Legislative hearings on a sleeper of a bill, S. 217, have had the unintended consequence of exposing the Agency of Education’s long-standing unlawful teacher licensing process, as explained below, with important financial implications for taxpayers generally and even more serious legal and financial implications for teachers, schools and the Agency itself.

First of all, the unlawful system drives up both property taxes and income taxes. By statute, a person cannot be employed as a "teacher" in a public school without a valid license. 16 V.S.A. § 1692. However, the Agency of Education, and the Vermont Standards Board for Professional[1] (a lay body with a teacher majority membership) have created a licensing process that requires every general teacher’s license to carry a specific “endorsement.”[2] There are now 44 different endorsements (six for administrators and the rest for various categories of teachers). Dividing up the duties of teacher in this way, while prohibiting schools from employing teachers in areas outside of their endorsement area[3], contributes to overstaffing in schools. The system requires specialists and prohibits generalists. More teachers means more local staff cost for schools paid for by property taxes. It also means more members of the teachers’ retirement fund, a big chunk of the general fund, which is largely supported by the income tax. 

The second problem is that the unlawful system is expensive for teachers. To be eligible for a particular endorsement a teacher must meet very specific requirements for education and experience and demonstrate competency in certain skill areas. Separate ongoing professional development requirements for renewing a license apply to each endorsement. If a teacher has more than one endorsement the cost of meeting initial licensure and professional development requirements is increased.

Finally, the unlawful system has created more state employees. The Agency of Education has an entire licensing division devoted to determining whether teachers meet endorsement requirements. Licensing fees primarily fund the positions but the retirement costs are yet another general fund expenditure.

So why is the teacher licensing system unlawful? As recently discovered and exposed by the Vermont Secretary of State’s Office, AOE and the Standards Board have created these endorsements completely outside of Vermont’s statutory requirements for rule making.[4]This came to light because over the years AOE has expanded its’ endorsement turf to capture professions, like speech language pathologists and psychologists, already regulated by the Secretary of State’s office. S. 217 is intended to put an end to dual licensure and require a study of statewide licensure with an eye towards consolidation. As the hearings became contentious and turfy the Secretary of State made good on its commitment to transparency by taking a close look at the endorsement requirements.  Here’s what the Deputy Secretary of State had had to say:

“Endorsements are promulgated by the VSBPE (Standards Board) outside of the APA (Administrative Procedure Act) process…. It is well established and self evident that “when an agency adopts policy or procedure it should not supplant or avoid the adoption of rules.” See 3 V.S.A. § 800(4).

He goes on to point out a very specific APA rulemaking provision designed to control education costs:

“If a rule affects or provides for the regulation of public education and public schools, the agency proposing the rule shall evaluate the cost implications to local school districts and school taxpayers, clearly state the associated costs, and report them in a local school cost impact statement to be filed with the economic impact statement on the rule required by subsection 838(c) of this title. An agency proposing a rule affecting school districts shall also consider and include in the local school cost impact statement an evaluation of alternatives to the rule, including no rule on the subject which would reduce or ameliorate costs to local school districts while achieving the objectives or purposes of the proposed rule. The legislative committee on administrative rules may object to any proposed rule if a local school cost impact statement is not filed with the proposed rule, or the committee finds the statement to be inadequate, in the same manner in which the committee may object to an economic impact statement under section 842 of this title. 3 V.S.A. § 832(b).”

Senate Government Operations S.217

By ignoring the rule-making process both the Agency of Education and the Standards Board have avoided public input, cost analysis and legislative oversight. Then there’s the issue of enforcing “rules” that arguably don’t have the force and effect of law. [5]The implications here are staggering. How this gets sorted out is the responsibility of the Governor’s office and quite possibly the courts. Now that the Governor has direct supervisory authority over the Secretary of Education he needs to exercise it by insisting that teacher endorsements are subject to immediate rulemaking. The legislature in turn should take this as a lesson in why professional licensure should be housed entirely within an agency that understands and respects its’ legal obligations and its’ responsibility to the public.

We believe Campaign for Vermont offers substantive insight, information and advocacy on a non-partisan basis relative to Vermont's affordability crisis. We hope you have found value in the above presentation. A contribution of $50 dollars, $100 dollars or more would be greatly appreciated and well used to keep us working hard for you. We do recognize that not all of our supporters can afford this so a donation in any amount is highly valued. Please renew that support with a donation. 

And visit us on Facebook or Twitter too!

Best,

Barbara Crippen
Policy Coordinator

Don’t Agonize, Advocate

The Chancellor of Vermont State Colleges (VSC), Jeb Spaulding, rightfully laments that Vermont’s higher education institutions, including VSC, UVM and the Vermont Student Assistance Corporation (VSAC), have lost ground in the state budget. In 2014 through 2016 these institutions received between $88.8 million and $87.7 million. Governor Shumlin’s proposal for fiscal 2017 is again level funded at $87.7 million. Such flat-lined allocations impact the finances of not only the higher education institutions but also the students they serve. With one “budget gap” crisis after another year after year at the State House, driven mostly by health care expenditures, there’s little funding left for much else.

But Chancellor Spaulding is in a unique position to turn the tide in favor of higher education. After all, he’s a former Secretary of Administration as well as a former Chair of the Senate Appropriations Committee. Further, he’s in a position to call upon the help of other seasoned state house players. There’s Richard Cate, former State Commissioner of Education and now UVM’s Vice President for Finance and Treasurer as well as Senator Richard Westman, a VSAC manager now serving on the Senate Finance Committee and former Chair of the House Appropriations Committee. Chancellor Spaulding might call these folks together to roll up their sleeves and pursue this path for higher education funding.

Governor Shumlin has proposed increasing the fee/tax on mutual funds to raise $13.5 million. (In fact, state house scuttlebutt has this revenue source being hit even harder). He then proposes that $1 million of these new revenues fund a new program to create $250 college savings accounts for every Vermont newborn, with the remainder going to the general fund to bail out the Governor’s most recent Medicaid driven “budget gap”.  However, without limiting eligibility, reforms in Medicaid can address the Medicaid “gap”. With such reforms, the new revenues from mutual fund taxes can be used, for example, to support higher education institutions or lower property taxes by covering the cost for the state’s mandated but unfunded pre-K program now forced upon property tax payers.

Vermont has one of the most expansive Medicaid programs among the 50 states. As of December, 2015, 30 percent or 190,398 of all Vermonters were directly enrolled in Medicaid as compared to a national average of 22 percent. In 2003, with then Representative Westman as Chair of House Appropriations, Representatives Patty O’Donnell (R-Vernon) and I (I-Calais) successfully proposed and got enacted major reforms and efficiencies to Vermont’s Medicaid payment system. These changes basically eliminated almost all co-payments by converting the system to a more progressive and disciplined income based premium system. One can see this legislation here in Act 66 , the fiscal 2004 Budget Act (see Section 147).

More recently, here is a set of 21 tables recently published by the Kaiser Family Foundation (KFF) comparing Medicaid enrollment and cost sharing policies across the 50 states.

From the above there are two observations of note. First, when comparing Medicaid programs across the 50 states it is clear there exist numerous options among which states can choose to structure their Medicaid program. Medicaid is not a top-down, one-size-fits all federal program. In fact, Vermont has more flexibility in this regard than many states because of our Global Commitment waiver. Secondly, when comparing Kaiser Family Foundation premium and co-pay data profiling Vermont with that established in 2003 by Act 66, it’s clear that many premiums and co-pays have not been adjusted for inflation and in some instances  have been reduced or eliminated since 2003.

The above observations are not new. In 2009 a team of talented and seasoned state employees undertook an analysis and issued this report - A Path to Medicaid Savings

The Executive Summary of the Report concludes the following. “The original goal of the EDS/Medicaid Tiger Team was to identify expense reductions or revenue enhancements that save 5% ($50 million) of the $1 billion total spending in FY09. We believe this paper identifies options of this order of magnitude.”

Further, this recent Rand Corporation Report to the legislature shows that low and moderate income households of equal income levels pay widely different proportions of their income for health care insurance. (See Tables A.9, A.10, A.11)

The Rand Report concludes: “We find that people with the same income levels often pay very different amounts for health care, suggesting that horizontal equity in the state is limited. For example, 27 percent of individuals with incomes below 139 percent of FPL will pay less than 5 percent of income on health care, while 21 percent of these individuals will pay more than 20 percent of their income on health care. This finding is driven partly by the fact that people with the same income levels get health insurance through different sources. For example, a person with income below 139 percent of the federal poverty level (FPL) could be enrolled in Medicaid, employer coverage, or Medicare; that individual could also be uninsured.”

The additional resources that Chancellor Spaulding seeks for higher education are not going to fall from the sky. Further, it is perfectly clear from the above three cited reports that options exist to rationalize and make more efficient both the revenue streams and expenditure profiles of Vermont’s Medicaid and publicly funded health care programs. Cost saving reforms of just 3 percent in these programs would yield over $37 million, with the state dollar share comprising almost half of such savings. Given this, the Medicaid “budget gap” can be addressed within the Medicaid program, and Chancellor Spaulding might look to the new mutual fund revenues to support higher education budgets.

…………………………..

We hope you have found value in the above presentation. We believe Campaign for Vermont offers substantive insight, information and advocacy on a non-partisan basis relative to Vermont's affordability crisis. A contribution of $50 dollars, $100 dollars or more would be greatly appreciated and well used to keep us working hard for you. We do recognize that not all of our supporters can afford this so a donation in any amount is highly valued. Please renew that support with a donation.

Be Well,
Campaign for Vermont

Don’t Agonize, Advocate - For Fiscal Responsibility

Contact your legislator

In our first Don't Agonize, Advocate letter, we pointed the way to reduce property taxes by at least $88 million and redirect millions in general fund dollars to enhancing the seriously depleted teachers retirement pension fund, now only 58 percent funded.

In this, our second “Don’t Agonize, Advocate” letter, we point to $143 million in health care reductions including $10’s of millions in state budget savings at the Agency of Human Services.

Tort Reform and Defensive Medicine – State Budget Savings Target not less than $35 million

It’s been more than a decade since Vermont seriously considered Tort Reform, an approach to reducing the cost of litigation associated with the provision of health care. This 2005 report by the Vermont Medical Malpractice Study Committee resulted in some minor changes in Vermont law but nothing  of measurable consequence.

However, much has changed since 2005. The Affordable Care Act (Obama care) has been enacted at the federal level and Act 48, Vermont’s so-called landmark health care bill, has dramatically changed Vermont’s healthcare landscape. Now that millions more of taxpayer dollars are directed to financing health care and public oversight via the Green Mountain Care Board now guides statewide health care expenditures, in the interests of protecting taxpayers it is quite reasonable to revisit possible savings from tort reform and the reduction of defensive medicine.

The technical foundation for Act 48 was the 2011 Hsiao Report.  One recommendation of the Hsiao Report that the legislature did not adopt was tort reform. The Hsiao Report took an extensive look at how tort reform might reduce health care spending in Vermont over a 5 year period by 2.6 percent, with .6 percent assigned to lower costs of malpractice insurance and 2 percent assigned to reduced instances of defensive medicine.  These estimates were conservative as they reflected the low end of the range for savings estimates by the Report. Tort reform comprised almost 30 percent of the $500 million estimated savings possible from implementing Hsiao’s recommended health care reform recommendations.

With Vermont’s health care spending at $5.5 billion, such savings equate to $143 million. Given Vermont’s publicly fund health care costs of $1.377 billion, $10’s of millions of state and federal dollars now spent on liability insurance and defensive medicine can be saved and redirected to increase provider rates and lessen the cost-shift onto those with private insurance.

Here are quotes from the Hsiao Report with regard to Tort Reform: 

“From literature and national experience, we estimate that conventional reforms such as capping non-economic damages would result in at most an overall decline of 0.6 percent in overall healthcare spending. (Page 62)”

“The Vermont Medical Malpractice Study Committee's actuarial consultant concluded that, because of Vermont's already low malpractice rates, a popular tort reform of capping non-economic damages at $250,000 would produce a 5.7 percent premium reduction [144], as opposed to a 10 percent national decrease assumed by the CBO [137]. (Page 59)”

And with regard to Defensive Medicine:

“Lastly, Vermont can reduce health spending through a change to a no-fault system of medical malpractice. The main effect of this change would be to alter provider perceptions of the risk of law suits thereby reducing defensive medicine. While rigorous studies document the existence of defensive medicine, it is difficult to quantify and estimates of defensive medicine range from 2 percent to 9 percent of total health spending.” (Page Xiii)

“Likewise, changes to medical malpractice will take time to translate into altered physician behavior with respect to defensive medicine. We assume it will take five years to capture the potential savings.” (Page 37)

“As noted, estimates of defensive medicine vary widely, from 2 percent to 9 percent of total health spending. We use the lower-bound estimate that 2 percent of total health expenditure can be saved through the elimination of defensive medicine practices resulting from a transition to a no-fault insurance system. We use the lower-bound due to uncertainties surrounding implementation and the resulting impact.” (Page 63)

As the Vermont state budget crumbles beneath the fiscal pressures of Obamacare and Act 48, Vermont’s taxpayers might find significant relief through the cost constraints of tort reform and the reduction of defensive medicine. Many other states have enacted tort reform; why not Vermont.

We believe Campaign for Vermont offers substantive insight, information and advocacy on a non-partisan basis relative to Vermont's affordability crisis. We hope you have found value in the above presentation. A contribution of $50 dollars, $100 dollars or more would be greatly appreciated and well used to keep us working hard for you. We do recognize that not all of our supporters can afford this so a donation in any amount is highly valued. Please renew that support with a donation.

And visit us on Facebook or Twitter too!

Be Well,

Campaign for Vermont

Power Alley is about what goes on in key legislative committees where legislation is crafted before voted on by the full House and Senate. This Power Alley profiles a property tax cost shift from one set of property tax payers to another by the House Ways and Means and Senate Finance Committees.

Income sensitivity is zero sum. The property tax subsidies given to eligible taxpayers are paid for by higher property taxes on others. The current cost of the program is $166.3 million. Simply put, non-residential property owners and those not eligible for income sensitivity pay $166.3 million more in taxes, allowing those who are eligible to pay $166.3 million less. For a sense of scale, this 2010 Federal Reserve Bank of Boston study of property tax relief programs in New England shows that Vermont, by far, spends more than all other New England states combined. (See page 26)

Kenyon Langley Property Tax Relief

The change in law was little noticed until this observation in a recent VTDigger state house article.

“Outside the House chamber, Rep Heidi Scheuermann was a little stunned looking at a state tax form. She said “income sensitivity” now extends to households with incomes as high as $137,500. (Rep.) Ancel explained the Legislature made the change last year with the intent to have that benefit decrease gradually, like a slope, instead of ending at a certain income level like a cliff. There’s so little benefit at that high-income level, she said, it may not be even worth applying. Scheuermann thought it sent a bad message.”

The fact is that income sensitivity has for years incorporated a benefit that decreases gradually from the full benefit level of $90,000. For tax year 2008, the slope ranged from $90,000 to $97,000. By 2014 it had extended to $109,000, a 2% annual increase. But, for 2015, the current tax season, it jumped by 26% to $137,500. (See Section B of these 2014 and 2015 tax forms)

http://tax.vermont.gov/content/2014-form-hs-122-hi-144 

http://tax.vermont.gov/sites/tax/files/documents/2016-HS-122-2015-HI-144.pdf

The increases prior to 2015 were due to underlying economic factors built into the law. However, the major increase for 2015 was due to a simple, though expensive, one line change tucked deep in H.884, a miscellaneous tax bill. (See section 64)

Draft Bill H.884

The two key committees sponsoring H. 884 were House Ways and Means and Senate Finance. These two Power Alleys profile their respective votes on H.884.

http://www.campaignforvermont.org/poweralleyhouse_884
http://www.campaignforvermont.org/poweralleysenate_884

We believe Campaign for Vermont offers substantive insight, information and advocacy on a non-partisan basis relative to Vermont's affordability crisis. We hope you have found value in the above presentation. A contribution of $50 dollars, $100 dollars or more would be greatly appreciated and well used to keep us working hard for you. We do recognize that not all of our supporters can afford this so a donation in any amount is highly valued. Please renew that support with a donation.

And visit us on Facebook or Twitter too!

Be Well,

Campaign for Vermont

Contact your legislator

The legislative session has likely three months remaining, more than enough time to put Vermont state government back on a sustainable fiscal course. Over the next couple of weeks, Campaign for Vermont will send you powerful opportunities that the legislature could choose that achieve sustainability. You may agree with some of these opportunities and disagree with others, but when you agree, contact your legislator and challenge them to take action.

House Members: http://legislature.vermont.gov/people/all/2016/House

Senate Members: http://legislature.vermont.gov/people/all/2016/Senate

Introduction: Keeping the state budget on a sustainable track requires commitment, good ideas and leadership. Here’s what that looked like when the unsustainable spending of the Kunin Administration hit the wall of the 1990-1991 recession.  As Vermont emerged from that recession, both Governors Snelling and Dean committed themselves to sustainable spending.  Snelling raised taxes to protect the most vulnerable through the bottom of the recession but simultaneously demanded that those tax increases sunset once the state was back on an even keel.  Dean stayed true to the course Governor Snelling set, allowing budget growth of just 1.85, then -2.16, then 2.88 percent for fiscal years 1992, 1993, and 1994 respectively. Dean leveraged this constraint to bring necessary reforms in human services and education spending, the same areas driving budget growth today.

Unfortunately, few current state house leaders exhibit much passion for sustainable spending and cost containment. In 2011, they abandoned their own effort, Challenges for Change, which had identified millions in potential cost savings opportunities. Since then, the spending of state dollars has increased at a 5% rate while Vermont’s economy struggles along, growing at just 2 to 3 percent.  The consequence of this imbalance is inevitable, the ever persistent “budget gaps” which the legislature then fills with more and more taxes and fees on Vermonters.

But, there are alternatives to ever increasing taxes and fees. Here’s one that legislators could choose to enact. Campaign for Vermont will offer more suggestions over the coming days.

Retired Teachers’ Pension and Healthcare Benefits: Property Tax Savings Target At Least $89 million; General Fund Savings redirected to reduce unfunded pension liability

Let’s face it, Act 46 is a dud. The people asked for property tax relief but got higher taxes. Frankly, the most hard-lined advocates of the education lobby would find it difficult to craft legislation more to their benefit. Act 46 squeezes school choice districts, centralizes bureaucratic power farther removed from taxpayers and parents, and allows property taxes to rise even more.

Just consider this contrast. This $300,000 consultant study just out on January 28th and paid for by the legislature says Vermont could spend $163.9 million less and still provide a top quality education for our children.  That’s a lot of property tax reduction.

VT EB Analysis 20.1 Executive Summary

Yet, this Joint Fiscal Office projection made on February 9^th, just after the recent “tweaks” to Act 46 shows the on-the-ground reality of property taxes under Act 46. They’re going up another $19 million - $10.3 million for homeowners (lines 1, 1a and 1b) and $8.7 million for non-homestead property owners (line 2).

Preliminary Education Fund Outlook - S.233

Apparently oblivious to the above, the legislature is not eager this session to further address structural reforms to Vermont’s education funding system. But, here’s an approach they can enact with substantial benefit for property taxpayers and improved funding for the teachers’ pension fund.

Outside the tangled web of the Education Fund is the Teachers Pension and Retiree Health Benefit system, funded substantially by General Fund contributions. Of the Governor’s proposed $45 million general fund increase for fiscal 2017, he directs $12.3 million or 27 percent to the Teachers’ Pension and Retired Teachers Health Care funds, totaling $101 million - an amount greater than the $83.3 million in general funds he proposes for Vermont’s institutions of higher education (See page 771 and 780).

FY 2017 State of Vermont Executive Budget Recommendation

In effect, the General Fund and not the Education Fund bankrolls the retirement costs for Vermont’s most generous in the nation, less than 10, 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.

It’s important to note that the core cost drivers for teacher retirement benefits are not driven by state decisions, but by the salary and benefit contracts between local school boards and the NEA. While the Governor, legislators and Secretary of Education lament the excessive staffing in Vermont’s schools, they remain silent and paralyzed about the General Fund bankrolling the retirement benefits driven by Vermont’s lowest-in the-nation pupil to teacher ratio of less than 10 to 1. 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, and Maine at 12.2. With General Fund budget pressures ranging from higher education to human services, it’s unfortunate that state house leaders won’t resolve these conflicting and costly policy tensions.

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

• Establish a ratio of 12 students per teacher as a threshold for school districts to enroll 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, property taxes will fall. At a ratio of 12:1, over $88 million would be saved in salaries alone and more when including benefits. Further, general fund savings as calculated by the pension fund’s actuary can be used to restore the retirement fund’s fiscal health, now funded at only at 58.6 percent and not a great legacy for the Governor and certainly a red flag to bond rating agencies.

Here are the key Committees that should lead on this opportunity:

House Appropriations: http://legislature.vermont.gov/committee/detail/2016/9

House Ways and Means: http://legislature.vermont.gov/committee/detail/2016/21

Senate Finance: http://legislature.vermont.gov/committee/detail/2016/25

Senate Appropriations: http://legislature.vermont.gov/committee/detail/2016/23

As always we need your support and donations so we can continue our efforts to watchdog and attempt to influence the legislature and to help you to do the same.  A contribution of $50 or $100 dollars would be greatly appreciated and well used. We do recognize that not all of our supporters can afford this so a donation in any amount is valued. Thank you for all of your past support.  Please renew that support with a donation.

And visit us on Facebook or Twitter too!

Be Well,

Campaign for Vermont

Taxes – the Beatles didn’t like them either - TAXMAN

But fees, they can bite just as much.

Here (2017 Fee Menu) is a spread sheet of the current fee increases and proposed new fees now under consideration by the House Ways and Means Committee.  There are almost 300 of them totaling near $26 million in increases. From farmers to car drivers to folks getting married, you’re on the list.

The biggest is a 100% increase in the mutual fund filing fee. The Governor’s recommendation is an increase from $600 to $1,200, raising $13.2 million.

But, there is a problem here. Under current Vermont law a fee is different than a tax, though both raise money. Taxes are for the general purpose of raising funds to support the broad functions of state government such as public safety, human services, natural resources, education, among many others. However, fees are different. Under Vermont law fees are associated with the support of very specific functions or services.

Current law now states that the rate or amount of a fee be “reasonably related to the cost of providing the associated service or product or performing the regulatory function. Cost shall be narrowly construed, but may include reasonable and directly related costs of administration, maintenance, and other expenses due to providing the service or product or performing the regulatory function.”

http://legislature.vermont.gov/statutes/section/32/007/00603

Now it’s certain that the cost of filing mutual funds at the Department of Financial Regulation has not increased by 100 percent, or $13.2 million. In fact, Governor Shumlin has explicitly proposed these new revenues be used to plug a revenue gap in Medicaid, a program far removed from the Department of Financial Regulation.

So rather than a fee increase, the Governor’s proposal is a tax increase…..a way to raise money to patch up the shaky financial footing of the state budget.  The Governor just finds it an easier political lift to call the increase a “fee” rather than a “tax”, despite what the law requires.

Readers might look over the above fee menu to see if any of these fee increases or new fees affect you. Further, while you look, keep in mind what the law requires of fees and decide whether you believe the increase or new fee fits these requirements. Then, if you have concerns, contact the committee members of the House Ways and Means Committee to voice your concerns. They are reviewing these fee proposals now and will make their recommendations shortly, so you’re input will be most timely.

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.

Act 46 and school choice- Whether it’s intentional or not, the legislature could not have done a better job of inhibiting independent school choice. Despite the strong preliminary language in Act 46 that can be construed as preserving school choice by not “ restricting” it, the rest of the Act undermines this statement of intent. (See Act 46, Section 4(C))

Act 46 As Enacted

Act 46 expressly precludes the merger of districts where operation of a school and tuitioning exist for the same grades. In other words, “like can only merge with like.” This was not carefully explained to the members of the general assembly who did not have the time to wade their way through a dense, complicated 64-page bill. Small wonder that some legislators felt hoodwinked. After all it makes perfect sense to look towards merging with neighboring districts. Nevertheless as Franklin Northeast Supervisory Union discovered in September of 2015 when it went to the State Board of Education (SBE) for approval of their consolidation plan, districts cannot do so and retain their unique character. They have to decide, all or nothing, no hybrids allowed.

VTDigger - SCHOOL CHOICE RULING CLOUDS CONSOLIDATION TALKS

This could easily be changed with a bill amending some of Act 46’s proscriptive language. In fact, two bills have been introduced to fix the drafting issue. One of these bills was introduced and assigned to the House Education Committee and the other was introduced and assigned to the Senate Education Committee. This late in the session it can fairly be said that they are “nailed to the wall”, an expression used to refer to bills that will simply die in committee without any public input. Campaign for Vermont will keep you informed in this regard. Here are links to the membership of both House and Senate Education Committees.

House - http://legislature.vermont.gov/committee/detail/2016/10

Senate - http://legislature.vermont.gov/committee/detail/2016/24

Some may argue that the bills are dying because hybrid consolidations are unconstitutional under the Vermont constitution’s “common benefits clause”,[1] as discussed in the landmark education funding case of Brigham v. State of Vermont. [2]  The SBE, in refusing to approve the consolidation plan submitted by Franklin Northeast Supervisory Union, relied upon a July 2, 2105 opinion by former Legislative Council Attorney Donna Russo-Savage that a hybrid consolidation would “likely violate the common benefits clause.” Her opinion is open to dispute.

GENERAL-310179-v1-Olsen-Memo-7-2-15-Act-46-Tuition-Operation.pdf

www.vtindependentschools.org/attorneys-letter-re-act-46.html

VTDigger - TUITIONING TOWNS DO NOT NEED TO GIVE UP CHOICE IN MERGERS

While the Vermont Supreme Court did conclude that that the common benefits clause required  “substantially equal educational opportunities“ and prohibited “gross inequities“ in education based on residence [3] it did not define these terms. Instead it held that: “Although the Legislature should act under the Vermont Constitution to make educational opportunity available on substantially equal terms, the specific means of discharging this broadly defined duty is properly left to its discretion” (Emphasis added.)

Nowhere did the Court state that “substantially equal” means identical. Certainly the notion that an education in an independent school is somehow inferior or superior to an education in a public school seems inherent in the notion that providing different educational opportunities (i.e. choice or no choice) based on residence creates substantial inequality or a gross inequity. In fact Vermont has historically been allowing or excluding school choice based upon residency for decades without any legal challenges.

Then there’s the public school choice lottery. Some parents get to choose their public high school and some don’t. Why isn’t this unconstitutional as a “gross inequity” in “substantially equal educational opportunity?” If it’s not, then does an independent school lottery in a consolidation of hybrid districts create sufficient equity to tip the scales?

There is also the question whether the voter-approved articles of agreement, which spell out the educational structure that will result from the merger, change the picture.  Could this voter approval take the purported constitutional issue off the table? This should be examined in the light of AOE’s statement on its webpage that such articles of agreement can “grandfather “ in choice for students already availing themselves of that opportunity. 

These dangling questions just highlight the fact that there was no discussion in the legislature about a constitutional concern with hybrid mergers. This is because Attorney Russo- Savage’s opinion that hybrid governance structures allowing for choice based upon town of residence was “likely unconstitutional “ was given in July, after Act 46 passed[4] and legislators had left Montpelier. Legislators never had a chance to put the brakes on Act 46 to examine the question.

Meanwhile lurking in the background is the Act 46 end game.  Districts that choose to retain their current structure rather than merge are facing the 2019 deadline for an SBE decision on their continued existence as independent entities. This is entirely predicated upon an SBE decision that they can “ meet the goals of Act 46.” The SBE has the absolute authority to decide whether to allow their current structure or force them to enter into a merger of any type and with any entity that the Board chooses. There is no appeal from an SBE decision. Predictably many districts will choose to avoid this fate and develop their own plans for merger even if this means giving up independent school choice.[5] Here’s where mergers stand right now:

Nicole Mace - Update School Districts Map 2-17-2016

The reality is that parents like school choice. There are a lot of good reasons for this. Taxpayers did not ask the legislature to limit their school choice options and create a top down governance mandate. Instead voters asked for property tax relief. They didn’t get it from Act 46. Preliminary estimates are for a residential tax increase of $10.3 million and a non-residential tax increase of $8.7 million.

So is it too late to stop Act 46 to allow for discussion of an educational system that parents actually do want? Take another look at that map and remember mergers require your vote.

As always we need your support and donations so we can continue our efforts to watchdog and attempt to influence the legislature and to help you to do the same.  A contribution of $50 or $100 dollars would be greatly appreciated and well used. We do recognize that not all of our supporters can afford this so a donation in any amount is valued. Thank you for all of your past support.  Please renew that support with a donation.

And visit us on Facebook or Twitter too!

Best,

Barbara Crippen
Policy Coordinator

The truth is clear to see. With bi-partisan support, it’s your money they’re spending.

Since fiscal 2010, the year the Legislature overrode Governor Douglas’s budget veto and took the budget helm, the spending of state dollars (not including federal dollars) has increased from $1.760 billion to $2.387 billion, an increase of $627.5 million (up 35.7 percent) amounting to an annual growth rate of 5.2 percent. This does not include another $175.8 million in increased education fund spending driven by local school budgets.

The committee structure in the House and Senate hosts the Power Alleys where key decisions are crafted. The most recent event in spending growth is the 2016 budget adjustment recently passed by the House and Senate with bi-partisan Committee support and the subject of these Power Alley profiles.

House   http://www.campaignforvermont.org/poweralleyhouse_611

Senate  http://www.campaignforvermont.org/poweralleysenate_611

As noted in the profiles, with the increase of $28.4 million of state dollar spending in the 2016 budget adjustment, the total year over year (2016 over 2015) spending increase is $114.67 million or 5.05 percent. At this growth rate, the spending of state dollars in 2016 is in line with the six year trend of 5.2 percent since 2010.

With Vermont’s economy growing at the annual rate of 2 to 3 percent, the above 5 percent growth rates are clearly unsustainable without more and more taxes and fees burdening Vermonters’ wallets. Unfortunately, our legislators and governor are focused on raising revenues to support every increasing budgets rather than bending the spending trajectory in line with economic growth.

Here’s what an alternative looks like. As Vermont emerged from the 1990-1991 recession, both Governors Snelling and Dean committed themselves to sustainable spending.  Snelling raised taxes to protect the most vulnerable through the recession but simultaneously got language passed that sunset these tax increases once the state budget returned to sustainability.  Dean stayed the course of Governor Snellings commitments, allowing budget growth of 1.85 percent, -2.16 percent, and 2.88 percent for fiscal years 1992, 1993, and 1994 respectively. Dean leveraged this constraint to bring necessary reforms in human services and education spending, the same areas that drive the budget today.

Unfortunately, few of our state house leaders exhibit much passion for sustainable spending and cost containment. In 2011, they abandoned their own effort, Challenges for Change, which had identified millions in potential cost savings opportunities applicable to fiscal 2011 and 2012.

Campaign for Vermont believes it’s up to you to tell your legislators of all political parties that enough is enough with regard to raising revenues and it’s time to find cost saving reforms. Over the coming week, Campaign for Vermont will provide you with viable ideas for such reforms to suggest and discuss with your legislators. Reform is never easy, but totally necessary if we are to put our state budget back on sustainable and stable ground. Please share these Power Alleys with your friends and neighbors.

Be Well,
Campaign for Vermont

PS: And don’t forget to make a donation to Campaign for Vermont to help support efforts such as this. Donate Now

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.

Governor Shumlin’s recent budget speech is a vain attempt to craft a legacy of fiscal responsibility.  But, it’s too late for that; the damage is done to both Vermont’s fiscal standing and the Governor’s legacy.

Some housekeeping is in order.  Governor Shumlin points a finger at former Governor Douglas for the state’s fiscal woes; but state fiscal records reveal otherwise. Governor Douglas vetoed the fiscal 2010 budget not because it spent too little, but because it spent too much. It was Senate President Pro Tempore Shumlin and House Speaker Smith who in June, 2009 lead the veto override and henceforth set Vermont on its current unsustainable spending trajectory.

Governor Shumlin’s speech didn’t mention the $938 million in one-time federal stimulus funds Vermont received through fiscal 2011. Shumlin used these funds to both supplant general funds eroded by the Great Recession and grow base spending until these funds ran out in 2012. Then, Governor Shumlin, not Governor Douglas, raided $23 million from the education fund to prop up his unsustainable spending trend line.

About taxes - Governor Shumlin says, “This will be my sixth budget that does not increase income, sales, or rooms and meals tax rates”. Tax rates, maybe; but taxes, certainly not. Over the past 6 years income taxes (capital gains and deduction restrictions), sales taxes (sugary drinks), rooms and meals (vending machines), gas taxes, cigarette taxes, health insurance claims taxes, property taxes, and numerous fees,  among others, have all increased by the Governor’s actions.  For fiscal 2017, the Governor can say he’s not raising “income, sales, or rooms and meals tax rates” while increasing fees on mutual funds and new taxes on doctors and dentists. And so it goes.

Bottom line, since 2010 general fund and state fund spending generally, exclusive of federal funds, have grown at the respective rates of 5.3% and 5.2%, inclusive of the 2016 budget adjustment now before the legislature. In a Vermont economy experiencing 2 to 3 percent growth, the Governor’s (and legislature’s) aggressive spending of state taxpayer dollars drives the now annual fiscal hazards of budget gaps and higher taxes.

Each year there are two major budget bills before the legislature known as the Big Bill and the BAA (short for Budget Adjustment). The Big Bill covers the coming fiscal year while the BAA makes adjustments to the current fiscal year. When the legislature left Montpelier last year, they approved and the Governor signed the 2016 Big Bill with year-over-year general fund increases of 4.2 percent and all state fund increases of 3.8 percent. But now, with the 2016 BAA currently before the legislature more spending is proposed. The result, if approved, will be year-over-year increases of 5.1 percent and 5 percent respectively.

The Governor’s 2017 budget proposal is a 4.1 percent and 3.2 percent general fund increase over the 2016 Big Bill and 2016 BAA respectively. Relative to all state funds, the increases are 4.0 percent and 2.8 percent respectively. As is happening this year, these increases may rise next year with the 2017 BAA; but that will be next Governor’s worry.  The proposed increases again exceed underlying economic growth and require $13.2 million in higher mutual fund fees and $17 million in new taxes on doctors and dentists.

More of the Governor’s 2017 budget proposal will be uncovered as the legislative process unfolds, but interesting details already stand out. For example, the Governor’s proposed general fund increase totals $45 million. Of this, he directs $12.3 million or 27 percent of these new general funds to the Teachers’ Pension and Retired Teachers Health Care funds, now totaling $101 million - an amount greater than the $83.3 million general funds proposed for Vermont’s institutions of higher education. During Governor Shumlin’s term, the funding ratio of the Teachers’ Pension fund has dropped from 66.5 percent to 58.6 percent; not a great legacy and certainly a red flag to bond rating agencies. It must be noted, however, that the core cost drivers for teacher retirement benefits are not driven by state decisions, but by the salary and benefit contracts between local school boards and the NEA. While the Governor, legislators and Secretary of Education lament the excessive staffing in Vermont’s schools, they remain silent and paralyzed about the general fund bankrolling the retirement benefits driven by Vermont’s lowest-in the-nation pupil to teacher ratio of less than 10 to 1. This costly conflict between fiscal and educational policies and politics now consumes a whopping 27 percent of all new general funds, inclusive of new revenues from fees on mutual funds. With budget pressures ranging from higher education to human services, it’s unfortunate that state house leaders won’t resolve these conflicting and costly policy tensions.

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.