Default School Budgets - April 26, 2024

Chairwoman Kornheiser outlined a list of reasons that have led to the moment and need for a joint hearing of the House Education and Ways & Means Committees this week. School budgets have a “rough road to passage this year,” she argued, and even with the default budget that takes effect July 1st, districts will still eventually need to pass a budget. She is concerned that budgets may never pass. Additionally, the statute regarding tuitioning districts may have a little bit of conflict with itself.

She explained that after conversation with Chairman Conlon “and the field” (likely the interest groups representing school administrators) she sat down with the Joint Fiscal Office and Legislative Counsel to develop a set of scenarios as a starting point for discussions.

The first scenario is a district whose initial budget goes down and also fails the first revote. On June 30th the district is able to start borrowing funds to operate. They can only borrow up to 87% of the previous budget. Loaned funds are paid out quarterly, but as soon as the budget does pass the full balance would be transferred to them.

If no budget ever passes, and they borrow the 87%, the balance would carry as a deficit to the next fiscal year.

Hence, Kornheiser announced, the language being propose was an “alternative process.” However, Legislative Counsel described the draft bill as “spaghetti, and I am waiting to see if it sticks.”

Representative Anthony wondered if Vermont law has any “a process of receivership… where you takeover a school because it’s not functioning?” Legislative Counsel noted that there is a statute for failure to meet academic standards, but not a takeover like receivership but various levels of state control that can happen. None are specific to the failure of the budget process.

After three failed votes, a school board can elect to follow this new alternative budget process which allows them to bypass a public vote on their budget. The draft budget would need to be reviewed by the Secretary of Education (for “accuracy”) and then, once approved, the school board must approve their “final budget” by voting in an open meeting after having property warned the vote.

Kornheiser acknowledged that this “tends towards something anti-democratic,” but argued that the school boards are making that decision. The voters “voted that school board in and can vote that school board out” so there still is that accountability there, she believes.

The default budget would be based on the per-student spending from last year, but applies the current year’s student count and state categorical aid. The current year’s CLA would also be applied.

NOTE: This could result in a budget higher than the previous year, and even higher than a budget disapproved by voters.

Representative Austin wondered what the timeline was to stop reductions-in-force (RIFs). Conlon suggested if you failed to get a budget by the time that RIF date comes you will have issued RIFs anyways.

NOTE: After a budget is voted down, school boards have a set timeline to issue a RIF. They are usually contract-specific, such as 30 days.

Minier wondered if they should use 100% of the previous year budget as default.

NOTE: Most legislators take the view that a level-funded budget is still a cut because of inflation.

Representative Beck wondered if a district could propose a ballot item that offered two options: Option 1 Default Budget and Option 2 something else.

Conlon suggested they could delay the S.167 (miscellaneous education bill) to insert this language. “Short of any better ideas… This is better than borrowing 87% of last year’s budget,” he stated.

Representative Taylor commented that he thought “it’s important that with whatever method we choose, that there be a real endpoint at where you say… the voters are no longer involved.”  Anthony agreed, adding that he thinks many voters don’t know that at a certain point reducing spending doesn’t reduce tax rates.

NOTE: This only happens if the district’s pre-CLA property tax rate drops below the statewide $1.00 base rate. Fairly unlikely to happen.

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