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The state’s cratering revenues amid the coronavirus crisis are setting the stage for a fraught debate about education funding.
Neither Gov. Phil Scott’s administration nor lawmakers have yet to put concrete proposals on the table. Many key variables are still unknown – including whether the state will have additional flexibility to use nearly $2 billion in federal relief dollars, or the extent of Vermont’s revenue shortfalls.
Budgets approved by voters over Town Meeting week had schools on track to spend an additional $73 million next year. Now, with state revenues evaporating at a rapid pace, many Montpelier decisionmakers say some sort of reckoning is in the offing.
“We hope to have plans in front of you as early as next week,” Vermont Finance Commissioner Adam Greshin told the Senate Finance Committee Thursday. “The options are going to be varied. Some of them are going to be ugly, some of them are going to be not so ugly.”
Vermont’s preK-12 schools are paid for out of the state’s education fund. About two-thirds of its revenues come from property taxes, and the rest from so-called consumption taxes: a mix of sales, meals and rooms, and vehicle taxes.
With businesses closed and consumers reining in their spending, legislative analysts forecast consumption tax revenues will plummet $89 million this year, wiping out the education fund’s reserves and leaving a $40 million operating deficit in its place. That deficit could grow further if deferred taxes aren’t ultimately paid. The revenue picture is only expected to be even more grim next year, and lawmakers also worry about widespread property tax abatements.
A $2 trillion federal stimulus package passed by Congress in the wake of the crisis is bringing nearly $2 billion in relief to Vermont, and at least $30 million is earmarked for K-12 schools. But the bulk of those dollars are intended to go directly to coronavirus-related spending, and not to replace lost state revenues.
Stephen Klein, who leads the Legislature’s Joint Fiscal Office, told lawmakers Vermont was still awaiting word from the federal government about whether it might be able to get some wiggle room.
“If we can change that to cover the revenue decline, the revenue lost, then we have a fairly large resource we can use to address a lot of these problems. So the bad news is, we may know something, but we may not know right away,” he told Senate Finance.
Talk of cuts is nerve-wracking for local school officials, who worry that their most vulnerable students will need intensive services to repair the damage done by an extended closure. And a growing body of national research suggests student achievement was impacted by school budget cuts in the wake of the Great Recession.
Jay Nichols, the executive director of the Vermont Principals Association, told the Senate Finance Committee that, as a local administrator, he had prided himself on bringing budgets before voters that were well below the state’s average per-pupil spending. But he could not imagine a “worst time in my career” for austerity, he said.
“How can we contemplate cutting staff when we know students will be coming back to school with educational gaps?” Nichols said. “Most alarming will most assuredly be increases in social, emotional, and trauma-related concerns.”
Jeff Francis, the executive director of the Vermont Superintendents Association, on the other hand, said he would be “naive” to think taking a hard look at spending wouldn’t be part of the equation.
“I think that this crisis necessitates all of us coming together, as soon as possible, to look at both the revenues and the expenses,” he told the committee.
Jeff Fannon, the executive director of the Vermont-NEA, agreed that “everything has got to be on the table, in a legitimate way.”
But he emphasized that “revenue enhancements,” or tax increases for those who could afford them, would also need to be part of the discussion.
Meanwhile, 18 districts still don’t have a budget yet for next year. Nine saw their budgets go down during Town Meeting week, and another nine had yet to bring their spending plans to a vote when the epidemic came to Vermont. Local school officials are now worried about the logistics of bringing a budget before their electorate safely, as well as the politics of getting approval for a spending plan — any spending plan — in the midst of an economic catastrophe.
Per state law, if school districts don’t have a voter-approved spending plan by July 1, they can borrow up to 87% of their prior year’s budget in order to pay for operations. In the Senate Education Committee, lawmakers are at work on a bill that would give districts 100% of their prior year’s budget without needing to borrow, since a loan would incur additional costs over time.
Sen. Ruth Hardy, D-Addison, told her fellow members of the Senate Education Committee Tuesday that lawmakers didn’t have enough information at this point to know what they should do. But she added that she expected the Legislature would need to act on education finance before adjournment in order to address the spending increases that had been previously greenlighted by voters.
“I think it was a 4% average increase across our state. And there is just no way that is going to be supported by our education fund,” she said.
