[T]he House Ways and Means Committee is drilling down on the House Education Committee’s “big bill” this week.
Lawmakers have one objective: To find some way to bring the statewide property tax rate down.
Rep. Janet Ancel, D-Calais, summed up the problem her committee is trying to solve: “What’s meaningful to people is what happens to their tax rate.”
The cornerstone of the House Education Committee’s “big bill,” H.361, is to push the state’s nearly 300 school districts into larger school systems to both save money and increase opportunities for students.
Wednesday, the House Ways and Means Committee heard from more than a half-dozen witnesses who provided testimony on some of the financial pieces of the House Ed’s bill, and more.
Ancel said her committee will primarily be focused on three pieces of the 51-page bill: the tax rate, tax incentives and the yield proposal, which calls for setting the homestead property tax rate at $1.
Mark Perrault, of the Joint Fiscal Office, said the so-called yield proposal would help school boards and voters understand the relationship between local spending decisions and the homestead tax rate. It would also make it easier for homeowners to estimate how school budgets affect their homestead tax rate.
Perrault said if a school board proposed spending per equalized pupil that was 50 percent more than the yield, the spending-adjusted homestead tax rate would be 50 percent higher than the base homestead tax rate of $1.00 or $1.50.
Two of the witnesses providing testimony to the committee, Rich Pembroke and Grant Geisler, the current and past presidents of the Vermont Association of School Business Officials, both gave the yield idea a thumbs-down.
“I personally have some concerns with it,” Pembroke said. “I think it could create more confusion with the general populace right now.”
Geisler said VASBO does not believe the step simplifies the tax formula for property owners in Vermont and supports the move to larger school systems.
“There is some significant money that can be saved … there are efficiencies that can take place, we are strong supporters of the integrated education systems,” Pembroke said.
Pembroke said he believes cost containment can be achieved by getting rid of exemptions in the excess spending threshold.
The House Ed bill contains a provision that would impose a 2 percent per pupil spending cap for three years on school districts – a cost containment provision aimed at controlling costs until the larger school systems are in place.
“If you truly want to control spending, I would strongly recommend you take out the exceptions from the excess spending threshold,” Pembroke said. “I’m in a supervisory union where I have two districts that have bounced against that threshold. It forces a different conversation at the board level,” he said, because it carries a local tax penalty.
Geisler added, “I agree this is something maybe we should let work, instead of putting something else in the mix.”
The testimony from Pembroke and Geisler can be seen here.
Stephen Dale, executive director of the Vermont School Boards Association, said the association supports the need for property tax relief, but does not support the spending cap.
“We believe you need to do something specific and targeted about property tax rates this year,” Dale said. “Both through addressing costs and reducing the state-level demands on the education fund.”
The state has lost more than 21,000 students since 1997, but staffing levels have remained constant, and the costs of education spending and property taxes have continued to increase.
Dale suggested working on the excess spending threshold to control school district spending patterns instead. “Many school districts will tell you they set their marker at that line, and they work to it,” he said.
Jeffrey Francis, executive director of the Vermont Superintendents Association, said the association is supportive of the overall spirit of the bill. He supports the formation of larger school systems that “have economies of scale” and can share resources.
Francis too said the VSA does not support spending caps, and said they are inherently inequitable.
The cap has been bounced back to House Ed for a revisit, Ancel said.
Tom Vickery of the board of directors of the Vermont Assessors and Listers Association, said the state should have one tax rate, rather than separate homestead and non-homestead rates. “Is it necessary to have the two tax rates?” he asked.
Campaign for Vermont plan
Tom Pelham, co-founder of the Campaign for Vermont, also testified. Pelham is a former lawmaker, tax commissioner and deputy secretary of administration.
“Today we have a system that is scattered all over the landscape,” said Pelham.
He called last year’s 37 failed school budgets in Vermont “the mini backlash.”
The defeated budgets led to a statewide reassessment of how education is funded and structured across Vermont given the changes in the state’s demographics.
Pelham shared a handout with the committee, providing an alternative which he said “…meets the Brigham test, doesn’t require any caps,” and more.
Brigham was the case which led to current education funding law. Vermont is the only state in the nation that has a statewide property tax rate that is designed to provide funding equity to school districts.
Pelham’s model is based on Regional Education Administration Districts or READs, in which the state’s 300 school districts align with regional technical centers.
The regional READs would have a unified tax rate that would “inextricably link” communities to forge regional fiscal partnerships.
“In our plan, we’re not proposing that these READs be substitutes for supervisory unions, what we’re proposing is these READs” have a limited function – managing economies of scale, Pelham said. “Our recommendation would be that a READ board be comprised of members of school boards.”
Pelham said, “This system would reward those systems that spend less.” If schools in those regions spent less than a state-set allowance, property tax rates would be lowered.
“It gives those school districts within the READ incentive to save money, to not spend it, because they can plow it back to taxpayers,” he testified.
“All of the property taxes raised in a READ stay in that READ,” said Pelham.
“I know that you’re dealing with a bill that is … reigniting the process towards consolidation. I personally don’t find any evidence that consolidation is a God-given path,” Pelham said.
The READ structure, he said, “rewards performance … it brings school districts together as peers to solve problems, it’s very transparent.”
Pelham worked with Mark Perrault, senior fiscal analyst with the Joint Fiscal Office, to test out the model. He presented the plan to House Ed early in the session.
“I think the march toward consolidation in that committee was pretty well established before many of us testified,” said Pelham. “I’m not sure there was a lot of listening,” he said.
A chart provided as part of Pelham’s testimony can be seen here.
