After failing this week to persuade a key Senate committee to move school budget votes to May, administration officials Wednesday took their appeal to the House.
Education Secretary Rebecca Holcombe, Finance Commissioner Andy Pallito, Tax Commissioner Kaj Samsom and Rebecca Sameroff, senior fiscal analyst at the Tax Department, appeared before the House Ways and Means Committee and the House Education Committee in an attempt to keep a key part of Gov. Phil Scott’s education overhaul proposal alive.
Scott wants to put more money into higher education and preschool by level funding K-12 programs. He asked local communities to postpone their votes from Town Meeting Day in March until May so they can rewrite their budgets.
The officials met sometimes fiery resistance and requests for a plan B from the lawmakers.
Officials tried to limit the conversation to a debate over changing the vote from March to May and how school budgeting for the next fiscal year would work out under Scott’s plan. Lawmakers’ questions consistently tested the boundaries the administration had hoped to set.
“We came in to talk about the current year,” Holcombe said to House Ways and Means members. “I realize this is a hard conversation.” Holcombe was originally appointed by Gov. Peter Shumlin.
However, Rep. Kurt Wright, R-Burlington, said “the second year (2019) is pretty attached to the whole plan. It is not a one-year plan.”
Pallito reminded lawmakers to consider the whole budget picture and remember they have to get to the end of April without adding any new taxes or fees.
“This is a very complicated problem. I know you are seeing the education piece. Once we get past what happened yesterday on the date thing, you would flesh these ideas out and see how complicated it is,” Pallito said, referring to the Senate education panel voting Tuesday not to recommend changing the date for school budget votes.
Rep. Janet Ancel, D-Calais, chair of House Ways and Means, said the administration is trying to remove pressure on the general fund by placing financial burdens in the education fund. “Yes, we have a problem in the general fund, and the governor said no new taxes and fees, but don’t put (the problem) over on the property tax.”
The general fund is paid for with revenues raised from the income tax, sales, rooms and meals tax, licensing and other taxes. The education fund relies largely on revenues from property taxes.
Rep. Cynthia Browning, D-Arlington, said the state has a habit of moving responsibilities for spending from the general fund to the education fund and driving up property taxes. “The state is dealing with general fund difficulties on the back of the K-12 education system,” she said.
Pallito admitted tensions in the general fund played into Scott’s plan. “Maybe this isn’t the perfect plan — we got that,” he told lawmakers.
Holcombe took a stab at explaining Scott’s thinking in suggesting a reallocation of education funds and priorities.
“The governor understands we have tight pockets but deep priorities,” she said, adding that he wants to make sure state funding makes a difference for children and the economy. Scott wants lawmakers to switch from a mind-set of pre-kindergarten through 12th grade to one focusing on “cradle through career.”
One of the big differences under Scott’s proposal would be a change in the way the tax rate is set. Instead of asking school districts for their budgets first and then setting the rate, Scott’s plan tells communities exactly what they will get from the state. Because it would be a fixed amount based on fiscal 2017 spending (a 1.5 percent increase from the previous year) and the Tax Department has predicted spending to go up 2.3 percent this year, if localities want to spend as they had planned, they would have to raise that additional money from local taxpayers.
Scott wants to push the school budget vote to May so voters will know what they are getting from the state and what they may have to raise on the side.
Holcombe said a later vote “will allow districts to rework budgets to level spend and let them determine the amount they would raise on their own grand list. If they choose to go over the state aid, then it comes off the local grand list.” Officials said towns would raise the additional money through municipal taxes.
But that relief valve for spending above level funding is just for this year. After that, localities would be precluded from raising additional money.
Rep. George Till, D-Jericho, asked what the point would be of voting on school budgets then.
Holcombe said school districts could still consider how to allocate the resources they would get from the state.
Samsom told lawmakers not to assume that a school district would always spend beyond the fiscal year 2017 allotment, especially if it was losing students. “Granted, more than half of schools are looking at that being a very real cap, but for purposes of discussion we can’t assume it would be a meaningless vote,” Samsom said.
Browning said she wants to work on slowing the rate of growth in education spending and is open to ideas such as freezing pay for administrators and moving teachers to the state health care exchange. But she called the administration’s current proposal disruptive and permanent.
The plan would hold school boards responsible for items that are not under their control — such as teacher retirement — and force property taxes to go up, according to Browning. “If you look at out years, this fundamentally redoes our financial system without discussion. … It immediately cannibalizes that restraint for general fund purposes,” she said.
Teacher retirement has always been paid for through the general fund, and for years the contributions were not fully made. State Treasurer Beth Pearce said the state is dealing with the underfunding and is on track to have it resolved in future years. No one is sure how the chronic underfunding would be affected if the responsibility is moved to the education fund.
Lawmakers on the House Education Committee seemed open to Scott’s ideas about adding early education and higher education to the K-12 education fund, but raised questions over the timing and the funding formula.
Chair David Sharpe, D-Bristol, had problems with reverting to pre-Act 60 and 68 funding formulas where communities were largely responsible for raising their own education money. That created disparities that were successfully challenged in court in the Brigham decision.
“When they are locked in at 2017 spending, communities with low income and a low grand list would be reluctant to raise education spending above 2017 levels, whereas communities with a high grand list and high income would be quite willing to spend above the 2017 level,” he said.
Sharpe asked if the Tax Department modeled what would happen. It did not, according to Sameroff.
In December the department projected spending in fiscal 2018 will grow 2.3 percent. The previous year’s spending rose just 1.5 percent. The administration expects a statewide savings of $30 million to $41 million if school districts level fund. That also means that communities will have to raise $30 million to $41 million on their own grand lists if they want to spend at the projected level.
There is also a problem with the $15 million the governor planned to recover from having teachers pay 20 percent of their health care premiums starting July 1.
Rep. Kate Webb, D-Shelburne, said the governor must have based this estimate on the previous health care plans. Teachers across the state will move onto new plans Jan. 1, 2018. The savings will come after that, not for this current fiscal year.
When speaking to Ways and Means members, Pallito said that if lawmakers would move the date of the school budget votes, then they would have all the time they need to consider the proposal. “The whole plan came over as a package,” he added.
Rep. Johannah Donovan, D-Burlington, said she has been very upset by a request that bypasses the legislative process on strict deadlines. “I don’t think it is possible to do that and for us to do our jobs,” she said.
“It is clear this will not pass,” Rep. Jim Condon, D-Colchester, told Scott’s team. “So what do we do next? It looks like there is a $35 million hole in the general fund budget. Will the administration be coming forward with a plan to deal with that?”
Since the straw vote in the Senate on Tuesday, the administration has begun looking into it, according to Pallito.
