The House gave preliminary approval to a bill Wednesday that’s designed to curb education spending and relieve some of the burden that school budgets put on the state’s property tax payers. Earlier this session, lawmakers approved a 5-cent increase in the state property tax rate to fund the cumulative $70 million increase in school budgets.
The bill passed, 110-24. A final vote is scheduled for Thursday.
H.538 was purged of one of its most controversial provisions — a phase-out of small school grants — in order to secure widespread support. Many lawmakers hail from districts with small schools that depend on these grants, making their termination politically unpalatable.
“We recognize that many legislators have small schools in their districts and getting enough votes to pass the bill with the small schools grant removed was going to be very difficult,” said Rep. David Sharpe, D-Bristol, a member of the Ways and Means Committee.
The bill presented on the House floor was a compromise between the Ways and Means Committee, which drafted the bill, and the Education Committee, which had reservations about the original draft. Education Committee Chair Johannah Donovan, D-Burlington, proposed two amendments that were ultimately supported by both committees.
The first stripped a provision from the original bill that would have phased out small schools grants. The Legislature spends roughly $7.5 million a year to buffer small schools from the full impact of their proportionally higher operating costs. Donovan’s amendment supplants that initiative with a study of how school size affects student achievement.
Sharpe remained adamant that small school grants are “poor tax policy.”
Donovan’s second amendment slows the move to mandate staff-to-student ratios. The original bill asked the Agency of Education to suggest minimum ratios (schools would be penalized for dipping below minimum standards and rewarded for staying above them) starting next school year. Donovan’s amendment asks the agency to collect data on appropriate ratios, and it delays implementation — which would still have to be approved by the Legislature — by another year. The original bill was too “heavy-handed,” Donovan said.
Staff salaries and benefits comprise roughly 80 percent of school budgets. “If we are serious, we have to start looking at the number of staff people in our school buildings,” Sharpe said, but, he added, Donovan’s amendment still sends that message.
After the Ways and Means Committee approved both amendments, Chair Janet Ancel, D-Calais, concluded, “I feel like we’ve gotten to a reasonable meeting point, so that nobody loves it.”
The bill’s centerpiece, as identified by the Tax Committee, stayed intact. This component lowers the excess spending penalty from 125 percent to 121 percent. Districts have to pay a tax penalty when their per-pupil spending exceeds this percentage of the state average, and tax committee members say they’ve heard a wealth of anecdotal evidence that districts take pains to avoid the penalty.
At times, the floor discussion meandered dangerously close to a full-on debate on the merits of the entire education finance system, resurrecting calls for an overhaul of Act 60.
Rep. Heidi Scheuermann, R-Stowe, has been an outspoken critic of the current finance system. H.538, Scheuermann said, doesn’t do nearly enough to fix its shortcomings. “It’s time to be bold, and this is anything but. Punitive, yes. Bold, no.”
But even among its principal champions, the bill won only muted praise, described as a step toward cost containment rather than a cure-all.
Rep. Kurt Wright, R-Burlington, put it this way: “This bill is better than nothing.”
The end product proved least palatable to Progressive and independent lawmakers, who argued that the bill amounts to an assault on the working class. They are likely to propose some amendments before the legislation comes up for a final vote Thursday.
Rep. Chris Pearson, P-Burlington, and Rep. Paul Poirier, I-Barre, both made impassioned pleas to remove the two parts of the bill that would increase the education tax burden for lower-income Vermonters. In doing so, they made the case that the bill does more to change who pays for education spending than it does to reduce those costs.
The bill would marginally increase the base tax rate for people who pay their property tax based on their income — any household earning $90,000 or less can do this. A family making $90,000 would be liable for another $90 under H.538. This would offset some of the tax burden for households who fall in the $90,000 to $135,000 range, which, according to Sharpe, currently pay the largest percentage of their income for property taxes.
But Pearson and Poirier argued that it’s unfair to shift the tax burden toward the lower end of the income spectrum.
“This bill says, very plainly, we are going to take the money from households earning $47,000 to $90,000 and ask them to pay more so we can bend the cost curve,” Pearson said. “That seems backwards to me when we talk about tax fairness.”
Poirier called the bill “a continued attack on an endangered species in this state,” arguing that this H.538, together with other bills passed by the House that will raise the gas tax and could result in increased health care costs for some, constitute an assault on low-income working Vermonters.
Poirier took particular issue with a provision in H.538 that would reduce renters’ rebates, which are intended to limit tenants’ indirect contribution to property taxes through their rent payments.
The Senate Finance Committee, currently preoccupied with passing a revenue package for fiscal year 2014, will clear its plate next week to take up H.538. Senate President Pro Tem John Campbell, D-Windsor, said stemming school spending is a “critical issue” and the Senate will follow the House’s lead in making it a priority.
“We need to get an absolute hold on it,” Campbell said. “I know the Speaker [Speaker of the House, Rep. Shap Smith] is very serious about it. I certainly am. And I believe the administration is as well.”
