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.

The contrasts are both striking and troubling. We learned recently that 4 of the 11 pediatricians serving Franklin County are closing shop due to low Medicaid rates. Since November we’ve known Vermont’s expanding Medicaid program is short $38 million state dollars in the current fiscal year and another $54 million in fiscal 2017. Further, the disastrous roll-out of Vermont Health Connect has been front page news far too often, from no-bid contracts for Washington, D. C.  insiders to the inability to enforce basic eligibility requirements for Medicaid enrollees.

Yet, throwing caution to the wind, our state house leaders double-down on their government funded health care effort. The Governor anxiously awaits a waiver from Washington that allows Montpelier appointees to manage Medicare payments for Vermont’s seniors and the Speaker of the House aligns himself with single-payer lobbyists regarding the expansion of Dr. Dynasaur to Vermonters of all incomes up to age 26, adding a projected 120,000 new enrollees to this publicly funded program for “children”.

More generally, the U.S. Census reports that Vermont has lost population since 2012 and the IRS reports for calendar years 2012-2013 a net out-migration of Vermont income tax filers, with Florida being the top destination and gaining $52.7 million of net new filer income that once resided in Vermont.  Clearly, from pediatricians to taxpayers, Vermonters are voting with their feet and leaving Vermont. Imagine the out-migration to Florida of more Vermont seniors should the state take over the management of their Medicare payments.

However, where our leaders take us is not inevitable; it’s a choice, both theirs’ and ours. With a bit of courage at the statehouse and pressure from voters, starting with the 2016 budget adjustment and 2017 budget, the corner toward sustainability can be turned. Here are options in healthcare, among others I’m sure. 

• Do no more harm: Approach the budget adjustment with the aim of bending the spending curve back toward sustainability. Given time constraints, if one-time funds are necessary to prop-up Medicaid spending in 2016, as recommended by the Governor, make the commitment to not rely on such funds in 2017. Further, abandon efforts for the state to manage Medicare payments and enroll young adults in Dr. Dynasaur.

• Strengthen tort reform consistent with Hsiao Report: The Hsiao report, a foundational document for Act 48, extensively discussed, then recommended, tort reforms for Vermont which the legislature did not adopt. Hsiao projected such would save Vermont’s health care system, at minimum, 2.6 percent or over $130 million. Given Vermont’s high level of publicly funded health care, these savings would accrue significantly to that system.

• Greater Equity in Health Care Payments: This 2015 Rand Corporation study, The Economic Incidence of Health Care Spending in Vermont, commissioned by the legislature’s Joint Fiscal Office, concluded the following: “While nearly one-third of low-income individuals spend less than 5 percent of their income on health care, about 21 percent of low-income individuals spend more than 20 percent of their income on payments for health care.”
  
  2015-01-06 RAND Economic Incidence of Health Care Spending PDF
  
  In view of this wide disparity and recognizing that health care payments include out-of-pocket expenses and premiums, redesigning the payment system such that enrollees in publicly funded health care, especially those between 139 and 317 percent of poverty, pay at least 5 to 10 percent of their income for health care will enhance equity and bring revenues into the system. Further, under the Affordable Care Act, premiums can be adjusted higher based on whether or not the insured smokes. 

• Rationalize Health Care Benefits: Update the 2009 Medicaid Tiger Team report.
  
  Tiger EDS Final PDF
  
  This report included a comparative analysis of utilization limits on certain, mostly medical related, Medicaid benefits among peer state Medicaid programs. The comparative states were Rhode Island, Massachusetts, Wisconsin, Washington, New Hampshire, Minnesota, New York, Delaware, Arizona and Pennsylvania.  The analysis encompassed only beneficiaries 23 and older and was conducted before Catamount health care was implemented. The Tiger Team analysis identified $22 million in potential general fund savings if utilization limits adopted by peer states were adopted as well in Vermont.  

As with Vermont’s K-12 education funding, our state is a leader relative to eligibility for publicly funded health care.  We are a middle income state more generous than most. The above options would not diminish our relative standing and include both revenue and cost containment opportunities. These would more than solve the current budget shortfall, leaving taxpayers grateful for the thoughtful balancing of a troubled situation.

The concept of sustainable spending is well honored but reluctantly embraced. The concept applies to both the ability of taxpayers to pay and the ability of providers to be paid fairly.  With regard to health care, our current leaders have violated both these objectives. Expanding health care programs already busting the budget while pediatricians close their doors for lack of fair payment sends a clear message that fiscal leadership is lacking at the state house. Over the coming weeks and months, we must ask our leaders, both current and future, to abandon the platitudes and give us their specific and serious recommendations for solving the problems before us.

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.

Here is Campaign for Vermont’s statehouse report for the week of February 1, 2016.

Budget: One (of many) controversial components of the Governor’s budget is his proposal to raise 17 million dollars in new revenue by way of a 2.3% “provider tax” on independent physicians and dentists. This week’s testimony in the House Ways and Means Committee by solo and small group practitioners was partly a cry for recognition of the benefit of their small size and strong community ties with patient relationships that span generations. It was also a dire warning that the provider tax could put them out of business or drive dedicated young professionals out of Vermont. Here are their presentations to the House Ways and Means Committee.

• Healthfirst - Physicians Practices Reimbursement Report
• Vermont Association of Naturopathic Physicians - Bernie Noe, ND
• Richmond Family Medicine - Hannah Rabin, MD

It’s hard not to smell a rat here. Lurking in the background is the Vermont’s Green Mountain Care Board‘s proposal to the federal government for the establishment of an “all-payer” health care model.  This is a complicated proposal but it is completely based upon the “ACO” (Accountable Care Organization) model of health care delivery. That model has been criticized as creating “a monopoly on health care” by hospital owned and controlled ACOs with an ultimate objective of merging them into a powerful single provider entity.

https://vtdigger.org/2016/01/28/independent-doctors-wary-of-provider-tax-all-payer/

http://vtdigger.org/2016/01/27/davis-the-all-payer-gambit/

The all payer proposal does not require legislative approval. During a Green Mountain     Care Board presentation to the House Ways and Means Committee on Friday, Chair Janet Ancel asked the pointed question, “What if we don’t like ACOs?” The response was basically that the train had left the station.

So while its uncertain at best whether voters can have much of an impact on the “all-payer” proposal, if you value your small town  “country doc” then heads up on the provider tax increase. 

Education Spending: During the first house floor debate on amending Act 46 spending caps some legislators spoke openly about the sense of helplessness school boards experience in trying to keep education tax rates down. Given our statewide system of education funding, there is a need for a complete overhaul of the incomprehensible education finance system. CFV has been promoting this since our inception.

http://www.campaignforvermont.com/ed

While there is little momentum this session to tackle the huge task of overhauling our education finance system there are easier ways to begin cost control, starting with an established standard for a student–teacher ratio tied to funding.  With less than a month left before crossover (the date when bills must go from one chamber to the other) no bills creating a mandated student-teacher ratio have been introduced. 

Several representatives have sponsored a bill to create a statewide teachers’ contract with a cap on teacher salaries. The bill is currently in the House Education Committee. A statewide teachers contract to cut costs is hardly a new idea.

http://vtdigger.org/2013/01/09/house-gop-supports-statewide-teacher-contract-nixing-education-property-tax-for-senior-citizens

Meanwhile here is what is really driving the large increase in teacher health care costs that led to the alteration of the original spending caps in Act 46.

http://vtdigger.org/2016/01/24/valley-news-big-differences-in-vermont-town-school-insurance-plans/

With town meeting day just around the corner the big question is how voters will react to having their plea for property tax relief ignored.

Power Alley: Power Alley, our new tool for informing you of the votes of committee members on significant issues, has been launched with a first installment covering  recent votes to effectively remove meaningful Act 46 spending caps. Please let us know if we can improve upon this service in any way. There is no better means of affecting change than your direct communication with your legislators on important votes.

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

Welcome to Campaign for Vermont’s first Power Alley presentation. Here’s the thinking behind Power Alley.

On any given issue, not all legislators are created equal. Each legislator is appointed to a Committee and such Committees guide the substance and conversation within the Committee’s area of jurisdiction.

These Power Alley profiles focus upon the recent actions of the House Education Committee and the Senate Education Committee with regard to amending the “spending caps” in Act 46, a bill passed last session to reform Vermont’s education system. Click to learn more about the education power alleys.

http://www.campaignforvermont.org/poweralleyhouse

http://www.campaignforvermont.org/poweralleysenate

If you live in the legislative district of a member of the House or Senate Education Committees, you have more clout to change education policy in Vermont than Vermonters who live outside such districts, given that you directly vote for these Committee members. As noted in the Power Alley profiles, Campaign for Vermont considers Act 46 a weak effort to reform our education system, especially when it comes to reducing property tax burdens.

Whatever your view of Act 46, as amended, we urge you to share these Power Alley profiles with your neighbors and be in contact with your elected representatives about their Committee bills.

One final point. Recently a consultant to the legislature released a study costing near $300,000. Here’s a link to that study:

http://www.leg.state.vt.us/jfo/education/adequacy/VT%20EB%20Analysis%2020.1.pdf

The study concluded the following:

“Using data for school year 2014-15, the Vermont EB model estimates an adequate funding level of $1.56 billion or some $163.9 million (approximately 10%) less than Vermont school districts spent for PK-2 education that year.”

Please ask your legislator whether Act 46, as amended, will save Vermont taxpayers $163.9 million and if not, why not.

Thank you,
Campaign for Vermont