Editor’s note: This story by Matt Hongoltz-Hetling was first published by the Valley News on Oct. 7, 2017.
WHITE RIVER JUNCTION — State officials and school board members say the Education Fund shortfall could go as high as $80 million and could wallop many property owners with a 5 percent increase in the school tax rate.
Vermont Secretary of Education Rebecca Holcombe has said that a 7- to 9-cent increase in the statewide property tax is likely unless school boards make significant budget cuts.
The projections for fiscal year 2019 will ultimately add pressure to local school boards gearing up to begin their budget processes, said Hartford School Board Chairman Kevin Christie, who also is a Democrat in the Vermont House.
“There might be some very, very difficult decisions to make, and until we know what that bottom line is looking like, we don’t know what they are,” Christie said.
If the budget gap falls on property taxpayers, who pay $1.06 billion into the $1.58 billion Education Fund, it would add about 8 cents to the current homestead property tax rate of $1.51 per $100 of assessed property. It also would add 8 cents to the nonresident rate, currently $1.535, state officials said this week.
The exact impact on individual school districts will vary, depending on their spending, but the base rate increase would amount to a $200 tax hike on a home valued at $250,000 for those Vermont residents not eligible for the state’s income sensitivity program.
“Needless to say, the pressures that we’re trying to address are very similar to the state level, especially with the health care component, and we haven’t completed our negotiations for our teacher contracts,” Christie said.
Emily Byrne, the chief financial officer for the Vermont Agency of Education, said the primary driver of the funding gap is the state’s decision to prop up the current FY2018 budget with about $47 million in “one-time” funds that were taken primarily from an end-of-year surplus and an education reserve fund.
“The problem from a budgetary perspective is, if you use one-time money for ongoing costs, you have a problem right out of the gate the following year,” Byrne said.
Those measures actually slightly decreased the property tax rate for the current year, but for fiscal year 2019, which starts next July, there is pressure not only to make up for the loss of the cushion, but also to put about $9.4 million back into the reserve.
Adam Greshin, commissioner of finance and management said the Education Fund gap could go as high as $80 million if school district voters approve budgets with an average increase of of 3 percent. If school budgets are held level or below 3 percent, the anticipated tax increase could be partially averted, said Greshin, a former independent state representative and school board member from Warren.
“I think the governor is going to continue to focus on the same issues because they’re just as important,” he said. “We’re going to ask school districts to reduce the growth in their spending and level fund their budgets, and we’re going to continue to advocate strongly for a statewide health care contract.”
Greshin pointed to an anticipated spike in fiscal year 2019 health care rates — the Vermont Education Health Initiative says premiums will increase by as much as 17 percent for school district employees across the state.
“Keep in mind, the two initiatives that you saw out of the administration last (spring), both would have zeroed in on unsustainable growth. The first would have asked school boards to level fund their budgets. That didn’t happen,” Greshin said.
“The second initiative, which received a great deal of attention, was to move to a statewide health care contract for all school employees. That too didn’t happen. Both of those initiatives would have made life substantially easier this year.”
Royalton School Board member Geo Honigford, president of the Vermont School Boards Association, said he’ll argue against a budget cap at an upcoming Oct. 19 meeting of VSBA members that will include a discussion on how to address the fiscal crisis.
“Caps are never really great policy, because they’re a one-size-fits-all solution,” he said, citing schools with capital improvement emergencies or growing student populations as examples of districts that would not do well under a cap.
Honigford said the Vermont School Boards Association is developing recommendations for solutions that would include a statewide teacher health care agreement negotiated by school boards and unions.
The VSBA also will seek to address Vermont’s student-to-staff ratio, which Honigford said has fallen from 4.7 students per staff member to a lowest-in-the-nation 4.2 to 1 over the past several years.
“A task force would look at staffing in each district and then be able to make recommendations,” he said.
Honigford said that local budget talks in Royalton would depend on the outcome of an upcoming Oct. 24 vote on a consolidation with the Bethel School District.
Even as school boards prepare to sharpen their pencils on local education budgets, there will be various initiatives to change the picture at the state level.
Honigford said the Legislature is sure to make an effort.
“It’s an election year, so we fully anticipate legislators will have no stomach for an 8-cent increase and then saying ‘vote for me.’ We anticipate some sort of cost containment measures coming down the road and we want them to make sense,” he said.
Christie said he’s seen several proposals, some including diversifying the revenue stream, that would dramatically change the way that education is funded, and that any one of them could be implemented very quickly — if the political will can be mustered.
“Most of the concepts have been placed on the table before or at least have been looked at in a cursory way,” he said. “It kind of takes a collective will to say ‘we’re going to change.’ That’s not easy.”