher taxes while a district that adds spending may see no tax increase at all.

Layered on top of this system, the Legislature last session enacted Act 46, including spending caps and spending penalties. Such an unworkable mishmash they crafted. Now the Governor wants the caps repealed or “tweaked”; key Senators on the Education Committee, having voted for the caps, now call for their repeal; and other legislators dig in their heals hoping that somehow the caps will lower property taxes.  

There are alternatives more simple and straight forward.  The driving force behind high property taxes is the high staffing levels in our schools. Vermont spends $19,100 per pupil, among the highest in the nation. As our student count continues to drop, now down 20,000 since 1997, our students to staff and students to teacher ratios are now the nation’s most generous at 4.7 and 10 respectively. For perspective, recent data from the National Center for Education Statistics (2013) shows the national average students to teacher ratio at 16, Rhode Island at 14, Massachusetts at 13.5, New Hampshire at 12.7, Connecticut at 12.5, Maine at 12.2 and Vermont at 10.7.

Outside the tangled web of the Education Fund is the Teachers Retirement system, funded substantially by the General Fund with contributions of $46.9 million in 2011 and rising to $73.1 million this year. In effect, the General Fund bankrolls the retirement costs for Vermont’s most generous in the nation students to teacher ratio. The opportunity exists to leverage access to the Teachers’ Retirement Fund such that Vermont’s students to teacher ratio is more tax payer friendly, say a ratio of 12, while remaining the best in New England.

Here’s an outline of what the legislature might do: 

  • Abandon the current caps and penalties as they are temporary, poorly designed and causing great confusion.
  • Establish a ratio of 12 students per teacher as a threshold for enrolling new teachers in the retirement system. Existing teachers would be grandfathered. (Alternatively, a ratio of students to staff could be used upon developing a reliable counting system). Further, establish a threshold of spending per pupil to allow low cost districts more hiring flexibility than high cost districts.
  • Assign teachers (or staff as the case may be) employed at supervisory unions to local school districts similarly to how supervisory union budgets are now assigned to member district budgets.
  • Starting in school year 2018, phase-in the thresholds that inhibit the enrollment of new teachers into the retirement system if the sponsoring school district exceeds both the established pupil to teacher and spending per student thresholds.

The above system would be a powerful spending constraint targeted at the very cause of Vermont’s high education spending and property taxes. Unlike Act 46 which caps every district, leveraging access to the retirement system would target only districts with high staffing levels, leaving the rest alone. As school district’s trend toward lower students to teacher ratios, millions will be saved in the general fund to be used to restore the retirement fund’s fiscal health or redirected to underfunded areas of state government like higher education. For property tax payers, the higher students to staff ratios translate into tens of millions in reduced property taxes.   

If our legislators exercise the necessary political courage to look past the pressures of the education lobby, property taxes can be reduced without undermining education quality.

This commentary is by Tom Pelham, formerly finance commissioner in the Dean administration, tax commissioner in the Douglas administration, a state representative elected as an independent and who served on the Appropriations Committee, and now a co-founder of Campaign for Vermont.

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