Joint Hearing on Education Spending - Jan 9, 2024

Joined by the House Education Committee on Tuesday, the House Ways and Means Committee dove into their weekly briefing on education spending and property taxes. Chairwoman Kornheiser thought that the Committee might get to solutions in the next week or two.

The Joint Fiscal Office (JFO) reviewed an updated Education Fund Outlook that had updated the 2024 numbers to reflect the Governor’s recommended budget adjustment.

Jeff Francis (Executive Director, Vermont Superintendents Association) spoke to the Committee. He was joined by representatives Vermont School Business Officials and the Vermont School Boards Association organizations. He called the situation “unusual” with the focus on the FY2025 budget cycle. He highlighted cost pressures on the current budgeting cycle, which include Act 173 and other requirements the Legislature places on school districts.

The school business officials surveyed their membership and found that there was a wide range in budgeting changes at the local level resulting in very different education spending per pupil which was -35% to +45%. He highlighted that there is higher wage and benefit pressures which are being driven by “shortages” and competitiveness between districts. With respect to collective bargaining, Francis noted that there “had been tremendous upward pressure on settlements.” Also troubling were 16% increases in health care cost and a lack of ability for cost containment.

Another issue he pointed to was the “burgeoning need for mental health services.” His comments sounded very similar to the VT-NEA testimony from last week when he blamed the collapse of community mental health services, PCB remediation, and pandemic deficits for an increased burden on school districts.

He also noted, as previous testimony had, that the federal funds are going away this year and certain school districts had a “need to maintain those investments.” School construction

NOTE: This essentially means that districts used one-time funds for ongoing expenses.

One of the largest factors in large jumps in tax rate changes are the result in changes of the Common Level of Appraisal (CLA) which push rates up when property values are increasing rapidly compared to the state as a whole. Many large towns in Chittenden County are seeing this.

Jake Feldman (Tax Department) explained that the CLA’s have dropped 10 points on average across the state because of rapidly increasing property values. He noted that in some ways the CLA mechanism is rescuing the Education Fund (EF). Without that adjustment, it would create $200M hole in the EF and every district would be capped at the 5%. It also doesn’t change the 18.5% increase in property taxes it just would shift more of the burden onto local towns.

Another issue raised is the appearance of an incentive to reach the 5% tax rate cap under Act 127. If districts don’t reach that cap then they will be paying (out of the education fund) for districts who are.

Craig Bolio (Tax Commissioner) shared that he’s heard things like the “projects in the letter are what we always see” and that the “Administration is trying to scare people.” He reminded the Committee that these are consensus forecasts between the Department of Taxes, the Agency of Education, and the Joint Fiscal Office and has a very specific formula. He noted that property tax forecasts have been highly volatile over the past few years, largely due to federal funds and overperformance of consumption taxes that have erased spending increases.

He wondered if there was a better way to distribute the 5% cap because he believes there is in fact an incentive to spend up to that cap. Representative Anthony worried that playing with the cap because they were trying to incentivize low spending districts to spend-up with Act 127.

NOTE: Anthony is getting at the underlying issue in Act 127 which is that two-thirds of districts will find increased taxing capacity (free money) under the bill which means they will likely spend more. Seeing an overall higher level of spending on behalf of school districts should not be a surprise here. It was planned by the Legislature.

Colin Robinson (Political Director, VT-NEA) shared his perspective that the cost drivers in school budgets are the same cost drivers that all Vermonters are experiencing.

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