Act 46 brought new and unusual energy to the start of the session and continued to influence education policymaking throughout. With the Agency of Education having all hands on deck implementing that law’s sweeping governance changes and other initiatives under previous laws, call for changes related to school choice as well as any new education initiatives went unanswered.
Spending Caps
Education spending was the alpha and the omega for the 2016 legislative season. Lawmakers spent January in machinations typically seen at the end of a session, as they strove in the lead-up to March town meetings to adjust the controversial allowable growth spending caps in the landmark school governance law passed late in the 2015 session. Then the Senate and House spent the end of this session at an impasse over setting the property tax rate that was resolved just hours before midnight Friday.
The new allowable growth rates were meant to keep the increase in school spending to 2 percent statewide. Each school district was told to keep its increase in per-pupil spending to between 0 and 5.5 percent, based on the prior year’s per-pupil spending, or face a financial penalty.
Lawmakers soon heard from school districts that were struggling to stay under the caps in light of factors that included a 7.9 percent increase in health care costs, contracted pay raises and in some cases an uptick in special education students.
As the gavel fell on opening day of this legislative season, some House lawmakers were already trying to come up with a way to modify the caps, while the Senate was preparing to repeal them.
Gov. Peter Shumlin called in his State of the State speech for a repeal of the spending caps in time for school districts to plan their budgets. The Senate obliged and passed its repeal bill, S.233, and bounced the matter to the House the same day that agreement over a House-built fix fell apart.
Republicans made moves to keep strict cost containment in Act 46; they offered amendments, held news conferences and used procedural tools to thwart a softening of the caps.
Negotiations intensified in the House, illuminating differences between the Education Committee and the Ways and Means Committee. As the last day that school boards could produce budgets for the printers approached, Speaker of the House Shap Smith appointed a bipartisan committee of members from House Education and Ways and Means to hash out the differences privately.
In the end, after the speaker kept the House in session for a midnight vote, the body agreed with a Senate compromise that bumped up every district’s allowable growth by 0.9 percentage points. It also exempted districts that spend less than the state average from any penalties and lessened the penalty from 100 percent of every dollar spent over the allowed amount to 40 percent. It also repealed the caps for fiscal year 2018.
Committee Chooses Not to Deal with School Choice
Before the 2016 legislative session opened, the State Board of Education ruled that it would not consider school district merger proposals between districts that pay tuition for students to attend school elsewhere with those that operate the same grades in their schools. Under Act 46, the board is responsible for approving unification plans, then the decision on whether to proceed is in the hands of voters in affected districts.
House Minority Leader Don Turner, R-Milton, argued that the board’s determination didn’t match up with the intention of lawmakers who voted for Act 46 during the previous session. He began to press for clarifying language from the Legislature.
More than a dozen bills on the subject of school choice were still on the wall in the House Committee on Education at the close of the session. Some of the bills would have eliminated tuitioning in every school district; some would have expanded it to every student in the state; and some would have let operating school districts and tuitioning districts merge.
Both the House and Senate Education committee chairs indicated they did not want to interrupt the merger conversations going on around the state. The discussions have been described as difficult, and lawmakers decided to stay the course and let Act 46 play out until the next session, at which point both chairs have said they are willing to work on adjustments to the law.
Another reason the education leadership was unwilling to open up Act 46 was the possibility that the move would be hijacked by those seeking a repeal.
Act 46 is widely considered successful in its goal of pushing unification. Communities in 40 school districts have streamlined into nine unified school districts. Districts in 33 supervisory unions have formed 29 formal merger study committees, according to the Agency of Education.
So far, the board has approved 14 unification plans; of those, eight were approved by voters, and four more will be voted on in June. When the law was written it was expected that approximately five unifications would happen during the first year.
Tinkering with Special Education Funding
The Agency of Education and the groups that represent school boards and superintendents made it clear to lawmakers they did not want any landmark education initiatives launched during this legislative season.
In addition to school governance overhauls, educators and school boards are implementing previously passed Act 166, for universal pre-kindergarten, and Act 77, known as flexible pathways.
The only bill the House Education panel advanced was a special education bill, H.859, that was passed into law on the last day of the session after going to conference due to disagreement over spending $200,000 on a pilot project.
The majority of H.859 deals with streamlining the current way special education payments are made and bringing them into alignment with the way services are delivered. Special education payments will be shifted from the schools to the supervisory union level, where the responsibility for special education lies.
The bill also provides $90,000 for a study of a block grant and fee-for-services system. The current funding system is blamed for being tangled in red tape and causing more children to be identified as needing special education services.
The pilot program was rejected by the Senate, but the House fought to get it put back into the legislation even though members risked running down the clock and killing the bill. During the conference, House members persuaded their Senate colleagues that a pilot program would help modernize Vermont’s special education services and increase opportunities for students while saving money. They agreed to spend $75,000 on a smaller version of the House plan.
Higher Education Garners Support in Budget Bill
The budget bill, H.875, provided a dual win for Vermont’s institutions of higher education, delivering a repeal of the “40 percent rule” for the University of Vermont and upping appropriations for the Vermont State Colleges system by $700,000 — the first increase since 2008.
UVM lobbied lawmakers to repeal the 1959 law that forces it to limit tuition for Vermont students to 40 percent or less of that charged to out-of-state students. It argued that repeal would let the college bring in more students and more revenue by becoming more competitive with schools elsewhere. UVM President Tom Sullivan promised changing the rule would not drive up costs for Vermont students.
Tax Rates
Another showdown broke out in the last days of the legislative season, and again it was over taxes and school spending. Senate Finance Chair Tim Ashe, D/P-Chittenden, went toe to toe with the House speaker while conference committee members waited for direction.
The shadow of Act 46 spread over the entire session, since both the allowable growth spending caps and the new education tax calculation based on yields arose from that law. And both were resolved in late-night sessions.
In the beginning of March, the House approved H.853, known as the yield bill, establishing a set of dollar figures to be used in residential education property tax calculations and setting the nonresidential property tax rate at $1.53.
Months later, the Senate passed its version of H.853 with different figures and a nonresidential property tax rate of $1.539.
The House version would have translated into lower tax rates because it infused several years’ worth of surplus education funds — amounting to $18.8 million. The Senate, concerned that numerous school districts raided their rainy day funds to keep down spending under the spending caps, wanted to split the surplus between this year and next.
When the Senate bill hit the House it immediately garnered a no vote, and conferees began negotiating. The Senate and House fundamentally disagreed over the use of the surplus and the House’s move to bring back a cost-containment mechanism after losing the original allowable growth rates earlier in the session.
The House version of the bill reverted back to last year’s excess spending threshold formula tied to per-pupil spending in fiscal 2014. If spending thresholds had been in place this year instead of allowable growth rates, school districts would have needed to spend less per pupil than 121 percent of the fiscal 2014 state average. House lawmakers voted to tighten this to 119 percent in fiscal 2020, which would send more towns into the excess spending category next year.
The Senate didn’t like this move, and conferees proposed reverting to the original excess spending thresholds in Act 68 that tied the threshold to the prior year’s average per-pupil spending. They would have held at 121 percent.
House conferees pushed back, eventually offering to tie the 121 percent to fiscal 2015 average per-pupil spending. The Senate complied with this and gave in to the House on the one-time infusion of $35 million into the system.
For fiscal 2017 school tax calculations, the property yield is $9,701 and the income dollar yield is $10,803. The nonresidential property tax rate is $1.535.
Correction, May 12, 9:52 a.m.: The property yield figure for FY 2017 school tax calculations has been corrected.
