Chairwoman Kornheiser kicked off the House Ways & Means Discussion on Thursday around H.887 by telling the Committee to “take a breath on all our opinions on everything related to the Yield. And actually, just first hear what the Senate did.” She instructed them to keep their questions restricted to “qualifying” and understanding, keep notes on other concerns for later.

See our report on the Senate Finance Committee's discussions leading up to the Senate version of the bill.

Legislative Counsel began walking the Committee through a side-by-side comparison of the House and Senate versions of the bill. There were a number of minor changes, but key differences included:

• Senate removed the increased property tax credit for FY2025 and reduces the non-homestead rate accordingly.
• Senate version creates a $25M General Fund transfer to buy-down property tax rates.
• Senate version narrows the Cloud Tax to retail only instead of including platform services.
• House version contained an Education Finance Data Analyst position at the Agency of Education. The Senate removed this.
• Senate version increases the short-term rental surcharge to 3% instead of the 1.5% in the House version. Implementation was changed from July 1, 2024 to August 1, 2024.
• The Senate lowered the excess spending threshold from 120% of the statewide average per pupil spending to 116%.
• The Senate included a provision reimbursing 11 towns for underpayments for education services in FY2024. This provision was originally in a separate bill and was moved here.

The Senate also made significant revisions to the Commission on the Future of Public Education, cutting back the number of members (particularly from the Legislature) and requiring a work plan and pushing the timeline out a year to 2026. Most significantly, they created a new Finance Study that was solely focused on the funding mechanisms and cost savings for education. This study group is responsible for returning recommendations that can be implemented in the next legislative session.

The Joint Fiscal Office (JFO) shared that the Senate version achieved an average 12.5% average bill increase for both homestead and non-homestead property taxpayers. This is mostly thanks to the $25M in General Fund dollars.

Kornheiser noted that the “lived experience of the tax bills” will likely be higher for income sensitized people because of the year lag in the property tax credit. Taxpayers pay on their property value in year 1 and then get reimbursed with a tax credit the following year to bring the rate down.

JFO shared details on the new senate excess spending threshold which was lower at 116% of average per pupil spending compared to 120% in the House version. The basis for growth was also different. Instead of growing with average spending each year, the Senate’s excess spending threshold grew at an inflationary rate every year.

Representative Demrow wondered if the schools at the high end of the scale were smaller school districts. Legislative Counsel thought this might be the case but no data was provided.

Kornheiser noted that it was the taxpayers who live in the district that exceeds the threshold that will experience the penalty as higher taxes. Beck added that even though you are double-taxing them… taxpayers in that school district are probably still not even close to paying for the whole dollars that they are taking,” from the Education Fund.

Thursday Evening

They returned that evening to debate whether or not to push back on the Senate’s decision to remove the extra increase in the property tax credit for 2024 in order to compensate for the sharp increase in property taxes. Kornheiser stated that without the bump, “income sensitive households are going to be worse off than those who don’t unless we restore the Property Tax Credit.”

After 30 minutes of debate, Representative Sims stated strongly that the point of what they are doing (supposedly) is to change the system. While its fine to assist the taxpayers who are income sensitive now, without changing the system and even stronger excess spending thresholds in future years all this will be for naught.

They seemed to settle on increasing property taxes back to 14.1% in order to re-install the property tax credit increase for income-sensitized payers.

Shifting gears, Kornheiser expressed her preference to embed the Education Finance Study Committee (which the Senate added) within a subcommittee of the Commission on the Future of Public Education. Her intention was always that there would be subcommittees, but this never made it into the bill as written.

Representatives Masland and Anthony approved of this approach, but Representative Ode had objections about the size of the membership in the Senate version, preferring to have more voices involved. Kornheiser actually liked the smaller size.

Representative Andrews voiced that the Senate version is intended to create an imperative focus on finance first before addressing other issues.

Representative Beck stated that wants to concur with the senate. He believes the Commission needs to build this new educational system on top of a “rational funding system. It’s not fair to build this thing on top of a funding system that does not even work right.”

Kornheiser pushed back, saying that “I don’t think you can build a rational funding system when you don’t know what you are funding…and so I don’t think one should go before the other, I think the conversations should happen together…”

Representative Canfield jumped in to say that he thought the study committee would be more effective because it left the education special interests on the sidelines. “Taxpayers of Vermont pay for education like they are supposed to, but they want action now! They don’t want status quo. We need to get at this.”

Friday Morning

The House Ways & Means Committee returned Friday morning to review the amendment language to the Sente’s version of H.887 again. A couple of changes had been made overnight. Also, the decision had been made that this would be a Kornheiser-Demrow amendment instead of a committee amendment.

One of those changes was to balance the ratio of House & Senate members on the new education finance sub-committee. It also required the Commission to include “all public feedback received as an addendum to its final report.”

Also noteworthy was that the Commission’s steering group could appoint non-Commission members to the education finance sub-committee. This appears to be the only sub-committee where this would be allowed.

The Committee came back later that morning to review a fresh draft of the amendment. Representative Sims had added language requiring an implementation plan for any recommendation that the Commission puts forward.

Chairwoman Kornheiser thanked them all for their working, saying that “everything about the bill has been difficult… over the last five months we have been able to do tremendous work… what we expected to be an 18.5% increase down now to a 14.1% average bill increase.” She added that “we are going to have to do some deep structural work to make sure our schools have the resources they need and that taxpayers are also protected… so we are launching a pretty comprehensive conversation that is going to require some very very tough decisions next year and the year after.”

Representative Beck responded that “we owe Vermont a structural reform to the education fund this year and this bill does not do the work.” Representative Mattos added that he was “More in support of the Senate version of this bill…. Next year we will also not have a $25M General Fund transfer so I think they are going to get double whacked next year when this comes around again. I cannot support this.”

Sims echoed this, saying that she was uncomfortable they raised the uniform tax rate increase from 12.5% to 14%. She understood why, but also wished they were doing more than a study. However, she still planned to vote yes.

Kornheiser reminded them that they were “Going slow to go fast…and make sure the structural change we are doing is informed by the folks who are executing it on the ground.”

See our report on the Senate's reaction to the House changes.