Done with the task of devising next year’s revenue package, the House tax committee took up a second colossal task — reining in education spending.
Last week the Ways and Means Committee drafted — and unanimously approved — a bill designed to stem school spending.
H.538 puts stricter penalties in place for excess spending and whittles away at a number of quirks in the education finance system, which traditionally have softened the impact of spending on tax rates for some districts.
The savings to the Education Fund and the General Fund will be measly — $5.5 million in FY 2015 — but Ways and Means Chair Janet Ancel, D-Calais, says the real goal is to encourage districts to spend less, and that’s trickier to try to quantify.
The concepts in H.538 have been percolating in the Statehouse for years but the most recent crop of school budgets approved — which marked a 5.5 percent increase in spending — seems to have stimulated the legislative appetite to implement them.
One week after the House approved a 5-cent increase in the statewide property tax to fund school spending, the Ways and Means Committee met with the House Appropriations and Education committees; together the three groups compiled a list of ideas to drive down education spending. The Ways and Means Committee took that list, pared it down, and refashioned it into H.538.
Some of the changes sound miniscule — shaving off a percentage point here and there — but lawmakers have high hopes they’ll have the cumulative effect of curbing spending.
Ancel says her committee supports the education finance system and has no intention of directly meddling in local school spending decisions.
“All we can do is set in place things that can influence those spending decisions. We’re not going to make them for the schools,” Ancel said. “We are using all the tools we have to try to bring spending down and that’s not to say school boards don’t try to keep spending down. They do. But we are going to give them some additional tools to do that.”
Much of the committee’s hope for changing spending habits rests upon a change to the excess spending penalty, according to Ancel.
Under current law, school districts whose per-pupil spending exceeds 125 percent of the statewide average from the previous year have to pay a tax penalty. H.538 lowers that threshold in two stages, bringing it down to 123 percent in FY 2015 and to 121 percent in FY 2017.
Ancel said her committee has consistently heard anecdotal evidence that “the excess spending penalty really works and that school districts work really hard to stay below it. It’s not something we can quantify, so it doesn’t show up on a fiscal note. But we hear consistently that it works.”
In FY 2014, seven districts were penalized for exceeding the 125 percent threshold. If the threshold had been 121 percent, 31 districts would have been affected.
H.538 also lays the framework for the state to dabble in student-teacher and student-staff ratios. The bill asks the Secretary of Education to propose minimum ratios for students to teachers, staff and administrators in time for them to go into effect for the 2014-15 school year. Schools districts that don’t comply with these ratios would have to pay a tax penalty.
Ancel says those ratios “make a difference because we look at the comparisons of Vermont to other states. We have a lot of staff per student and a lot of teachers per student. And that’s where the spending is — in salaries. That’s looking really long view. That’s not saying we are going to have these dollars next year. But we think we can move the trend down by making these changes.”
The bill does away with small schools grants — financial assistance for schools in which the two-year average enrollment is less than 100 or where class size averages are 20 or fewer — for about 80 districts. The grants are phased out incrementally, beginning in FY 2016 and terminating in FY 2019.
Currently there are twenty-three other districts that would continue to receive the grants because the Agency of Education has deemed their schools small due to “geographic necessity” — in other words, the town was too remote to consolidate with another school or send its students elsewhere. The Agency will reassess which schools fall into this category each year.
The other major changes that H.538 makes are:
• Under current law, homeowners who earn less than $90,000 can pay a tax based on their income rather than property value. The bill would raise the base tax rate for these people from 1.8 percent of household income to 1.9 percent.
• It reduces the maximum property tax adjustment that an income-sensitized household can claim from $8,000 to $6,000.
• It reduces the amount of rent that a renter can claim for the renter rebate program from 21 percent to 19 percent.
• Current law caps the number of equalized pupils a school can lose at 3.5 percent of the student body. This has the effect of buffering a school district that loses a large number of students during one year from full property tax increase that would likely result from an increase per equalized pupil spending. H.538 scales back this buffer by raising the cap to five percent.
• The bill eliminates the “fast-growth” provision, which allows school districts that sustain a rapid increase in their student bodies — defined as 20 or more students during one year — to adjust their equalized pupil count upwards accordingly. Normally these adjustments are made based on a two-year average.
Correction: Whether or not a small school is small due to “geographic necessity” will be determined on an annual basis, not based on a 2011 study, as originally reported.
