Gilbert: Douglas wins Challenges for Change battle

Editor’s note: This op-ed is by Allen Gilbert, executive director of the Vermont-ACLU and a member of the Vermont Journalism Trust board, which is the umbrella organization for VTDigger.org. The Vermont-ACLU represented Anne Galloway, editor of VTD, in a public records lawsuit lodged against the Town of Hartford.

Our former governor tried last year to punish school districts that didn’t cut their budgets. The legislature rejected the idea. The plan wouldn’t work the way it was supposed to, House members said. And, they noted, it violated the equity principle established in the Vermont Supreme Court’s 1997 Brigham decision. Well, this year the proposal has been resurrected and turned on its head. Rather than punishing “bad” towns, the House Ways and Means Committee has decided to reward “good” towns.

This proposal –Section 4 of H. 436, the annual miscellaneous tax bill — will be taken up by the full House this week. The proposal wasn’t a good idea last year, and it’s not a good idea this year. Below are the reasons why.

But first, you should know that there are some interesting politics swirling around H. 436, despite its seemingly innocuous title of “miscellaneous tax bill.” The politics have to do with an effort to get as many representatives as possible to buy into other proposals.

Sometimes, if you have to give a little to get more, compromises are made. And the “more” in this bill is much bigger than a school tax break.

There’s a provision that levies an .8-percent tax on health insurance claims, payable to the state’s “health care resources fund.” Another provision raises the tax levied on hospitals from 5.5 percent to 6 percent. Assessments on home health agencies and nursing homes are increased, too. Tobacco taxes are raised. Burlington’s “tax increment financing” agreement is fine-tuned.

Discussion around H. 436, therefore, will pop off the debate over this year’s signature issue, health care reform, if it hasn’t started already.

The school tax provision has a bit part in the total scheme of things. Nonetheless, there are good reasons to oppose the provision. We see four, and they are all rooted in equity:

1. A town spending $15,000 per pupil meets its spending reduction target by cutting its Russian language and swim programs. Under Section 4 of the bill, its school tax rate is reduced a penny. A town spending a third less — $10,000 per pupil — feels it just wouldn’t be right to cut a calculus course and reduce phys ed time to meet its spending reduction target. Even though the second town is spending far less per pupil than the first town, it doesn’t get a tax break. In fact, its tax rate is set marginally higher to cover the costs of the tax break given to the higher-spending town. This is not equity.

2. A punishment-and-rewards budget-cutting system ignores expenses the state has told schools must be covered — at all costs. The addition of two special needs students with severe disabilities can mean $400,000 in new budget expenses for a district. A punishment-and-rewards budget-cutting system also ignores additions of any students anywhere. A school can, in fact, cut its per-pupil spending costs and be running more efficiently because new students have moved into town — yet it may not be meeting budget reduction targets. School tax rates are directly related to spending per pupil, not to the size of a school’s budget.

3. The tax rate reduction is given to ALL towns in a supervisory union, regardless of whether each town’s schools met their target. As long as the SU collectively meets the Challenges for Change target for that SU, all towns get a break.

4. The $1 million in “rewards” that the miscellaneous tax bill offers may be seen as “inconsequential” given the size of the state’s overall education spending. But creating another “carve-out” by allowing an unequal draw on school funds trims another corner from the equitable school funding principle the state has followed for 15 years.

Here’s the bottom line: Our current school funding formula already has a built-in, equitable mechanism for rewarding efficient management of tax dollars. Tax rates go up when per-pupil spending rises. Tax rates go down when per-pupil spending falls. An inequitable second system is not needed.

Admittedly, crafting the annual miscellaneous tax bill is a difficult job. But this is one tax provision that is not sound policy.

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